President Barack Obama will announce a plan on June 9 to expand the "Pay As You Earn" program to as many as 5 million more Americans with federal student loans. Obama also will press lawmakers to pass legislation by U.S. Sen. Elizabeth Warren (D-Mass.) so that borrowers can refinance both federal and private student loans at lower interest rates.
Under the "Pay As You Earn" program, monthly student-loan payments are capped at 10 percent of the borrower's income, and any remaining debt is forgiven after 20 years of payments. Debt would be forgiven after 10 years for government workers and those in certain nonprofit jobs. Borrowers must have taken out these federal student loans after October 2007 to be eligible for the program.