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REPAYE stands for Revised Pay As You Earn. Pay As You Earn or PAYE was one of the payment options offered by the US Department of Education. According to this plan, borrowers paid a percentage of their income as their monthly loan payment. The advantage of the PAYE program was that it helped borrowers get a better handle on their finances if they were struggling to make the payments under the Standard Repayment Plan.
While this offered a practical solution to individuals with low monthly incomes, the terms and conditions of the program were restrictive. It automatically excluded many borrowers. The US Department of Education revised the plan in 2015 in an effort to make the plan more inclusive. They named the new plan REPAYE or Revised Pay As You Earn. Here’s everything you need to know about REPAYE.
REPAYE vs PAYE
REPAYE is similar to PAYE in many ways. Two of the most notable similarities are:
- Both programs set monthly payments to 10% of discretionary income
- Student loan balances may be forgiven after a 20-year repayment period if the conditions are met
Here’s a look at how REPAYE is different from PAYE.
Income Requirements – With PAYE, borrowers had to provide proof of income compared to outstanding student debt to qualify. Borrowers who do not meet required economic qualifiers still qualify for the program regardless of their debt to student loan balance ratio.
Time Constraints – The timing of the loan played a key role with PAYE. To qualify for PAYE, students had to be new borrowers as of October 1, 2007. They also should have received their loan disbursement by at least October 1, 2011. However, there are no time constraints with REPAYE. Students sign up for the program regardless of when they apply for the loan or when the loan is disbursed.
Payment Limits – PAYE limited potential monthly payments to 10% of a standard repayment plan. There are no such payment limitations with REPAYE. For the life of the loan, borrowers continue to pay 10% of their discretionary income, no matter how much they earn. This means you will have to make higher monthly payments if your monthly income goes up substantially but that is good for you as you will be out of debt earlier.
Married Couples – The REPAYE program sets the monthly payment amount based on combined spousal income and because there are no payment limits, you may end up making higher payments every month. This is unlike other income-based repayment plans that use their combined income for tax purposes ONLY if the couple files tax jointly.
Is REPAYE The Right Option For You?
REPAYE is one of the most popular student loan forgiveness programs for federal student loans. You qualify for REPAYE if you have Direct, Stafford, or Graduate PLUS loans, regardless of when you borrowed the money. If you are struggling to make your student loan payments, switching to REPAYE could help make your monthly dues more affordable.
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