Guide to Revised Pay as You Earn (REPAYE) vs PAYE

Q: What are the advantages of REPAYE over PAYE?

The biggest benefit of REPAYE vs PAYE is that all borrowers with qualifying federal loans can apply. With PAYE, you may need to show financial hardship. Also, on REPAYE, the government covers 100% of surplus interest charges on subsidized loans in the first three years and 50% after that, as well as 50% of accruing interest on eligible unsubsidized loans at all times if your payments are too small to cover the interest. On PAYE, only the first three years of surplus interest on subsidized loans are covered.

Q: How are REPAYE and IBR different?

One difference is that with IBR, your payments are 10% to 15% of your discretionary income over 20 to 25 years. On REPAYE, your payments are 10% of your discretionary income over 20 years for undergrad loans and 25 years for grad school loans. In addition, with REPAYE, your spouse’s income is included when calculating your monthly payment amount. This is not the case with IBR.

Q: Can you switch from PAYE to REPAYE?

Yes, it may be possible to switch from PAYE to REPAYE if you’re eligible, but be sure to check with your loan servicer. They will be able to let you know the details and how to switch.

Melissa BrockUpdated August 21, 2023

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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.

Revised Pay as You Earn (REPAYE) and Pay as You Earn (PAYE) are two different federal income-driven repayment plans. These plans extend your federal student loan term and set the repayments at 10% of your discretionary income. Under REPAYE and PAYE, your remaining loan balance is forgiven once the repayment period ends.It's important to know that both of these plans are being replaced by the Department of Education's new Saving on a Valuable Education (SAVE) Plan over the next year. Borrowers on the REPAYE Plan will automatically get the benefits of the new SAVE Plan.The SAVE Plan, like other income-driven repayment (IDR) plans, calculates your monthly payment amount based on your income and family size. The SAVE Plan provides the lowest monthly payments of any IDR plan available to nearly all student borrowers, including PAYE and REPAYE.

What Is REPAYE?

The REPAYE Plan is a federal student loan repayment plan that generally sets a borrower’s monthly payments at 10% of their discretionary income. (Discretionary income is the difference between your annual income and 150% of the poverty guideline for family size and the state of residence.) Borrowers with the following types of Direct Loans may be eligible for this plan:

Direct Subsidized Loans: These are need-based federal student loans for which the government pays the interest while you're in school.
Direct Unsubsidized Loans: Non-need based federal loans. The government doesn’t pay the interest on these loans while you’re in school.
Direct PLUS Loans: Federal loans for eligible graduate or professional students and parents of dependent undergraduate students
Direct Consolidation Loans: Loans that allow you to combine multiple federal student loans (including FFEL and Perkins loans) into one loan with one monthly payment. REPAYE is not available for consolidated PLUS loans made to parents.

The repayment term for REPAYE is 20 years for loans for undergraduate study, and 25 years for loans for graduate or professional study. After that time, the remaining balance of the loans will be forgiven.

How REPAYE Works

Fill out the income-driven repayment plan request online at studentaid.gov, logging in with your Federal Student Aid (FSA) ID. Select the REPAYE plan and enter the required income, spouse, and family details.It may take your loan servicer a few weeks to process your request. Once approved, pay your loan as required. Note that under the REPAYE plan, your loan servicer will use your spouse’s information for calculating your monthly payment, even if you file separate tax returns. In addition, with REPAYE, your payment is always based on your income and family size — whether you experience changes to your income or not. This means if your income rises, your payment might be higher compared to the traditional 10-year Standard Repayment Plan. You will need to recertify your income and family size each year.

Pros and Cons of REPAYE

There are advantages and disadvantages to REPAYE that you’ll want to consider when determining whether this plan is right for you.

Pros

The benefits of REPAYE include:

Set monthly payments: Your monthly loan payment is 10% of your discretionary income.
Forgiveness: Under REPAYE, if you haven't paid off your loans after 20 or 25 years, the remaining balance will be forgiven.
Direct Loans qualify: If you have any type of Federal Direct Loan (except consolidated Parent PLUS loans), you may qualify for REPAYE and get the lowest possible monthly payment available to you.
Interest subsidy: If your payments don’t cover the interest that accrues on your subsidized loans, the government will cover 100% of surplus interest charges for three years, and 50% after that. If your loans are unsubsidized, the government will cover 50% of excess interest charges at all times.

Cons

There are cons of REPAYE, such as:

Lengthy repayment: With REPAYE, it takes 20 years to repay undergraduate loans and 25 years to pay off loans for graduate or professional study. If you remained under the standard 10-year repayment plan, you could potentially repay your loans 10 or 15 years sooner.
Spouse's income factors in: If you're married, your payments might end up being higher because your spouse's income is considered in the discretionary income calculation.
No cap on monthly payments: If your income increases, your payments could be higher than they would be on the standard 10-year repayment plan.
Excess interest accrual: In some cases, your payments may be too small to cover the student loan interest that accrues, which could lead to surplus interest charges. (The Biden-Harris administration is developing new rules that may prevent this in the future.)

Here’s a side-by-side comparison of the pros and cons of the REPAYE plan:

Pros of REPAYE	Cons of REPAYE
Set monthly payments	Payments are always based on income. That means if your income increases, your payments might be more than they would be on the standard repayment plan
Interest subsidy available	Missing the yearly recertification date can lead to penalties
Easier to qualify for	May lead to surplus interest charges in some cases
Balance is forgiven after 20 or 25 years	Takes longer to pay off than the standard 10-month payment plan
All Direct Loans qualify for REPAYE	Spouse's income is considered in the monthly payment calculation

Recommended: Your Guide to Choosing a Student Loan Repayment Plan

What Is PAYE?

The Pay as You Earn Plan is a federal student loan repayment plan with monthly payments equal to about 10% of your discretionary income. Your payments on the PAYE plan will never be more than what they would be on the standard 10-year plan based on your income and family size. The following federal student loans qualify for PAYE:

Direct subsidized and unsubsidized loans
Direct PLUS loans for graduate and professional students
Direct Consolidation Loans (not including any PLUS loans made to parents)
Consolidated subsidized and unsubsidized federal Stafford loans
Consolidated FFEL PLUS loans for graduate and professional students
FFEL consolidation loans (not including any PLUS loans made to parents)
Consolidated Perkins loans

The repayment term is 20 years. After this time, the remaining balance will be forgiven. You will need to recertify your income and family size each year.

How Does PAYE Work?

To enroll in PAYE, use your FSA ID to log in at studentaid.gov and choose the income-driven repayment plan request, specifically choosing PAYE. Include your income, family information, and spouse's information on your application. To qualify for PAYE, you may need to show proof of financial hardship. Your required payment under the PAYE plan, which is based on your income and family size, will never exceed what you would pay under the 10-year repayment under the Standard Repayment Plan.

Pros and Cons of PAYE

There are advantages and disadvantages of PAYE to take into consideration if you’re thinking about enrolling in the plan.

Pros

The advantages include:

Forgiveness after 20 years: One of the biggest benefits of PAYE is that after 20 years, whether you have graduate or undergraduate loans, any remaining balance you owe will be forgiven.
Spousal income excluded: If you file taxes separately, your spouse's income is not used to calculate your monthly payments.
Capped payments: The amount you pay monthly will never go over the 10-year Standard Repayment Plan.

Cons

There are disadvantages to PAYE, such as:

Qualification limits: You may only be eligible for PAYE if your income is low enough that your payments would be lower than they would on the 10-year standard plan.
Only open to new borrowers: Not everyone can qualify under this plan. You must have borrowed your first federal student loan after October 1, 2007 and a Direct Loan or a Direct Consolidation Loan after October 1, 2011
If your income rises, you’ll pay more: If your income increases and your calculated monthly payment amount would be more than what you'd have to pay under the 10-year Standard Repayment Plan, you'll start paying the amount you’d pay on the 10-year plan.

PAYE vs REPAYE

Here are some of the similarities and differences of REPAYE vs PAYE to help you decide which of these plans might be a better fit for you.

Similarities

The biggest similarities of Pay as You Earn vs Revised Pay as You Earn is that the two plans set the amount you’ll pay at 10% of your discretionary income. Both plans are also available for the same federal loans:

Direct Subsidized and Unsubsidized loans
Direct PLUS loans for graduate and professional students
Direct Consolidation Loans not including any PLUS loans made to parents
FFEL loans if consolidated
Consolidated Perkins loans.

Differences

Understanding the differences between PAYE and REPAYE could help you decide which plan makes the most sense for you.

	PAYE	REPAYE
Repayment term	20 years	20 years for undergraduate loans, 25 years for graduate loans
Financial qualifications	Must show financial hardship	All borrowers with qualifying loans can apply
Payments	10% of discretionary income (you will not pay more than you would under the 10-year Standard Repayment Plan)	10% of discretionary income(no income cap)
Interest subsidy	Government pays surplus interest charges on subsidized loans for the first 3 years	Government pays surplus interest charges on subsidized loans for 3 years, and 50% of surplus interest after that. Government pays 50% interest charges on unsubsidized loans at all times
Spouse's income	Spouse's income is not considered if you file taxes separately	Spouse's income is considered even if you file separate tax returns

How Do You Apply for the SAVE Plan?

The SAVE Plan includes multiple new benefits for borrowers. The changes will begin to go into effect the summer of 2023. Your monthly payment amount is based on your discretionary income—defined as the difference between your adjusted gross income (AGI) and 225% of the U.S. Department of Health and Human Services Poverty Guideline amount for your family size.That means you will not owe loan payments if you are a single borrower earning $32,800 or less or a family of four earning $67,500 or less (amounts are higher in Alaska and Hawaii). Borrowers earning more than these amounts will save at least $1,000 per year, compared to the current income-driven repayment plans. A beta version of the updated IDR application is now available and includes the option to enroll in the new SAVE Plan. The DOE website says, "We're accepting applications now to help us refine our processes ahead of the official launch. If you submit an IDR application now, it will be processed and will not need to be resubmitted. The application may be available on and off during this beta testing period. If the application is not available, try again later. You will receive an email confirmation after you have applied. "If you had already enrolled in the REPAYE Plan or recently applied, you will automatically be put on the SAVE Plan. There is no need to reapply or request to change your plan. Learn how to check which plan you’re on."

Other Student Loan Repayment Options

There are a number of other ideas for paying off student loans besides REPAYE and PAYE. Here are three additional options to consider.

Student Loan Refinancing

When you refinance student loans, you exchange one or more of your existing loans for a new loan with a private lender. The way refinancing works is that it gives you choose new repayment terms, typically between five and 20 years. If you opt for a longer term, you may lower your monthly student loan payments. Just be aware that in this case you’ll likely pay more interest over the long term. It’s wise to weigh the advantages and risks of student loan refinancing. While refinancing can have a number of benefits, including potentially lowering your interest rate, which could save you money, when you refinance federal student loans, you lose access to federal programs and protections, such as deferment and loan forgiveness programs.

Student Loan Forgiveness Programs

With student loan forgiveness, also called student debt forgiveness, you are no longer required to make payments on your loans. Your debt is canceled, or forgivenThese include the Public Service Loan Forgiveness (PSLF) Program, which you might qualify for if you work for a government or nonprofit organization. PSLF forgives the remaining balance on your federal direct loan after you make 120 monthly payments under a qualifying repayment plan. You can review other federal student loan forgiveness programs at studentaid.gov. There are also state-based forgiveness programs you can explore.

Other Income-Based Repayment

If you have private loans, your lender may be able to adjust your payment based on your income. Reach out to your loan servicer for more details.For federal loans, there are two other federal student loan repayment plans, called the Income-Based Repayment (IBR) Plan and the Income-Contingent Repayment (ICR) Plan Plan).Under the IBR Plan, your payments are based on 10 percent of your discretionary income if you were a new borrower on or after July 1, 2014. You'll never pay more than the 10-year Standard Repayment Plan amount. If you're not a new borrower, your payments will be 15% of your discretionary income.Under the ICR Plan, you'll make payments based on the lesser of the following: 20% of your discretionary income or what you would pay on a repayment plan with a fixed payment over the course of 12 years, adjusted according to your income level.If you’re having trouble repaying your loans, student loan rehab may be an alternative option to consider. Contact your student loan holder for information about starting this process.

The Takeaway

Both the REPAYE and PAYE plans may help give you relief on your federal student loan payments by setting your monthly payments at 10% of your discretionary income. However, the two plans extend your repayment terms to at least 20 years. The new SAVE Plan will replace these programs and lower your payment to as little as 5% of your income.There are other ways to help pay off your student loans, including alternative income-based payment plans as well as forgiveness programs. You may also want to explore the option of refinancing your student loans — as long as you don’t need access to federal programs or protections and if you could save money by qualifying for a lower interest rate.

3 Student Loan Tips

Refinancing your student loan can lower your monthly payments and help you adjust your loan term. Compare student loan refinancing rates to find a loan that works for you.
One pain-free way to pay down your student loan sooner: send in your tax refund to put against the principal balance. Since it’s money that has already been taken out of your pay, you won’t miss it.
If you teach full-time for five complete and consecutive academic years in a low-income school, you may be eligible for federal student loan forgiveness.

Check your student loan refinancing rates and terms with Lantern.

Frequently Asked Questions

What are the advantages of REPAYE over PAYE?

How are REPAYE and IBR different?

Can you switch from PAYE to REPAYE?

Photo credit: iStock/andresr

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About the Author

Melissa Brock

Melissa Brock is a higher education and personal finance expert with more than a decade of experience writing online content. She spent 12 years in college admission prior to switching to full-time freelance writing and editing. Her work has appeared on Yahoo Finance, Entrepreneur, Investopedia, The Balance, FinanceBuzz, The Journal of College Admission, MarketBeat, College Finance, Rocket Mortgage, LeverageRx, Benzinga, Morty, Ally, and more.

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