REPAYE: How it works and is it right for you?

Everything You Need to Know About Revised Pay As You Earn (REPAYE)

REPAYE: How it works and is it right for you?

Physicians are eligible for REPAYE when they fall within certain guidelines. 

If you’re considering going the Public Service Loan Forgiveness (PSLF) route to pay off your student loans, you’ve probably already realized it’s a little more complicated than it first looks.

Having your loans forgiven isn’t as easy as just filling out a couple forms and choosing the right career path – you have to pick a specific repayment plan, which can save or cost you thousands depending on which you choose.

That choice is entirely personal, and depends on factors your marital status, how much your spouse earns, your income and how much you owe overall. One of the newest options is REPAYE, an updated version of the Pay As You Earn (PAYE) plan. Here’s everything you need to know about choosing that path.

What is Revised Pay As You Earn (REPAYE)

REPAYE is a relatively new plan, first announced in 2015. It’s similar to the Pay-As-You-Earn (PAYE) plan, but REPAYE is available to about five million more borrowers than its older counterpart.

Payments under REPAYE are 10% of your adjusted gross income (AGI) minus 150% of the federal poverty guidelines, your family size and state of residence. If you earn less than 150% of the federal poverty guidelines, approximately $18,210 for one person, you’ll pay $0 each month.

A major perk of REPAYE is the interest subsidy provided by the government. When you use REPAYE, you often accrue interest faster than you pay it off. This interest collects and capitalizes on your loan.

But if you have subsidized loans, the government will help cover the extra interest – 100% for the first three years and 50% after. If you have unsubsidized loans, they’ll pay 50% of the interest. REPAYE is the only income-driven repayment plan that offers this interest subsidy.

REPAYE structures payments a 20-year term for undergraduate loans and 25 years for graduate or professional school loans. If you still have debt after your term has expired, the remaining balance will be forgiven.

You’ll owe taxes on the amount forgiven, which can equal thousands of dollars – or more – depending on the remainder. A graduate with $50,000 forgiven under REPAYE could have to pay an extra $12,500 to $15,000 on their taxes.

Who is eligible for Revised Pay As You Earn (REPAYE)?

Un PAYE, which has some restrictions on who is eligible, REPAYE is open to any borrower with Direct student loans. Direct student loans include Direct Subsidized and Unsubsidized Loans, student Direct PLUS loans and Direct Consolidation loans. Parent PLUS loans are not eligible for REPAYE.

PAYE requires you to be a first-time borrower, with the loan term starting on or after October 1, 2007 and the first loan disbursement on or after October 1, 2011. REPAYE has no such requirements.

Graduates with Federal Family Education Loans (FFEL) or Perkins loans need to consolidate into a Direct Consolidation loan in order to be eligible for REPAYE. Only consolidation through the federal government is accepted. If you consolidate with a private company, such as SoFi or LendKey, your loans will become private and no longer eligible for REPAYE.

With REPAYE, you don’t have to prove a financial hardship in order to qualify.

How Revised Pay As You Earn (REPAYE) works with PSLF

Public Service Loan Forgiveness (PSLF) is a government program that encourages graduates to work for public institutions or non-profits by forgiving their loans after 10 years of payments.

Because PSLF allows borrowers to choose an income based plan, many use that opportunity to lower their monthly payments while working for loan forgiveness. PSLF doesn’t report the amount forgiven as income, so borrowers don’t have to pay any extra taxes on that amount.

Doctors working in a public hospital or not-for-profit can use REPAYE while striving for PSLF – in fact, it might be their best option.

A pediatrician earning $120,000 a year with $450,000 in student loans at 4.25% interest will pay $849 a month. After 25 years, they’ll have paid $130,791 total and have $481,355 forgiven.

How interest works in Revised Pay As You Earn (REPAYE)

Interest on student loans accrues while you’re in repayment. If you choose an income based plan REPAYE, it might accrue faster than you can repay it.

In that case, the federal government can cover the remaining interest. For the first three years, they’ll pay 100% of extra interest for subsidized loans and 50% for unsubsidized loans. After three years, 50% of any leftover interest will be covered.

The remaining interest will be capitalized or added onto your original balance. If you finish your REPAYE term without going through PSLF, you’ll owe taxes on that capitalized interest.

To find out if you have a subsidized or unsubsidized loan, log on to your loan servicer’s website. You should see subsidized or unsubsidized next to the name of the loan. If not, call your issuer and ask.

Any income based repayment plan will cost you more in interest than the regular 10-year term, so take that into consideration when you’re deciding. It might be better to choose REPAYE at the beginning of your career while you’re just getting started and switch back to the standard plan once you can afford those payments.

Is Revised Pay As You Earn (REPAYE) Right for You?

A good rule of thumb for deciding if REPAYE is right for you is to compare your income to your debt. If you owe double or more than you currently earn, you’ll benefit from REPAYE – especially if you’re struggling to make your student loan payments every month.

One of REPAYE’s few downsides is that it counts spousal income toward your AGI, whereas other plans don’t. This will ly increase your monthly payments, unless your spouse earns significantly less than you do.

A couple with one spouse earning $50,000 and another earning $30,000 with $45,000 in student loans will pay $464 a month, compared to $47 on the PAYE or IBR plan which excludes spousal income when couples file their taxes separately.

A single person with $75,000 in student loans and $25,000 in income will pay $58 a month, the same as they would under the PAYE or IBR plan. After 20 years of payments, they would have $103,047 forgiven, compared to $140,003 for the IBR or PAYE plans.

How much you save under REPAYE depends on your marital status, how much your spouse earns, your income and how much you owe. Use the Department of Education’s repayment estimator to figure out the best option.

You can also contact an accountant or CPA to ask them what your tax liability might be if you choose REPAYE and have your loans forgiven. The cost might seem a bit prohibitive if you’re a new resident, but the expense of hiring a professional to guide you down the right path will end up paying for itself.

A qualified fee-only financial planner can also help decide if REPAYE is the best option for you and your personal situation or if another repayment plan will suit your needs better. They can also show you how to lower your AGI and get a smaller monthly payment if you’re pursuing PSLF with REPAYE.

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Did you enjoy this blog? You’ll really this one: How To Qualify For Public Service Loan Forgiveness


REPAYE: How it Works and Who it’s For

REPAYE: How it works and is it right for you?

Our goal is to give you the tools and confidence you need to improve your finances. Although we receive compensation from our partner lenders, whom we will always identify, all opinions are our own. Credible Operations, Inc. NMLS # 1681276, is referred to here as “Credible.”

If you’re struggling to keep up with your monthly student loan payments, the Revised Pay As You Earn plan (REPAYE) might help. This plan limits your payment each month your income.

how payments are calculated, REPAYE is best for:

  • Single borrowers (not married)
  • Borrowers with Federal Direct Loans
  • Borrowers with no graduate student debt

In this post:

How REPAYE works

REPAYE puts a cap on your monthly federal student loan payments at 10% of your discretionary income. This number is your adjusted gross income (AGI), family size, and total student loan balance.

Under this plan, if you haven’t paid off your loans after 20 or 25 years, your remaining balance can be forgiven. Because your monthly payment is your income, you could also pay off your debt a bit earlier.

If you’re married, your spouse’s income and student loans are considered when calculating your discretionary income. That can make your payment a lot higher than it is if you’re single. REPAYE can also lead to a situation where your payments are less than your monthly interest, which may lead to a growing loan balance instead of a shrinking one.

How REPAYE compares to other income-driven plans

If you’re interested in income-driven repayment and REPAYE doesn’t look a great choice, you can also consider another IDR plan Income-Based Repayment (IBR), Income-Contingent Repayment (ICR), or Paye As You Earn (PAYE).

Repayment lengthNo more than 20 or 25 yearsNo more than 25 yearsNo more than 25 yearsNo more than 20 years
Payment amounts10% of discretionary income15% of discretionary income20% of discretionary income10% of discretionary income
Who it’s best forBorrowers looking for a lower monthly paymentFederal Family Education Loan Program (FFELP) borrowersAvailable to Parent PLUS Loan borrowersBorrowers with graduate student loans
To qualifyMust have Federal Direct LoansFFEL Program and Direct LoansMust have Federal Direct LoansDirect Loan borrowers since Oct. 1, 2007

When REPAYE might make sense for you

REPAYE is the best repayment plan for many student loan borrowers. It has wide qualification requirements, gives you the lowest payment, and results in forgiveness for the remainder of your balance after 20 years if you only have undergraduate loans.

REPAYE could make sense in these scenarios:

  • You’re single and have a low income and high monthly payments
  • You’re married and both you and your spouse have large student loans
  • You have student loans that don’t qualify for other income-driven repayment plans due to the origination or disbursement date
  • You have any type of Federal Direct Loan and want the lowest monthly payment possible
  • You’re willing to pay for your loans over a longer period of time to get a lower monthly payment

How to apply for REPAYE

Applying for REPAYE is easy. The best way to apply for most people is online at the website.

Here’s how to apply for REPAYE apply online:

  1. Go to the IDR plan application page
  2. Scroll down to the section for new applicants or returning applicants
  3. Click the button to log in and start your application
  4. Log in with your FSA ID and password (the same login you used when completing the FAFSA)
  5. Enter your personal information including details on your family size, employment, and marital status
  6. Connect your application to your IRS tax return to import your adjusted gross income (AGI) and other required financial details from your taxes
  7. Select the REPAYE option if eligible
  8. Enter your personal contact information
  9. Review everything for accuracy, sign, and submit your application

You can also get a PDF version of the paper application to mail in if you prefer.

What you can do if you don’t qualify for REPAYE

Some borrowers don’t qualify for REPAYE. If you don’t qualify and want an income-driven repayment plan, start the application process the same as you would for REPAYE. When you get to the end of the financial section, you will be presented with other options your loans and income.

If you have good credit, you might be able to save money by refinancing your student loans to get a lower interest rate. Those loans don’t end with forgiveness after 20 or 25 years, so do the math and weigh out the pros and cons to decide what makes the most sense for you.

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PAYE Vs. REPAYE: Which Student Loan Payment Plan Is Right For You?

REPAYE: How it works and is it right for you?

Editorial Note: Forbes may earn a commission on sales made from partner links on this page, but that doesn't affect our editors' opinions or evaluations.

If you have federal student loans and can’t afford your current monthly payments, enrolling in an income-driven repayment (IDR) plan can give you some relief. By basing your monthly payments on your discretionary income and extending your repayment term, IDR plans can reduce your payments. But which IDR plan is best for you?

Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE) are two of the four available IDR plans. They differ in how much you could potentially pay—and for how long—as well as the types of student loans eligible. Here’s what you need to know about these two repayment options.

What Is Pay As You Earn (PAYE)?

PAYE was introduced in 2012 by the Obama administration as an alternative to the existing income-based repayment plan.

As of 2020, PAYE is the third-most popular IDR plan with 1.48 million borrowers enrolled and $108.5 billion in outstanding loans.

Under PAYE, the repayment term is set at 20 years for both graduate and undergraduate students. If you enroll in this plan, the loan servicer sets your monthly payment at 10% of your discretionary income, but your payment will never exceed what it would be under a standard repayment plan with a 10-year term.

Not all federal loan borrowers are eligible for PAYE. To qualify for PAYE, you must be a new loan borrower—meaning you don’t have an outstanding loan balance on a direct loan or Federal Family Education Loan (FFEL) on or after Oct. 1, 2007, and you received a disbursement of a direct loan on or after Oct. 1, 2011.

PAYE Interest Subsidy

If you’re enrolled in PAYE and your monthly payment doesn’t cover all of the interest that is due, the government will pay for the remaining interest on your subsidized loans for the first three years of repayment under PAYE. If you have unsubsidized loans, you’re responsible for all interest charges.

What Is Revised Pay As You Earn (REPAYE)?

Launched in 2015, REPAYE is the newest and most widely available of the four IDR plans. REPAYE is the most popular IDR option. As of 2020, 3.2 million borrowers are enrolled in REPAYE with $189.4 billion of student loans in repayment.

Available to all federal loan borrowers, REPAYE limits your monthly payment to 10% of your discretionary income, but there is no payment cap, meaning your payments eventually could be higher than it would be on the standard plan. If all of your loans were for undergraduate study, your repayment term is 20 years. If any of your loans were for graduate or professional school, your repayment term is extended to 25 years.

REPAYE Interest Subsidy

With REPAYE, if your monthly payment isn’t enough to cover the cost of interest that accrues, the government will pay all of the remaining interest that is due on your subsidized loans for up to three years.

After the three-year period expires, the government will pay half of the remaining interest on your subsidized loans. With unsubsidized loans, the government will always pay for half of the interest that is due.

PAYE Vs. REPAYE: Key Differences

  • Repayment term: Under PAYE, the repayment term is always 20 years. With REPAYE, your repayment term is determined by your education level. Your loan term is 20 years if all of your loans were for undergraduate study and 25 years if any of your loans were for graduate school.
  • Payment cap: With PAYE, your monthly payment will never exceed the payment you’d make under a standard repayment plan. By contrast, REPAYE doesn’t have a payment cap.Eligible loans: All federal direct loans, regardless of when you first took them out, are eligible for REPAYE. PAYE is more limited; it’s only available to new direct loan borrowers.
  • Interest subsidy: How interest is handled depends on your repayment plan. With REPAYE, the government covers half of the interest that is due on unsubsidized loans. Under PAYE, you’re solely responsible for all interest charges if you have unsubsidized loans.
  • Marital status: Your loan servicer will use your spouse’s information when calculating your monthly payment for REPAYE, even if you file separate tax returns. PAYE works differently; if you file separate tax returns, it only considers your income when determining your payments.

REPAYE Vs. PAYE: Similarities

  • Loan forgiveness. Both PAYE and REPAYE are qualifying repayment plans if you’re pursuing Public Service Loan Forgiveness or if you have a remaining balance after completing your repayment term
  • Discretionary income. Your monthly payment under PAYE and REPAYE is set at 10% of your discretionary income. For both repayment plans, your discretionary income is the difference between your adjusted gross income and 150% of the federal poverty level for your family size and location

Income-Driven Repayment (IDR) Alternatives

If neither PAYE nor REPAYE is right for you, there are other repayment options for federal direct loan borrowers, including:

  • Income-based repayment (IBR). Depending on when you first took out your loans, your payments will be either 10% or 15% of your discretionary income under IBR, and your repayment term will be 20 or 25 years
  • Income-contingent repayment (ICR). The only IDR plan available to parent loan borrowers, ICR sets your payment at 20% of your discretionary income and has a repayment term of 25 years

If you don’t have direct loans or are ineligible for an IDR plan, consider the following federal repayment alternatives:

  • Extended repayment. If you have at least $30,000 in direct loans, you can qualify for extended repayment. With this option, your repayment term is extended to 25 years, and your payments may be fixed or graduated.
  • Graduated repayment. Available to all federal loan borrowers, your loans are paid off within 10 years with graduated repayment (or up to 30 years for consolidated loans). Your payments start low and increase every two years, even if your income doesn’t change.
  • Income-sensitive repayment. If you have FFEL Loans, you can qualify for an income-sensitive repayment plan. With this option, your repayment term is at least 15 years and your monthly payment is your annual income.
  • Direct consolidation loans. By consolidating your loans, you can extend your repayment term to 30 years, reducing your monthly payment.

How to Choose the Right Payment Plan for You

If you’re not sure whether PAYE or REPAYE is best for you, there is help available.

You can use the Federal Student Aid Loan Simulator to enter your loan information and see what your monthly payments would be under each of the available IDR plans.

It will tell you what plans you’re eligible for, how much you’ll pay over the loan repayment term and how much will be forgiven if you qualify for loan discharge.

By using the Loan Simulator, you can see which plan would give you the lowest monthly payment so you can make an informed decision when enrolling. On the Income-Driven Repayment Plan Request form, you can also choose the option, “I want the income-driven repayment plan with the lowest monthly payment” to be automatically enrolled in the cheapest plan.

What about Student Loan Refinancing?

While IDR plans PAYE and REPAYE can reduce your monthly payments, you’ll still have to make payments for decades. With the longer loan term, you may pay more in interest charges. And if you have private student loans, you’re ineligible for IDR plans.

Another way to manage your education debt is student loan refinancing. When you refinance your loans, you combine multiple loans into one easy-to-manage loan. You can qualify for new loan terms, including a lower interest rate and monthly payment, helping you save money over time. This option is best for borrowers who have stable incomes and good-to-excellent credit scores.

If you’re considering refinancing, make sure you get quotes from multiple lenders so you can find the lowest interest rate. Check out our picks for the best refinancing lenders.


REPAYE: How it works and is it right for you?

REPAYE: How it works and is it right for you?

When comparing income-based repayment options for student loans, REPAYE (Revised Pay as You Earn) might catch your eye if you're looking for low monthly payments.

This program bases your monthly payments on your income, potentially allowing some much-needed breathing room in your budget. Compared to other income-driven repayment plans, there are several features that make REPAYE attractive when you're overwhelmed by student loan payments.

If you have private student loans, however, you should head to a multi-lender marketplace Credible to see if you can lower your monthly payments with a student loan refinance. Insert some simple information ( your loan balance) into Credible's free online tools to see if you can reduce your payment and cut down your loan debt quicker today.

For those with federal loans considering alternative loan repayment plans REPAYE, here are some simple questions you should ask.

  • How does the REPAYE plan work?
  • Is REPAYE a good idea?
  • Is REPAYE right for me?
  • Should I consider other loan repayment plans?

How does the REPAYE plan work?

The REPAYE (Revised Pay as You Earn) option is designed primarily to help you lower your monthly loan payments.

It's similar to other income-driven repayment plans but with some key differences:

  • For eligible loans, the monthly payment is 10% of income over 150% of the poverty line. “In other words, if you earn less than 150 percent of the poverty line, you don't pay anything,” said Robert Farrington, creator of The College Investor. 
  • REPAYE also subsidizes interest on student loans for some borrowers. If your monthly payment doesn't cover the interest that accrues on your loans, the federal government picks up the tab during your first three years of enrollment in the program. “After that, the government will pay for half of that interest,” said Farrington. “If you have unsubsidized loans, the government will pay for half of the interest that's due.” 
  • Revised Pay as You Earn allows you 20 years to pay off undergraduate loans and up to 25 years for graduate loans. 

Here's an example of what your payment might look under REPAYE. Assume that you graduated with $26,946, which is the average debt load for students attending four-year public schools, according to the Department of Education. Your starting salary is $40,000 a year and you're not expecting to get a raise any time soon. 

If you choose the REPAYE program, your monthly payments would be $177 and you'd pay your loans off in 20 years. The standard repayment program would help you become student debt-free in 10 years, but your monthly payment would be almost $100 more, at $272 per month.

If this loan repayment plan doesn't make sense in your situation, consider checking out your student loan refinance options via Credible. A student loan refinance can help private student loan borrowers lower their monthly student loan payments and make loan debt more manageable.


Is REPAYE a good idea?

REPAYE may be better suited to some borrowers than others for managing student loans.

You may consider using this program if:

  • You took out Direct Loans or consolidated Stafford and Federal Family Education Loans into a Direct Loan.
  • You're single and don't expect your household income to increase significantly in the long-term. 
  • You're interested in Public Service Loan Forgiveness. 
  • You have graduate school debt but don't want to take 25 years to pay it off. 
  • You don't qualify for other income-driven repayment options. 

Keep in mind that not every loan is eligible for REPAYE. Direct Parent PLUS loans, Direct Consolidation loans that include PLUS loans and Perkins loans aren't covered by this repayment option. Whether it makes sense for you can depend on how much debt you have, your income and your primary goal in managing student loans.

Is REPAYE right for me?

“The program can be great for some, but there are some drawbacks,” said Farrington. “For one, you must always use your combined adjusted gross income if you're married, which may raise your monthly payment.”

In that scenario, you'd be better off considering other income-driven repayment plans, such as Income-Based Repayment or Income-Contingent Repayment.

The key is understanding what you can realistically afford to pay. Income-Contingent Repayment, for instance, limits payments to 20 percent of your discretionary income so using the numbers from the earlier example, your monthly payment would be $195.


Should I consider other loan repayment plans?

Aside from income-based repayment plans, there are other ways to lower monthly student loan payments, such as:

  1. Student loan refinance
  2. Debt consolidation loans
  3. Graduated repayment

1. Student loan refinance

A student loan refinance can help you secure a lower interest rate (especially given today's low loan rates) and reduce your monthly payments.

A student loan refinance can help make your loan debt easier to deal with and can potentially even cut the life of your loan. Just remember: This is a better option for those with private student loans.

If you have federal student loans, make sure to do your research (as you could lose some federal benefits) before you refinance.

Keep in mind that loan rates vary greatly between lenders, so be sure to use a tool Credible to shop around.


2. Debt consolidation loans

Debt consolidation allows you to combine multiple loans into one, which can help make monthly payments for federal loans more manageable. Comparing loan consolidation and refinancing can help you figure out which one yields the most benefit.

You can visit Credible to find the best loan rates and decide what debt it makes sense to pay.


3. Graduated repayment

Graduated repayment starts your payments off low using your current income, then increases them as you earn more money. Extended repayment does something similar, with payments increasing periodically every two years.

“There is no one-size-fits-all program, so make sure you do your research and decide what’s best for you,” said Farrington.



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