Class , take a look at this on Student Loans . It was in this week's WSJ . That is why it is crucial to read the financial press constantly you don not want to miss anything!

Millions More to Qualify for Student-Loan Modification Program

WASHINGTON—Five million more Americans can join a program to lower student-debt bills, part of a broad campaign by the Obama administration that has provided relief for some households but done little to reduce underlying college costs.

Under rules effective Tuesday, any American who borrowed directly from the federal government for college or graduate school can enroll in a program called Pay As You Earn. The program—previously open to only newer borrowers—sets the monthly payment at 10% of a borrower’s discretionary income, defined as adjusted gross income minus 150% of the federal poverty level.

Monthly payments typically drop by hundreds of dollars under the program but extend beyond the standard 10 years—to a maximum 20 years for those with undergraduate loans and 25 years for those with graduate loans. Any remaining balances at that point are forgiven.

The program, put in place by the administration in 2012, had already been available to most of the 29 million Americans with direct federal loans, and enrollment has surged. The administration initially excluded borrowers who took out loans before October 2007.

Administration officials said Tuesday that they were opening up the program to essentially all federal borrowers—excluding parents who financed their children’s educations—to stem a continued rise in defaults and streamline the federal government’s notoriously convoluted repayment options. The expanded program will cost an estimated $15.4 billion over 10 years.

“We are targeting benefits to the neediest borrowers,” Education Under Secretary Ted Mitchell said.

More than 1 in 5 Americans with student loans—excluding those still in school—are at least three months behind on a payment, Federal Reserve Bank of New York figures show. About 7 million had gone at least a year without making a payment as of July, Education Department data show. The administration has warned of harm to the economy if too many borrowers damage their credit standing due to student loans and are unable to borrow for homes, cars and other items.

But the program carries risks for borrowers. Many will see their balances grow because their new monthly payments won’t cover interest.

Also, balances forgiven after 20 or 25 years will be taxed as ordinary income, leaving many borrowers suddenly facing tax bills in the thousands of dollars. The Obama administration has proposed making forgiveness tax-exempt but needs approval from Congress.

Heather Jarvis, a student-loan expert who advises borrowers, said expanding Pay As You Earn will help many cash-strapped households juggling multiple bills. “People need to pay for rent and food first and so they do,” she said. Lowering student-loan bills will keep such families from falling behind, she said.

But other policy experts and some Republicans have characterized the administration’s approach as a bandage, providing immediate relief to borrowers but doing little to address what is driving the debt: rising tuitions.

Debt burdens among seniors at public and nonprofit colleges continue to climb despite the administration’s focus on higher education, according to a separate report Tuesday from the Institute for College Access & Success, a nonprofit advocacy group. Among the 69% of last year’s college seniors who owed student loans, the average debt burden upon graduation was $28,950, 2% higher than the previous class, the group said.

Mr. Mitchell, the Education Department official, acknowledged that income-based repayment doesn’t solve the cost problem. “This is a trajectory that needs to be reversed first and foremost by states stepping up to their responsibility to fund higher education,” he said in a call with reporters.

He pointed to other administration moves to address the problem, including President Barack Obama’s call this year to make community college tuition-free. The Education Department also created a “college scorecard,” detailing each institution’s student outcomes and debt loads, to empower consumers to make better choices about where to attend.

On the presidential campaign, candidates from both parties have endorsed income-based repayment. Democratic front-runnerHillary Clinton has called for expanding the Pay as You Earn program as part of a broader higher-education plan that would also make tuition debt-free at public colleges.

On the Republican side, Sen. Marco Rubio of Florida has endorsed making income-based repayment the standard plan for all borrowers. He has also called for allowing students to spend federal grants and dollars outside of traditional colleges, which he has characterized as a “cartel” that often fails students.

Write to Josh Mitchell at joshua.mitchell@wsj.co