The Revised Pay As You Earn Repayment Plan (REPAYE) can help you limit student loan payments to 10% of your discretionary income and provides complete student loan forgiveness to those who qualify.
After signing the PAYE Program into law in 2012, the then President, Barack Obama approved an extension to the program in 2015, giving even more federal student loan borrowers a way to pay off student debt. Also called the REPAYE Program, the new law featured fewer restrictions than PAYE, while continuing a lot of the same benefits as the original program.
How to Qualify for the REPAYE Program
As an applicant, you will need to meet certain requirements before your approval into the REPAYE program can be approved. Firstly, unlike the PAYE Program, REPAYE allows anyone with eligible federal loans to participate in the program, no matter the origination of your student loan debt. This includes applicants whose loans originated before October 1, 2007 PAYE deadline.
The student loans eligible for the REPAYE Program are:
- Direct Subsidized Loans
- Direct Unsubsidized Loans
- Consolidated Unsubsidized Federal Stafford Loans from the FFEL Program
- Consolidated FFEL PLUS Loans made to graduate or professional students
- Consolidated FFEL Consolidation Loans not used to repay PLUS loans made to parents
- Direct PLUS Loans made to graduate or professional students
- Direct Consolidation Loans not used to repay PLUS loans made to parents
- Consolidated Subsidized Federal Stafford Loans from the FFEL Program
- Consolidated Federal Perkins Loans
Any PLUS Loans, private loans made to your parents, or Consolidation Loans that were used to repay loans made to your parents are ineligible for the REPAYE Program.
Check to see if you can take advantage of the REPAYE Program for free.
Benefits of REPAYE Plan
The REPAYE Plan allows 5 million more Direct Loan borrowers to cap their monthly student loan payment amount at 10% of monthly discretionary income, without regard to when the borrower first obtained the loans. The REPAYE Plan improves upon the present PAYE Plan while extending its protections to all student borrowers with Direct Loans.
Aside the payment cap per month, REPAYE will forget the rest of the debt after 20 years for those who borrowed only for undergraduate study and 25 years for those who borrowed for graduate study.
The REPAYE Plan will also offer a new interest subsidy benefit to prevent ballooning loan balances for those whose income-driven payments cannot keep up with interest accumulating.
Cons of REPAYE vs. IBR or PAYE
- REPAYE will count your spousal income for payment requirement regardless how you file (where as PAYE/IBR will not count your spousal income if you MFS, married filing separately.)
- REPAYE lacks a payment cap (where as IBR/PAYE caps your monthly required payment at 10 year standard payment on the loan amount you entered IDR with.) This means for those going for PSLF, you potentially will pay back more on REPAYE compared to PAYE/IBR after training/lower income years.
- If you are presently in IBR/PAYE, to switch to REPAYE, you will be entered into 10 year standard repayment plan first, then make at least one payment, before you can be qualified for REPAYE. Aside that, your interest accumulated under PAYE/IBR will capitalize when you leave PAYE or IBR.
How to apply for REPAYE
You should enroll in Revised Pay As You Earn and can do this by mailing a completed income-driven repayment request to your student loan servicer, but the process is simpler to complete online. You can change your student loan repayment plan at any time.
- Head on to studentloans.gov. create an FSA ID if you don’t have one or with your Federal Student Aid ID.
- Choose the income-driven repayment plan request. Preview the form so you know what documents to have ready, like your tax return.
- Select your plan. If you qualify for more than 1 income-driven repayment plan, you can be automatically placed in the plan with the lowest payment or specifically choose REPAYE if it makes the most sense for you.
- Complete the application. Enter the required details about your family and income. Ensure you include your spouse’s information, if applicable, as it will affect your payments under REPAYE.
Other ways to pay less
If Income-driven repayment doesn’t seem like the right plan for you, the federal government offers extended repayment and graduated repayment plans, that reduces your payments but aren’t based on your income. You may pay more interest under these plans, though, and neither offers loan forgiveness.
The federal government offers graduated repayment and extended repayment plans, which lowers your payments but aren’t based on your income.
You may also be able to pay less by refinancing your student loans. Refinancing federal student loans can carry unseen risks, as you’ll lose access to income-driven repayment and other federal loan protections and programs. However, if you’re comfortable giving up those options and have strong credit as well as a steady income, refinancing may save you money.
How REPAYE Works
Like the PAYE Program, the Revised pay as you earn repayment plan Program provides student loan borrowers a reduced monthly payment capped at 10% of discretionary income if approved. Discretionary income is determined by subtracting 150% of your state’s poverty level, which is based on your household’s size, from your household’s adjusted gross income (AGI).
The amount you make annually determine your monthly payments for the Revised pay as you earn Program, and are reassessed per year to determine your new monthly payment for the following year. These is presently no cap on the size of your monthly payment, and your spouse’s income and existing federal student loan debt may be calculated into payment each month.
Depending on your level of education, REPAYE provides 2 options for student loan forgiveness. After 20 years, if you take part in the REPAYE Program and is an undergraduate, your student loans are forgiven if they make consistent payments during this period. Those who earn professional or graduate degrees, on the other hand, are eligible for student loan forgiveness after 25 years of meeting program requirements, which includes making regular monthly payments. As with PAYE, student loans forgiven under the REPAYE Program may be taxed by the IRS.
Let’s face it, your student loans are probably aren’t going anywhere soon. Although payments per month can be somewhat overwhelming, repayment plans like REPAYE can make your loan debt more manageable. If you’re feeling the pain of federal student debt, meet your loan service provider to talk about your options or visit StudentLoans.gov to learn more.
For more details on the REPAYE program, speak with a REPAYE specialist by phone at CALL US NOW.