In December 2015, the Department of Education created REPAYE (Revised Pay As You Earn) as an extension of the current PAYE program. REPAYE was designed to remove some of the restrictions imposed by previous IDR plans while adding some additional benefits. In the REPAYE your monthly payment would be capped at 10% of your discretionary income, and offer loan forgiveness after 20 years of payments for undergraduate loans, and 25 years for graduate loans.
Qualifications for REPAYE
REPAYE is a federal repayment program and eligibility requires that you have Federal Direct student loans, Stafford or Graduate Plus loans. Parent Plus loans unfortunately do not qualify, and Direct Loans consolidate that include a Parent Plus loan would also not qualify. Private loans also do not qualify for this program. There are no loan origination date restrictions for eligibility as was previously the case with the PAYE plan. There are also no minimum income requirements.
*Note – If you have Stafford or FFEL loans they must be consolidated into the Direct Loan program to qualify. Any PLUS loans added into that consolidation would make the loans ineligible.
Benefits of the REPAYE plan
Under the REPAYE plan your payments would be capped at 10% of your discretionary income. This means that the payment should be very affordable for most people, and have a big impact specifically for those with a lower income. This is currently the lowest percentage of discretionary income required as a payment for any of the income driven repayment plans.
The REPAYE is also a qualifying repayment type for Public Service Loan Forgiveness(PSLF). One of the main reasons people fail to qualify for PSLF is that their loan payments are not in a qualifying payment type. REPAYE solves this program and makes your payment eligible.
Enrolling in the REPAYE also makes your loans eligible for loan forgiveness after 20 years if they are undergraduate loans, and in 25 years is they are graduate loans. If loan types have been combined in a consolidation, then it would be a 25 year forgiveness term.
A government subsidy is included which covers unpaid interest accrued each month for the first three years, and HALF the accruing interest afterward (this is on subsidized loans only. This can amount to many thousands of dollars being forgiven. Here is additional information on how interest forgiveness works.
Reasons To Avoid REPAYE
Restarting of Your Loan Forgiveness Term
If you are currently in a repayment plan that has forgiveness at the end of the term, enrolling into the REPAYE through a consolidation would restart your track to forgiveness.
Married Couples May Have Higher Payments than PAYE
If you are married, there is a major difference calculating your monthly payment between PAYE and REPAYE. In REPAYE your monthly payment will be based on both yourself and your spouses income, regardless if you file taxes joint or separately. This can have a significant impact on your payment. In the PAYE program the payment will only be based on your taxes, and not your spouses if filing separately. We high advise you do the math and see which one makes most sense for you.
Graduate Loans Extended Forgiveness Terms
Borrowers with graduate loans may want to stay in the PAYE program which offers forgiveness on the debt after 20 years instead of 25 in REPAYE. This information should be used in conjunction with the payment amount. It might make sense for you to have a smaller payment for 25 years in the REPAYE, than a larger payment for 20 years in the PAYE. There is no one size fits all here, and its important to do your research and calculations prior to enrolling into their program.
Payment Not Capped
One thing to note with REPAYE is that your payment amount is NOT capped at what your Standard repayment monthly repayment would be. This means that if your income gets high, your REPAYE payment could be higher than your standard repayment would have been.
Why was the REPAYE program introduced?
Date Restrictions Removed
One of the drawbacks of the PAYE program was that anyone who took out student loans before October 2007 was ineligible to participate. REPAYE removes that barrier completely. With REPAYE, there is no time requirement to participate. Whether you took out student loans 20 years ago or yesterday, you are now eligible for the REPAYE program.
Removal of Income Requirements
Borrowers no longer have to show that their income is low in comparison with their student loan debt to qualify for REPAYE.
Increasing Interest Forgiveness
in REPAYE they have expanded the amount of interest forgiveness as previously discussed above.
Tax Implication for Forgiven Loan Balance
Being enrolled in the REPAYE plan may end up resulting in loan forgiveness on any unpaid balance of the loan after 20-25 years of payments. The amount forgiven may be considered taxable income.
How do I get Enrolled?
If you have federal student loans, you can always enroll in any of the income-driven repayment plans by calling your loan servicer to help you or applying through the US Department of Education for free, or you can work with a credit counselor or hire a private company to assist you through the process.
Compare the Best Student Loan Refinance Rates
Here are our top student loan refinance picks for 2019
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Student Debt Relief Loan Refinancing Advertiser Disclosure
College Ave: College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
College Ave Refi Education loans are not currently available to residents of Maine.
1 – The 0.25% auto-pay interest rate reduction applies as long as the borrower or cosigner, if applicable, enrolls in auto-pay and authorizes our loan servicer to automatically deduct your monthly payments from a valid bank account via Automated Clearing House (“ACH”). The rate reduction applies for as long as the monthly payment amount is successfully deducted from the designated bank account and is suspended during periods of forbearance and certain deferments. Variable rates may increase after consummation.
2 – $5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees. Information advertised valid as of 04/26/2019. Variable interest rates may increase after consummation.
3 – This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
ELFI: Subject to credit approval. Terms and conditions apply. To qualify for refinancing or student loans consolidation through ELFI, you must have at least $15,000 in student loan debt and must have earned a bachelor’s degree or higher from an approved post-secondary institution.
LendKey: Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
CommonBond: Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate.
Splash Financial: Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval.com
Earnest: To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest’s fixed-rate loan rates range from 3.89% APR (with autopay) to 7.89% APR (with autopay). Variable rate loan rates range from 2.50% APR (with autopay) to 7.27% APR (with autopay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms of 10 years or less. For loan terms of 10 to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 0.26% and 5.03% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 23, 2019 and are subject to change based on market conditions and borrower eligibility.
Auto Pay Discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/23/19. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice.
Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 303 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, e-mail us at firstname.lastname@example.org, or call 888-601-2801 for more information on our student loan refinance product.