Revised Pay as You Earn

The Repaye Program was started in 2015 to extend the benefits of Income Driven Repayment Plans to more individuals. Repaye provides the forgiveness option to undergraduates loans after 20 years in repayment and to graduate loans after 25 years. The monthly payments will be calculated as 10 of the household income.

Do You Qualify For Repaye?

To apply for the Revised Pay as You Earn Program you must have Direct Federal Loans. Your years in repayment are no longer calculated by the date your loan was taken out. In this plan you would make payments for 20 years on undergraduate loans, and 25 years for graduate loans. Any loans that are not Direct Loans will not qualify for this program unless they are Direct Consolidated by The Department of Education.

Benefits of The Repaye Program?

There are several benefits to this plan, quite similar to the IBR. In this program your monthly payments are income based, you are eligible for interest and possible loan relief, as well as having loans prepared for Public Service Loan Forgiveness (if you are employed in the public sector).

Income based payments are the biggest part of this program. Anyone enrolled into the Repaye Plan will have a monthly payment calculated as 10 of the households monthly income vs the 15 in the IBR. 10 discretionary income is currently the lowest monthly payment afforded to anyone in repayment unless qualifications were met for a $0 monthly payment due to unemployment or some other financial hardship.

Repaye does support interest forgiveness. Just like the IBR, persons who’s monthly payments are calculated to be less than the monthly interest on the loan will be eligible for subsidized interest to be bought back from their loan in the first three consecutive years on this plan. What makes interest buyback sweeter in Repaye is that you are able to have half of the subsidized interest bought back each year after year three if your monthly payments are still lower than the amount of interest accrued.

In the Repaye Program, your loan is eligible for relief after only 20 years in repayment for an undergraduate degree. At most you would be in repayment on the loans for 25 years and this is in the case that they were graduate loans or Direct Consolidated to be included into a forgiveness plan.

Public Service Loan Forgiveness is supported by this program as well. Even if your monthly payment is calculated as $0/month, those months count towards the 120 months required for an employee of the public sector to receive forgiveness.

Repaye was initiated to address several concerns from the other IDR options. On Repaye you are eligible for a greater opportunity at interest forgiveness. This is because of the interest that may be forgiven beyond the initial three year period on the IBR. Repaye also has no income requirements like the other IDR’s. Because the plan also reaches more borrowers with the removal of loan origination date restrictions, Repaye has quickly become one of the most utilized Income Driven Repayment options.

Things to Consider

–Although Repaye is a great solution for many, like anything else, it’s not for everyone. If you are already in a forgiveness offering repayment plan and decide to move over to repaye it will restart the calculation of your term. For instance, if you have made payments on the IBR for four years and find that your monthly payment is still lower than the interest on the loan each month, you may consider  moving over to Repaye for continued interest forgiveness. That’s great, but your years in repayment will start over once you make the switch.

–Unlike the IBR monthly payments on Repaye will never cap. For those in a better financial position, it could cause monthly payments that are higher than what your payments would’ve been on the Standard Plan.

–For those with Graduate Loans, forgiveness is pushed back five more years than in the other IDR’s. On repaye, a Graduate Loan will only receive relief after 25 years of qualifying monthly payments.

This is where being informed and prepared can really be key. If your situation calls for lower payments to be the priority, then 25 years of lower payments may be a better plan of action for you and your family. The alternative of that is that if you are interested in receiving forgiveness as soon as possible Paye may be a wiser choice, despite a slightly higher monthly payment.

–Lastly, if you are a married couple, the Repaye Program could result in a higher monthly payment for you. If you and your spouse file taxes separately, the Paye plan will count only your income. This is different with Repaye. Rather the two of you file jointly or separately the income will be combined for a married couple to calculate the monthly payments for your loan.