Revised Pay As You Earn (REPAYE) Student Loan Repayment Plan
There is a ton of focus on getting into and paying for college. However, after those four (hopefully!) years, young adults must often face the task of not only finding employment but also repaying college student loans. There are many different ways to tackle student loan repayment. Let’s take a look at one option available: Revised Pay As You Earn (REPAYE) Student Loan Repayment Plan.
Revised Pay As You Earn (REPAYE) Plan
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What are Revised Pay As You Earn (REPAYE) Plans?
The Revised Pay As You Earn (REPAYE) Plan is a federal student loan repayment plan that was introduced in December 2015 as part of President Obama's efforts to expand and improve income-driven repayment options for student loan borrowers.
Details of Revised Pay As You Earn (REPAYE) Plan
Under the REPAYE Plan, eligible borrowers can have their monthly student loan payments capped at 10% of their discretionary income. Discretionary income is calculated as the difference between the borrower's adjusted gross income and 150% of the federal poverty guideline for their family size and state of residence.
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The REPAYE Plan is open to borrowers with Direct Loans (including Consolidation Loans that include Direct Loans), regardless of when the loans were originated, as well as to Graduate PLUS Loans and Parent PLUS Loans. However, borrowers with older Federal Family Education Loans (FFEL) or Perkins Loans are not eligible for the REPAYE Plan unless they consolidate those loans into a Direct Consolidation Loan.
Interest Subsidies & Loan Forgiveness
One key feature of the REPAYE Plan is that it offers an interest subsidy for borrowers with subsidized Direct Loans and those with a partial financial hardship. The government pays the unpaid interest on these loans for the first three years of repayment, and then pays 50% of the unpaid interest after that. Borrowers with unsubsidized Direct Loans and those without a partial financial hardship are not eligible for the interest subsidy.
Another important aspect of the REPAYE Plan is that it includes loan forgiveness after 20 or 25 years of qualifying payments, depending on whether the borrower has undergraduate or graduate loans. However, borrowers who receive loan forgiveness under the REPAYE Plan may be subject to income taxes on the forgiven amount.
Overall, the REPAYE Plan can be a helpful option for borrowers who are struggling to make their monthly student loan payments. However, it's important to carefully consider the pros and cons of any repayment plan and to explore all available options before making a decision.
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