Guide to Revised Pay as You Earn (REPAYE) vs PAYE
Share this article:
What Is REPAYE?
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.
How REPAYE Works
Pros and Cons of REPAYE
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.
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.)
What Is 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
How Does PAYE Work?
Pros and Cons of PAYE
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.
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
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.
How Do You Apply for the SAVE Plan?
Other Student Loan Repayment Options
Student Loan Refinancing
Student Loan Forgiveness Programs
Other Income-Based Repayment
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.
Frequently Asked Questions
About the Author
Share this article: