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Revised Pay As You Earn: How It Works and Whom It’s Best For

Revised Pay As You Earn, or REPAYE, is a good option if you’re single, don’t have grad school debt or don’t qualify for other income-driven repayment plans.
April 11, 2019
Loans, Student Loans
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Revised Pay As You Earn, or REPAYE, is an income-driven repayment plan that caps federal student loan payments at 10% of your discretionary income and forgives your remaining balance after 20 or 25 years of repayment.

Among income-driven options, REPAYE offers the best combination of availability to borrowers and low monthly payments. You may want to choose REPAYE in the following instances:

  • You’re single.
  • You don’t have grad school debt.
  • You expect a much higher future income.
  • You don’t qualify for other income-driven repayment plans.
If REAYE doesn’t sound right for you, consider one of the other three income-driven repayment plans.

  • Pay As You Earn (PAYE): good for single borrowers, those without grad debt and those with higher earning potential.
  • Income-Based Repayment (IBR): good for borrowers who don’t qualify for PAYE or have FFELP loans.
  • Income-Contingent Repayment (ICR): good for parent PLUS borrowers and those who only want to reduce payments slightly.

  • » MORE: Income-driven repayment: Is it right for you?

    REPAYE vs. other income-driven plans

    All income-driven plans share some similarities: Each caps payments to between 10% and 20% of your discretionary income and forgives your remaining loan balance after 20 or 25 years of payments. Use Federal Student Aid’s Repayment Estimator to see how much you might pay under different plans.

    REPAYE at a glance

    • Repayment length: 20 or 25 years.
    • Payment amounts: 10% of your discretionary income.
    • Other qualifications: Must have federal direct loans.
    • Best for: Non-married borrowers; no grad debt; higher incomes.

    The biggest difference with Revised Pay As You Earn is its interest subsidy. Because income-driven payments are often low — they can be as small as $0 — they may only chip away at the accruing interest on your loans. Interest accumulates fast that way, so most income-driven plans subsidize the difference between your payments and the accruing interest at certain points in repayment.

    REPAYE has a more generous subsidy than other income-driven plans, paying the entire difference on subsidized loans and half the difference on unsubsidized loans for the first three years. After that, it covers half the difference on both loan types.

    For example, let’s say you owe $20,000 in subsidized loans and $80,000 in unsubsidized loans, with both having 5% interest rates. Each month, your subsidized loans would accrue $84 in interest and your unsubsidized loans would accrue $336. If you qualified for $0 payments, the government would pay that entire $84 and half the $336, or $168, for the first three years under REPAYE. After that, your subsidy would be $42 and $168.

    » MORE: Calculate daily and monthly interest

    In most cases, the least confusing way to select an income-driven plan is to let your servicer place you on the one you qualify for that has the lowest monthly payment. But based on its features, specifically choosing REPAYE may be right for you in the following instances:

    Revised Pay As You Earn is open to all federal direct loan borrowers, except those with parent PLUS loans. If you have parent loans, you can only use income-contingent repayment.

    » MORE: Income-Contingent Repayment: How it works and whom it’s best for

    You can consolidate other federal loans, such as Perkins loans or older Federal Family Education Loan Program loans, for free at studentloans.gov to make them eligible for REPAYE. Weigh the pros and cons of consolidation before taking this step.

    Revised Pay As You Earn offers loan forgiveness after 20 years but tacks on an additional five years if you owe loans for graduate or professional studies. If you have graduate school debt, look into PAYE or income-based repayment to minimize your repayment term.

    » MORE: Pay As You Earn: How it works and whom it’s best for

    Qualifying for Public Service Loan Forgiveness would shrink that timeline to 10 years for any income-driven plan.

    As your income rises, you may no longer qualify for certain income-driven plans. If that happens, your payments would stop being based on your income and any unpaid interest would be added to your balance, increasing the amount you owe.

    This is not the case with REPAYE; your payments will always be capped at 10% of your discretionary income. Just keep in mind that REPAYE payments, if your income rises, can be higher than what you would pay under the standard repayment plan, unlike some other income-driven plans.

    Consider PAYE instead if you don’t think you’ll have much earning power. PAYE also caps payments at 10% of your discretionary income, but you won’t have to worry about them rising above the standard amount.

    » MORE: PAYE vs. REPAYE: How to choose

    If you’re married, Revised Pay As You Earn will count your spouse’s income when calculating your payment amount. This can make REPAYE more expensive for married borrowers, especially if your spouse earns a lot of money and has little debt.

    Other income-driven plans let married borrowers make payments based on their individual incomes, but only if they file taxes separately.

    » MORE: Guide to filing taxes with student loans

    How to apply for REPAYE

    You must enroll in Revised Pay As You Earn. You can do this by mailing a completed income-driven repayment request to your student loan servicer, but it’s easier to complete the process online. You can change your student loan repayment plan at any time.

    • Visit studentloans.gov. Log in with your Federal Student Aid ID, or create an FSA ID if you don’t have one.
    • Select income-driven repayment plan request. Preview the form so you know what documents to have ready, like your tax return.
    • Choose your plan. If you qualify for more than one income-driven repayment plan, you can be automatically placed in the plan with the lowest payment or specifically choose REPAYE if it makes the most sense for you.
    • Complete the application. Enter the required details about your income and family. Remember to include your spouse’s information, if applicable, as it will affect your payments under REPAYE.
    To stay on the Revised Pay As You Earn plan, you must resubmit the income-driven repayment application every year. If your income changes, your payments will change, too.

    If you miss the recertification deadline, you will be placed on an alternative payment plan not based on your income. This plan will last either 10 years or what’s left of your existing REPAYE repayment term, whichever has you pay your loans in full earliest. Any interest you owe will also be capitalized, or added to your principal balance, at that point.

    » MORE: How to recertify income-based repayment

    Other ways to pay less

    If income-driven repayment isn’t right for you, the federal government offers extended repayment and graduated repayment plans, which lower your payments but aren’t based on your income. You may pay more interest under these plans, though, and neither offers loan forgiveness.

    The federal government offers extended repayment and graduated repayment plans, which lower your payments but aren’t based on your income.

    You also may be able to pay less by refinancing your student loans. Refinancing federal student loans can be risky, as you’ll lose access to income-driven repayment and other federal loan programs and protections. But if you’re comfortable giving up those options and have strong credit as well as a steady income, refinancing may save you money.

    » MORE: Should I refinance my student loans?

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