Pay As You Earn Loans

Recent and soon-to-be law school graduates who aspire to work in relatively low-paying legal jobs but owe large amounts of student debt may find relief in a recent program from the Obama administration.

"The biggest beneficiaries are law grads going into public interest," says Radhika Singh Miller with Equal Justice Works, a nonprofit that promotes legal careers in the public service sector.

Released in November, the rules for Pay As You Earn stipulate that graduates' monthly loan repayments will be capped at 10 percent of discretionary income; after 20 years of payments all federal debts are forgiven. To qualify, a borrower's monthly repayment amount must exceed 10 percent of monthly income. (See 34 C.F.R. §§ 674, 682 and 685.) (High earners therefore also can qualify, critics note, adding that the program may give students an incentive to acquire debt). To control costs, participation is limited to students who took out federal loans on or after October 1, 2007, or who received loan disbursements on or after October 1, 2011. (See 77 Fed. Reg. 66,101 (Nov. 1, 2012).) The program has no bearing on private loans, which account for roughly 15 percent of all student debt.

Heather Jarvis, a former criminal defense attorney and an expert on student debt, says she's optimistic that the new rules will help young lawyers afford careers in public service - especially coupled with the College Cost Reduction and Access Act of 2007 and other debt forgiveness programs.

"While I'm concerned that parts of the system are broken," she says, "mainly there is great relief available."

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