If you’re struggling to repay your federal student loans, you don’t have to resign yourself to pinching pennies to make your payments. Borrowers who qualify for the Revised Pay As You Earn (REPAYE) program can get their monthly payments capped based on their income.
REPAYE is one of several U.S. Department of Education’s income-driven repayment plans (IDR) that can help make loan repayment more manageable than the 10-year Standard Repayment Plan for federal student loans. What sets REPAYE apart is its generous interest benefit and more relaxed requirements for qualification.
Here’s what you should know:
- Who is eligible for the REPAYE program?
- When is remaining student loan debt forgiven?
- What about interest on your student loans?
- How does REPAYE work with Public Service Loan Forgiveness (PSLF)?
- REPAYE and additional student loan forgiveness programs
- Is REPAYE right for you?
What is Revised Pay As You Earn (REPAYE)?
REPAYE is a relatively new program. It was introduced in 2015 as a revision to the Education Department’s Pay As You Earn (PAYE) plan, an income-driven repayment plan that generally limits your payments to 10% of your discretionary income. REPAYE opened up eligibility to millions more borrowers because unlike PAYE, it’s open to borrowers who took out federal student loans before Oct. 1, 2011.
REPAYE came at a time when student loan debt was continuing to rise. Right now, there are more than 45 million Americans with more than $1.56 trillion in student loan debt, and those numbers increase each year.
REPAYE doesn’t just reduce monthly loan payments. The program also promises to forgive student debt if certain requirements are met. Here’s a closer look at how it works.
All Direct Loan borrowers are eligible for a REPAYE plan, regardless of when the money was borrowed. Other types of student loans that are consolidated into Direct Loans — like Stafford and FFEL Plus — also qualify.
However, Parent PLUS loans or consolidated loans that include Parent PLUS loans, are not eligible. As with other income-driven repayment plans, private loans and defaulted loans are also ineligible with the REPAYE program.
Still, some student loan borrowers might find REPAYE better suited to their needs than others. To see if REPAYE is the best repayment choice for you, consider the following:
How much are monthly payments?
With the REPAYE program, payments are capped at 10% of your discretionary income. Your discretionary income is calculated using your adjusted gross income minus 150% of the state poverty guidelines for your family size and state.
Although it’s possible to qualify for a monthly payment of $0, there is also no cap on payments — a major difference from the original PAYE and IBR programs. So if your income increases significantly, your payments could too.
Another potential drawback: If you’re married, your spouse’s income and existing federal student loan debt are factored in when determining the monthly payment. This is true even if you file taxes separately, although exceptions are made for domestic abuse victims.
Balances for undergraduate degree loans are forgiven after you make 20 years of eligible payments. Balances for graduate and professional degrees, or a combination of graduate and undergraduate degrees, are forgiven after 25 years of eligible payments. In other words, if you only have undergraduate debt, you may want to consider PAYE because it has a shorter, 20- year repayment period.
Still, keep in mind that the IRS says forgiven student loans are taxable income. So if you qualify for student loan forgiveness under REPAYE, plan ahead and prepare for a potentially larger tax bill.
Any income-driven repayment plan has an important drawback: Your interest can keep accruing at a faster rate than you pay down your balance. With REPAYE, though, you have a bit of relief through the federal loan interest subsidy.
Here’s how it works: If your monthly payment is so low that it doesn’t cover the monthly interest charges, any excess interest on subsidized loans will be paid by the Department of Education for up to three years. After that time period, the Education Department will cover 50% of unpaid interest.The government also covers 50% of accrued interest charges on unsubsidized loans throughout the REPAYE repayment period.
If you decide to leave the REPAYE program — or no longer qualify because you failed to recertify your income by the annual deadline — interest will capitalize, which means you’ll owe any unpaid interest once you lose the federal interest subsidy. The interest will be added to your balance and you will have to repay that amount as part of your loan.
Still, if you are concerned about interest causing your loan balance to balloon to an unmanageable degree, REPAYE may be your best option. Its interest subsidy is more generous than other federal income-based repayment programs that offer assistance with interest.
Student loan borrowers often wonder exactly how REPAYE works with PSLF, the program that forgives federal student loan debt belonging to borrowers who work full-time for certain public service or nonprofit jobs. The good news is that you can be on the REPAYE program and still take advantage of PSLF, as you must have an income-based repayment plan to receive PSLF
REPAYE payments count toward the 120 payments that are required to qualify for PSLF. After that, your loans are erased.
If you work in the public or nonprofit sectors — and are currently under another type of repayment plan, like a 10-year Standard Repayment Plan — consider switching to an income-based repayment plan like REPAYE immediately. The reason? You’ll reach PSLF’s required 120 payments at the end of the Standard Repayment Plan’s 10-year payment period, and there will be no balance left for forgiveness.
PSLF covers a variety of employers, including AmeriCorps, Peace Corps and nonprofits involved in public interest law, health and disability services.
If you work for a qualifying employer and are also in a low-paying job, consider using REPAYE to manage your student loan debt and taking advantage of PSLF later.
In many cases, it’s possible to use REPAYE together with other student loan forgiveness programs. Once you get on a REPAYE plan to manage your monthly budget, research to see if you also qualify for other forgiveness programs.
Still, always double-check the requirements of the state and federal repayment programs to make sure that they are compatible with REPAYE.
In general, REPAYE is a good choice for:
- People who are single.
- Borrowers who are pursuing Public Service Loan Forgiveness (PSLF).
- Borrowers with only undergraduate school federal student debt.
- Borrowers who received loans before Oct. 1, 2011.
The good news is that once you’re on REPAYE, you don’t have to stick with it forever. You can pay off your student loans faster if you aren’t comfortable with debt. But deciding whether to pay down your student debt quickly is up to you.
Before deciding whether REPAYE is right for you, use a Revised Pay As You Earn calculator to get an idea of what your monthly payment might be with this repayment option. It’s also a good idea to take time to learn about other income-driven repayment plans and refinancing, and do what makes sense for your situation.
Marty Minchin contributed to this report.
Interested in refinancing student loans?Here are the top 9 lenders of 2021!
|Lender||Variable APR||Eligible Degrees|
|1.88% – 6.15%1||Undergrad & Graduate|
|1.88% – 5.64%2||Undergrad & Graduate|
|2.50% – 6.85%3||Undergrad & Graduate|
|1.89% – 5.90%4||Undergrad & Graduate|
|1.99% – 6.59%5||Undergrad & Graduate|
|1.88% – 5.64%6||Undergrad & Graduate|
|1.90% – 5.25%7||Undergrad & Graduate|
|2.39% – 6.01%||Undergrad |
|2.13% – 5.25%8||Undergrad & Graduate|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Splash Financial.
Splash Financial Disclosures
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. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount
The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.
To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of June 1, 2021.
2 Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest.
Interest Rate Disclosure
Actual rate and available repayment terms will vary based on your income. Fixed rates range from 2.48% APR to 5.79% APR (excludes 0.25% Auto Pay discount). Variable rates range from 1.88% APR to 5.64% APR (excludes 0.25% Auto Pay discount). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 36% (the maximum allowable for these loans). Earnest variable interest rate student loan refinance 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 2.04% and 5.8% to the one month LIBOR. Earnest rate ranges are current as of 6/8/2021, and are subject to change based on market conditions.
Auto Pay Discount Disclosure
You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. For multi-party loans, only one party may enroll in Auto Pay.
Student Loan Refinancing Loan Cost Examples
These examples provide estimates based on payments beginning immediately upon loan disbursement. Variable APR: A $10,000 loan with a 20-year term (240 monthly payments of $72) and a 5.89% APR would result in a total estimated payment amount of $17,042.39. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 20-year term (240 monthly payments of $72) and a 6.04% APR would result in a total estimated payment amount of $17,249.77. Your actual repayment terms may vary.Terms and Conditions apply. Visit https://www.earnest. com/terms-of-service, e-mail us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.
Earnest Loans are made by Earnest Operations LLC or One American Bank, Member FDIC. Earnest Operations LLC, NMLS #1204917. 535 Mission St., Suite 1663, San Francisco, CA 94105. California Financing Law License 6054788. Visit earnest.com/licenses for a full list of licensed states. For California residents (Student Loan Refinance Only): Loans will be arranged or made pursuant to a California Financing Law License.
One American Bank, 515 S. Minnesota Ave, Sioux Falls, SD 57104. Earnest loans are serviced by Earnest Operations LLC with support from Navient Solutions LLC (NMLS #212430). One American Bank and Earnest LLC and its subsidiaries are not sponsored by or agencies of the United States of America.
© 2021 Earnest LLC. All rights reserved.
3 Important Disclosures for CommonBond.
Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. 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. All variable rates are based on a 1-month LIBOR assumption of 0.15% effective Jan 1, 2021 and may increase after consummation.
4 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of April 29, 2021. Information and rates are subject to change without notice.
5 Important Disclosures for SoFi.
Fixed rates from 2.49% APR to 6.94% APR (with autopay). Variable rates from 1.99% APR to 6.59% APR (with autopay). All variable rates are based on the 1-month LIBOR and may increase after consummation if LIBOR increases; see more at SoFi.com/legal/#1. If approved for a loan your rate will depend on a variety of factors such as your credit profile, your application and your selected loan terms. Your rate will be within the ranges of rates listed above. Lowest rates reserved for the most creditworthy borrowers. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license #6054612; NMLS #1121636 (www.nmlsconsumeraccess.org). Additional terms and conditions apply; see SoFi.com/eligibility for details. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
6 Important Disclosures for Navient.
7 Important Disclosures for 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.
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of 5 years and is reserved for applicants with FICO scores of at least 810.
As of 04/07/2021 student loan refinancing rates range from 1.90% APR – 5.25% Variable APR with AutoPay and 2.49% APR – 7.75% Fixed APR with AutoPay.
8 Important Disclosures for PenFed.
Annual Percentage Rate (APR) is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rates range from 2.89%-4.78% APR and Variable Rates range from 2.13%-5.25% APR. Both Fixed and Variable Rates will vary based on application terms, level of degree and presence of a co-signer. These rates are subject to additional terms and conditions and rates are subject to change at any time without notice. For Variable Rate student loans, the rate will never exceed 9.00% for 5 year and 8 year loans and 10.00% for 12 and 15 years loans (the maximum allowable for this loan). Minimum variable rate will be 2.00%. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.