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  • 5m.
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    Using The Revised Pay As You Earn (REPAYE) Repayment Plan

    Revised Pay As You Earn (REPAYE) is the latest income-driven repayment option for federal student loans, and most federal student loan borrowers can take advantage of it.
    By Ashley Norwood - Updated: December 17, 2015

    What You'll Learn

    • What the REPAYE plan is.
    • Who is eligible for REPAYE.
    • How to apply for REPAYE.
    A rolled up stack of 100 dollar bills

    Revised Pay As You Earn (REPAYE) is an income-driven repayment plan for federal student loan borrowers. REPAYE is similar to Pay As You Earn (PAYE), income-based repayment (IBR), and income-contingent repayment (ICR); however, it has some unique qualities to it as well.

    The Basics of REPAYE

    • All Direct Loan (DL) Stafford and Grad PLUS loan borrowers are eligible for REPAYE regardless of when they borrowed their loans. (FFELP borrowers can consolidate into DL to apply.)
    • Borrowers do not need to have a partial financial hardship to be eligible.
    • Borrowers must provide their spouse's income when applying, whether the couple files their federal tax returns jointly or separately. The only exception to this is when a couple is legally separated or the borrower cannot reasonably access the spouse's income information. (Spouses cannot be included in the family size if the spouse's income is not provided.)
    • Monthly payments are capped at 10% of the borrower's discretionary income, which is the adjusted gross income (AGI) minus 150% of the state poverty guideline for the family. Payments can be as low as $0 per month.
    • For borrowers who only borrowed undergraduate loans, the remaining balance at the end of 20 years and 240 eligible payments will be forgiven but would be taxable—if the loan hasn't been paid off by that time.
    • For borrowers who borrowed any loans for graduate study, the remaining balance at the end of 25 years and 300 eligible payments will be forgiven but would be taxable—if the loan hasn't been paid off by that time.
    • Your remaining balance may be forgiven after 10 years if you work for a public service or nonprofit employer, and this amount wouldn't be taxable.

    The Fine Print

    • You need to reapply for REPAYE annually to reflect your updated financial situation and family size. As your income increases, your payments will increase as well.
    • If you do not renew on time, interest will capitalize and you will be put on a 10-year, alternative repayment plan.
    • There is no minimum monthly payment under REPAYE. It can be as low as $0 per month and still count as an eligible payment, but that means that your interest will build up over time—usually a lot more than with other non-income-driven repayment plans.
    • There is no maximum payment under REPAYE. This means that if your income goes up significantly, your payments may exceed the standard 10-year repayment plan amount, which usually offers the most expensive monthly payments.
    • For the first consecutive 3 years under REPAYE, the government pays the entire difference between the monthly payment and the monthly accruing interest (excluding periods of economic hardship deferment) on subsidized loans and the subsidized portion of Consolidation loans. After that, the government pays 50% of the difference between the monthly payment and the monthly accruing interest, and the borrower is responsible for the other half.
    • For unsubsidized loans and unsubsidized portions of Consolidation loans, the government pays half of the difference between the monthly payment and the monthly accruing interest while the borrower is using REPAYE, and the borrower is responsible for the other half.
    • Interest is only capitalized when the borrower leaves REPAYE.

    Loan Eligibility

    Only DL loans are eligible, but FFELP loans can become eligible through consolidation. Eligible loans include:

    • Direct subsidized and unsubsidized Stafford loans
    • Direct Grad PLUS loans
    • Direct Consolidation loans (Perkins and FFELP loans may be included in the consolidation, but Parent PLUS loans cannot)

    Ineligible loans include:

    • FFELP loans (need to be consolidated into DL)
    • Direct or FFELP Parent PLUS loans
    • Direct Consolidation loans that include Parent PLUS loans
    • Private, state, and other non-federal student loans
    • Loans in default

    Stacking It Up

    Borrowers often wonder which income-driven repayment option to choose. Sometimes, this is easy to figure out—most borrowers won't actually qualify for every plan. However, here's a look at some key features of them all to help you figure out which is right for you.

     

    REPAYE

    Old IBR

    New IBR

    PAYE

    ICR

    Monthly payment

    10% of disposable income

    15% of disposable income

    10% of disposable income

    10% of disposable income

    20% of disposable income

    Eligible loan programs

    DL

    DL or FFEL

    DL

    DL

    DL

    Forgiveness length

     

    20 years (240 eligible payments) for undergrad loans only

    25 years (300 eligible payments) for grad loans

    25 years (300 eligible payments)

    20 years (240 eligible payments)

    20 years (240 eligible payments)

    25 years (300 eligible payments)

    Must prove partial financial hardship

    No

    Yes

    Yes

    Yes

    No

    Interest subsidy if payments don't cover interest

    Yes, subsidized loans first 3 years and 50% of difference afterward and 50% of difference on unsubsidized loans afterward

    Yes, subsidized loans first 3 years

    Yes, subsidized loans first 3 years

    Yes, subsidized loans first 3 years

    No

    Interest capitalization

    Yes, when the borrower leaves the plan

    Yes, when there is no longer a partial financial hardship or leaves plan

    Yes, when there is no longer a partial financial hardship or leaves plan

    Yes, when there is no longer a partial financial hardship or leaves plan, but capitalization is limited to 10% of the original principal balance when entered this plan

    Yes, annually but limited to 10% of the original principal balance when entered this plan

    More of a numbers person? No problem! Let's look at what the initial monthly payment could look like under the REPAYE plan and other repayments plans. Keep in mind that monthly payments may go up over time depending on financial circumstances andrepayment plan.

    REPAYE chart

    REPAYE typically offers low payments, but that can mean paying interest longer—which makes the loan more expensive overall. Also, borrowers shouldn't count on forgiveness because the loan can be repaid in full before 20 or 25 years and 240 or 300 payments.

    Here's the total amount paid under REPAYE, compared to other plans. The repayment period will vary for each repayment plan.

    REPAYE chart

    How To Apply

    If you decide that REPAYE is right for you, you can apply quickly and easily through the online application at StudentLoans.gov.

    By applying online, you'll allow your servicer to receive your tax information from the IRS—which could save you the time of requesting the information yourself. To get started, log in to your account and select "Income-Driven Repayment Request Form."

    Por Ashley Norwood - Actualizado: 17 diciembre 2015
    A rolled up stack of 100 dollar bills
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