Paye as you Earn Repayment Plan

The Paye Program was first introduced in 2012 by former President Barack Obama. Paye was one of Obama’s first efforts to leap the hurdle of surmounting student loan debt. On December 21, 2012 Paye was introduced as an initial attempt at easing some of the stress associated with repaying Federal Student Loans. This program has proven beneficial to many and has more recently been revised to allow income-based repayment options to even more individuals. This program will allow a repayment solution to those facing economic strain or partial financial hardship. This option is afforded only to those whose Federal Student Loans were taken out after October 1, 2007.

Are your loans eligible for Paye?:

  • You must have loans that were taken out on or after October 1, 2007. This means all of your loans. Any loans issued prior to October 1, 2007 are not eligible.
  • The Federal Loans must be Direct Loans to be eligible.

            Direct Subsidized Federal Loans

            Direct Unsubsidized Federal Loans

            Direct Consolidated Subsidized Loans

            Direct Consolidated Unsubsidized Loans

            Direct Plus Loans (Graduate Loans only)

Direct Parent Plus Loans Are Not eligible for the Paye Program

  • The Paye program does require proof of Partial Financial Hardship as specified by The Department of Education.

Paye Program Benefits

  1. 10 capped income based repayment plan
  2. Student Loan Relief after 20yrs (five years earlier than the other relief programs)

There are two major benefits to this plan. Once enrolled into Paye, your monthly payment will not rise above 10 of your discretionary income. This payment amount will be recalculated each year (Annual Recertification). The annual income recertification allows your monthly payment to adjust as your household income adjust. A decrease in income will also mean a decrease in your monthly payment amount on the Paye Plan.

The Paye Plan also offers the shortest repayment term before loan relief. Paye requires 20 years in repayment for the loan to be eligible for relief. This relief, or discharge, of your loan balance is available after 20 years of qualifying monthly payments.

Relief of the balance of  your loan is considered taxable income by the IRS. Paye offers the lowest rate to calculate monthly payments as well as the shorter term in repayment to receive loan relief.

Paye Revision

It is important to remember that this plan has been revised. Although Paye is still available to borrowers with loans newer than 10/01/2007, there is now a more inclusive option known as Repaye. Repaye was also established during the Obama Administration. As of 2015 there are income based repayment options for Direct Loans that were issued before 10/012017.

Coming Changes To The PAYE Repayment Plan

In addition to his June executive order, the President’s proposed 2015 budget would also include these changes to PAYE in the coming year if approved by Congress:

  • Eliminate the standard payment cap under PAYE so that high-income, high-balance borrowers pay an equitable share of their earnings as their income rises.
  • Cap Public Sector Loan Forgiveness (PSLF) for undergraduate students at the aggregate loan limit to protect against institutional practices that may increase student indebtedness, yet ensure the program continues to provide sufficient relief for students committed to public service.
  • Extend the loan period to 25 years for borrowers with balances above the aggregate loan limit.
  • Prevent payments made under non-income driven repayment plans from being applied toward PSLF to ensure students with the greatest need are considered first for loan forgiveness.
  • Cap the amount of interest that is allowed to continue calculating when a borrower’s monthly payment is not enough to prevent ballooning loan balances.
  • Calculate payments for married borrowers who file separately on the combined household Adjusted Gross Income.