Revised Pay as You Earn REPAYE

Revised Pay as You Earn is an income-driven repayment plan for federal student loans. Learn all about its eligibility, process, repayment amount and more.

Updated by Alice Jojo on 16th May 2019


The United States Department of Education offers Income Driven plans. REPAYE plan is similar to the Pay-As-You-Earn (PAYE) plan, it is just a revised version. President Barack Obama circulated an official notice asking the U.S Department of Education to revise the Pay as You Earn plan to include more borrowers. It arrived at a moment when student loan debt was rising.

The plan was revised in December 2015 as an initiative to accept five million more borrowers. It allows borrowers with any Federal student loan to enlist in the new Revised Pay as You Earn Repayment plan.

REPAYE generally limits the payments up to a minimum of 10% of the borrower's discretionary income and it became available for about five million more borrowers.


Table of Contents

Number Topics
1. A glimpse of REPAYE Program
2. Loans under the REPAYE program
3. How does the REPAYE program work?
4. How is Payment Calculated in REPAYE
5. Eligibility criteria for REPAYE
6. REPAYE Application Process
7. Documents required for applying REPAYE
8.  REPAYE Reviews
9.  Conclusion

A glimpse of REPAYE Program

  • The repayment term is 20 or 25 years.

  • The monthly payment amount is 10% of the borrower's discretionary income.

  • The borrower must have at least one federal direct loan.

  • A better option for individual borrowers with no grad debt and higher earnings.

REPAYE Plans and terms 

This repayment plan reduces the monthly loan payments, but the program also promises to pardon student debt if specific requirements are fulfilled. It forgives the remaining debt after repayment of 20 or 25 years.

REPAYE payments are 10% of the borrower's adjusted gross income (AGI) subtracted 150% of the federal poverty lines, based size of the family and state of residence. If the borrower earns less than 150% of the federal poverty line, about $18,210 for one borrower will be paid by govt and, the borrower needs to pay $0 monthly.

A major benefit of REPAYE is the government provides Interest Subsidy. The borrower utilizing this repayment facility collects interest faster than the borrower pays it off. This interest is collected and capitalizes the loan.

If the borrower has subsidized loans, the additional interest will be covered by the government. That is a 100% payment of interest for the starting three years and after three years it will cover 50% of the interest amount to be paid. If the borrower has unsubsidized loans, the government will pay 50% of the interest rate. Subsidy in interest rate is only offered by REPAYE among all the income-driven repayment plans.

Its payment structure provides a 20-year term for undergraduate student loans and 25 years term for graduate student loans or acknowledged school loans.

If the borrower still has debt remaining after the loan term is over, the remaining debt will be pardoned. The borrower will have to pay taxes for the forgiven amount, which will depend on the remaining amount. The borrower with a $50,000 forgiven amount in REPAYE may have to pay an additional tax amount $12,500 to $15,000 which is lower than the remaining debt amount.

Let's know more about Revised Pay as You Earn, like how does it calculate the monthly payments and subsidies provided by the government. 


Loans under the REPAYE program

Some loans like Direct Parent PLUS Loans and Direct Consolidated loans that include Parent Plus loans are ineligible for this kind of repayment. Let’s see what loans qualify under this REPAYE program.

  • Direct Subsidized Loans.

  • Direct Unsubsidized Loans.

  • Direct Grad PLUS loans.

  • Direct Consolidation loans.


How does the REPAYE program work?

REPAYE is not just an income-driven repayment plan it is also subsidized student loan on interest. It is designed to help borrowers with a lower income it is a federal income-based repayment program.

There are only a few selected loans that qualify under this category of loan which are Direct Subsidised and Unsubsidized loans, and Direct consolidated loans that excludes Parent PLUS loans.

 Under REPAYE the borrower’s monthly payment is 10% of the borrower's income subtracted 150% of the poverty line and your family size. If the borrower is below the poverty line it minimizes the payment to $0.

The borrower is supposed to make payments for 20 years for undergraduate loans or 25 years for graduate or acknowledged school loans.

a borrower can ask for Public Student Loan Forgiveness in this repayment plan. If the loan is paid for 20-25 years, but the debt amount is not covered the remaining amount is forgiven under the PLFS. The prevailing debt amount is forgiven and counts as income tax.

Revised Pay as You Earn grants subsidy for all the Subsidized and Unsubsidized loans. It covers 100% of accruing interest for subsidized loans for three years and 50% of the interest after three years. It also covers 50% interest in Unsubsidised loans.


How is Payment Calculated in REPAYE

In REPAYE, the borrower’s monthly payment is based on discretionary income.

The monthly payment is calculated based on the difference between discretionary income and 150% of the federal poverty line, it varies depending upon the size of family size and the state of residing.

In REPAYE, the monthly payment will remain less than 10% of the borrower's discretionary income


Eligibility criteria for REPAYE

REPAYE provides the best blend of availability to borrowers with low monthly payments. There are several reasons why a borrower would want to choose this mode of repayment. The borrower can be single or can be a married couple.

1) If the borrower does not have a grad school debt. The borrower is free to choose this repayment plan.

2) If the borrower is expecting a higher income in the future the borrower still is eligible for this repayment option.

3) If the borrower cannot afford to pay federal student loans and is not applicable for other income-driven repayment plans.

4) The borrower with a financial hardship or with no financial hardships is eligible.

5) If the borrower paid monthly repayment is greater in federal student loan in the standard repayment term of 10-year. Then the borrower can choose REPAYE with a low monthly payment.

6) If the borrower wants to utilize the public service loan forgiveness.

7) If the borrower is currently on IBR, before July 2014 because the borrower was not eligible for PAYE now can apply for REPAYE.

8) If the borrower wants to pay his student loan debt before qualifying loan forgiveness under the repayment plan.


REPAYE Application Process

 The borrower must enlist in Revised Pay as You Earn as it offers subsidies for the loan. The borrower can mail an application of income-driven repayment requests to the student loan servicer, and can also fill it through the online process because it is easier. The Repayment plans can be changed anytime.

1) Search for studentloans.gov. Log in using Federal Student Aid ID, or Login using FSA ID. If the borrower does not have an FSA ID can easily create one.

2) Choose an income-driven repayment plan request and then choose the REPAYE option. Read the application form to know what are the related documents you would require. Keep the documents ready like Personal details, the tax return and the details about the previous loan.

3) Choose the plan from the list. If the borrower qualifies for more than one income-driven repayment plan, the repayment can be automatically set among the plans with the lowest payment option.

4) Fill the required information about personal and financial data. Spouse’s information is required as it will influence the borrower's payments in REPAY.


Documents required for applying REPAYE

  • FSA ID

  • Permanent Residential Address

  • E-mail ID

  • Telephone Number (Home)

  • Mobile Number

  • Most appropriate Time to Reach the borrower.

  • The borrowers are given an option and can document their annual income electronically, through a data retrieval tool with the Internal Revenue Service by the federal government. The borrower's tax information would not be displayed in the site but the borrower would be informed. This information is hidden for security purposes.

  • In case if the borrower does not want to give Adjusted Gross Income because of the change in income. The borrower can still apply electronically using the last tax return filed.

  • After the submission of the online application form, the borrower will be given instructions to provide his current income to the loan servicer.

  • The borrower is allowed to self-certify that the borrower has no current income in the application form in case the borrower is not earning.

  • For married couples, REPAYE plans are based on both the individual's (husband and wife) income and loan information even if they file their tax differently.


REPAYE Reviews

Comparison REPAYE vs. other Income-Driven Plans

Let's compare REPAYE to other income-driven plans. These plans share a lot of similarities between them. There are only a few major differences that distinguish it from other income-driven loans are as follows.

The Revised Pay-As-You-earn repayment plans minimize monthly payments to between 10% and 20% of the borrower's discretionary income and forgive the borrowers remaining debt amount after 20 or 25 years of payments.

The most significant difference between these is the interest subsidy. As it provides a 100% subsidy on interest for three years and after three years a 50% subsidy for subsidized loans.

It also provides a 50% subsidy on the interest rate on the unsubsidized loan. If the borrower’s income is below the poverty line the borrower is then required to pay 0$, it would be subsidized by the government.

Pros of REPAYE

  • The loans are forgiven in a different term period for Undergraduate loans that is 20 years, but for graduate loans, it is forgiven after 25 years.

  • The government facilitates it with subsidized loans. The government covers the first three years of 100% accruing interest for the borrower and after the three years it pays, 50% of all accruing interest.

  • In REPAYE the government covers 50% of accrued interest for unsubsidized loans.

  • The borrower can sign for Public Service Loan Forgiveness. The debt of the borrower who served in government service for 10 years

Cons of REPAYE

In the REPAYE program, married couples have their spouse’s income combined for calculating the 10% monthly payment, even if their taxes are filed separately.

  • Spouse income is counted including the borrower's discretionary income and can increase the monthly payment amount.

  • The borrower's total payments in this repayment plan can be more than the amount of 10-year standard repayment.

  • The borrowers with graduate loans have longer repayment term than the Undergrad loans.

  • Borrowers are supposed to apply to REPAYE once yearly to remain enlisted in the repayment plan.

  • If the borrower has a remaining debt amount at the end of the plan term, the loans are forgiven. But under the new rule of Internal Revenue Service rules, the borrower has to pay income tax for the remaining amount that was forgiven.


Conclusion

Revised Pay as You Earn is one of the best among the income-driven repayment plans for students with federal loans. If the borrower is below the poverty line the debt is fully subsidized and the borrower will have to pay 0$. It also gives a 100% subsidy on the interest rate on subsidized loans for three years and 50% after three years for subsidized loans.

It is also beneficial for the borrower with no financial hardship as it provides a 50% subsidy on the interest rate for Unsubsidized loan. Married couples can also apply for this repayment plan but this repayment plan combines and consider the monthly payment, which increases the monthly payment of the borrower. 

It provides a very long term payment of 20 to 25 years. The borrower can also apply for PSLF in this repayment option. It forgives the debt after completing payment for 20 to 25 years. But the forgiven debt amount is taxable and a borrower will have to pay tax for the forgiven amount.


FAQ'S

  What loans are eligible under the REPAYE ¬†program?


The loans that are eligible for the REPAYE program are Direct Subsidized Loans, Direct Unsubsidized Loans, Direct Grad PLUS loans, Direct Consolidation loans excluding the parent plus loans.

  When can the borrower apply for PSLF in REPAYE?


After the full term payment of 20 to 25 years, the remaining debt amount is forgiven under the PSLF. but the borrower has to pay tax for that forgiven amount.

  Can married couples opt for REPAYE?


Yes, a person as an individual and as a married couple can apply for this repayment option.

  The maximum term for REPAYE for loan forgiveness?


The loans are forgiven in a different term period for Undergraduate loans that is 20 years, but for graduate loans, it is forgiven after 25 years.

  Is REPAYE subsidized?


Yes, REPAYE is subsidized it provides a 100% subsidy in accruing interest for three years and 50% after those years for Direct Subsidized loans and 50% subsidy in accruing interest for Unsubsidized loan.

  How is the repayment amount calculated in REPAYE?


The monthly payment is calculated is based on the difference between discretionary income and 150% of the federal poverty line, it varies depending upon the size of family size and the state of residing.

  Can a borrower with financial hardship apply for REPAYE?


Yes, a borrower with or without a financial hardship can apply for this repayment program.

  Do Parent PLUS loans qualify under REPAYE?


No, Parent PLUS loans do not qualify under REPAYE.

  What will be my monthly payment in REPAYE?


It depends on the borrower's annual income. The monthly payment is calculated is based on the difference between discretionary income and 150% of the federal poverty line, it varies depending upon the size of family size and the state of residing. So, Higher the annual income higher the monthly payment and lower the annual income lower the monthly payment.

  Can the borrower under the IBR plan switch to REPAYE? 


Yes, If the borrower is currently on IBR,  before July 2014 because the borrower was not eligible for PAYE now can apply for REPAYE.