PAYE vs. REPAYE for Student Loans: How to Choose

Generally, PAYE is better for married borrowers in cases where both spouses have an income.
Teddy NykielApr 12, 2019
paye-vs-repaye

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Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE) are both federal income-driven repayment plans that extend your student loan term, set payments at 10% of your discretionary income and forgive any balance remaining after the repayment period.

Generally speaking, PAYE is a better option for married borrowers in cases where both spouses have an income. REPAYE is typically better for single borrowers and people who don’t qualify for PAYE.

But making sense of and ’s nuanced differences can make your head spin:

People with large amounts of debt and high income potential, such as dentists or physicians, may want to weigh factors such as PAYE's monthly payment cap and REPAYE’s superior interest subsidy.

You’ll need to do the math when debating PAYE vs. REPAYE to determine which plan nets out in your favor, but here are guidelines for making the decision.

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Private student loans aren't eligible for any of the four income-driven repayment (IDR) plans, including PAYE and REPAYE.

There are two main reasons to choose PAYE or REPAYE for federal student loan repayment:

In either scenario, your goal is likely to have the lowest possible monthly payment, so an income-driven repayment plan makes sense.

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If you're not pursuing PSLF and can afford to make payments on the , you should. You'll save on interest and become debt-free faster by sticking with the standard plan. If you have good credit, you can go a step further and to get a lower interest rate and save more.

It's also totally fine to go on income-driven repayment temporarily. Doctors, for instance, might want to make payments on PAYE or REPAYE during residency and refinance when they become an attending.

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To be eligible for PAYE, you must meet all of these requirements:

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PAYE’s income eligibility requirement effectively means that you qualify only if you’d benefit from the plan by getting a lower payment. On PAYE, your payment will never be higher than it would be on the standard repayment plan.

If you don't fit PAYE's requirements, your decision is easy: Choose REPAYE.

All federal loan borrowers qualify for REPAYE, regardless of income or when they borrowed. But if your income is high enough, your payment under REPAYE could be higher than it would be on the standard repayment plan.

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Use Federal Student Aid’s tool to compare monthly payments for PAYE vs. REPAYE, as well as all other federal student loan repayment plans. The tool also shows total interest costs and loan forgiveness potential on each plan. To get the most accurate results, include all of the following information:

Compare the monthly payment amounts under each repayment plan and choose the one with the lowest monthly payment.

Married borrowers who file taxes separately will see higher monthly payments on REPAYE if their spouse has an income. That’s because REPAYE payments are always based on a couple’s combined income, whereas PAYE will use only your income if you file taxes separately.

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This flexibility means PAYE is likely a better option if you’re married or anticipate getting married in the future. If you’re single or expect your income to grow, REPAYE is often the better choice. You’ll accrue less interest on REPAYE because of the plan’s expanded interest subsidy.

Under both PAYE and REPAYE, the government subsidizes 100% of unpaid interest that accrues on subsidized loans during the first three years of repayment. In other words, those loans won't accrue interest even if your payment isn't enough to cover all of the interest that accrues.

REPAYE goes a step further by subsidizing 50% of unpaid interest that accrues on subsidized loans after the first three years of repayment and on unsubsidized loans during all periods.

Before you make a final decision on PAYE vs. REPAYE, make sure you know these details:

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