Options to Reduce Federal Loan Payments - Revised Pay As You Earn Tab
Revised Pay As You Earn Repayment Plan (REPAYE)
The Revised Pay As You Earn Repayment Plan caps regular monthly payments at 10% of your discretionary income or, if married, 10% of your combined discretionary income. REPAYE will forgive remaining debt after 20 years for those who borrowed only for undergraduate study and 25 years for those who borrowed for graduate study.
Under the REPAYE plan, if your calculated monthly payment doesn’t cover all of the monthly interest that accrues on your loans, then the government provides an interest subsidy benefit. For subsidized loans under the REPAYE plan, the government will pay 100% of the accrued interest for the first three consecutive years of repayment and 50% of the remaining interest after that. For unsubsidized loans under REPAYE, you only have to pay 50% of the accrued interest for the full repayment period.
For example, if the monthly interest that accrues on your subsidized loans is $40, but your monthly REPAYE Plan payment covers only $25 of this amount, then the government will pay the remaining $15 for the first three consecutive years from the date you began repaying your loans under the REPAYE Plan, and will pay $7.50 of the remaining $15 in interest after this three-year period. If the monthly interest that accrues on your unsubsidized loans is $30, but your monthly REPAYE Plan payment covers only $20 of this amount, the government will pay $5 of the remaining $10 in interest during all periods.
All Stafford, graduate/professional PLUS loans, and Consolidation loans made under the Federal Direct Loan Program are eligible for repayment under REPAYE no matter when the loans were first borrowed. Federal Perkins Loans and any loan made under the FFEL Program must be consolidated into the Direct Loan program to qualify. Parent PLUS loans or Consolidation loans that repaid parent PLUS loans do not qualify. Use the Federal Student Loan Repayment Calculator to see if this plan is right for you.