President Obama expanded the federal “Pay As You Earn” program for federal student loan borrowers through executive order this summer, allowing those with loans borrowed before 2007 to be eligible.

Under PAYE, monthly payments on student loans will be capped at 10 percent of the borrower’s income, and the balance will be forgiven after 20 years of payments. Now expanded, government officials estimated PAYE will include about 5 million more people when enacted in 2015.

In accordance with Obama’s executive action, the U.S. Department of Education had renegotiated its contracts with federal student loan services to encourage loan servicers to be more attentive to the needs of their borrowers. According to a press release, the DOE will begin to undergo the process of altering regulations and allowing more borrowers to have payment caps of 10 percent of their income under PAYE, to make sure that students are able to pay off their student debt.

“All hard-working students and families deserve high-quality support from the federal loan servicer, and we are continuing to make sure that is the case,” Secretary of Education Arne Duncan said in a press release.

The department also detailed new incentives for lenders to improve customer service and repayment support.

The Department of Education will now allocate federal borrowers to lending services based on new performance standards. Lenders are incentivized by metrics that now weigh customer satisfaction more heavily and reward on-time repayment and low delinquency and default rates. Students currently default at a rate of 10 percent on two-year loans, and nearly 15 percent on three-year loans, according to the Department of Education. The department will implement new contract renegotiations in order to help prevent students from defaulting on their loans and help them in their pursuit of higher education.

Georgetown economics professor Arik Levinson said that although the higher default rates in student loans cost the federal government more, they are an important government service because they provide recent college graduates with wider job options.

“If you go work on Wall Street, you’ll pay it back quickly. If you go work at a lower-paying job, you can pay it back more slowly. Depending on your politics, it could be a good thing. It makes low-income jobs out of college more attractive,” he said.

According to the Institute of College Access and Success, the 70 percent of students nationally who graduated college in 2012 who took out student loans graduated with an average of $29,400 of debt.

“The student loan system is pretty messed up as it is now. … I think what Obama’s doing through executive order is great because Congress is not going to pass anything,” Elizabeth Biener (SFS ’17) said.

To facilitate the increased attention to customer service, the Secretaries of the Treasury and of Education will partner with private tax companies Intuit, Inc. and H&R Block, using their platforms TurboTax and to disseminate information on new federal student loan repayment options.

“Obviously, I support more customer service and ease, because I have student loans. … That really determines a big part of your financial future,” Biener said.

The Obama administration also aims to increase the funding of Pell Grants, community and minority-focused colleges, expand college tax credits and simplify the Free Application for Federal Student Aid.

Georgetown offers grants, scholarships, and loans to eligible students, based on each individual student’s financial needs.

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