Are you struggling to repay your student loans?
You aren’t doomed to spend the next decade eating Ramen noodles and driving a clunker while you chip away at your payments.
The U.S. Department of Education (DOE) offers a few different income-driven repayment plan options to help make your loan repayment more manageable.
One of those options is the Revised Pay As You Earn (REPAYE) program. This program is designed to allow you to cap your monthly payments based on your income. This can help you improve your cash flow and get back on your feet if you’re struggling to afford your payments under the Standard Repayment Plan.
What is REPAYE?
The DOE already offered a Pay As You Earn plan, an income-driven repayment plan that generally limits your payments to 10 percent of your discretionary income. However, the plan was revised in 2015 (hence the acronym RE for “revised”) in an effort to open up eligibility to about five million more borrowers.
President Obama issued a presidential memorandum asking the DOE to share its plans for revising the Pay As You Earn plan to encompass more borrowers no later than December 2015. REPAYE came at a time when student loan debt was continuing to rise. Right now, there are more than 44 million Americans with more than $1.4 trillion in student loan debt.
REPAYE doesn’t just reduce monthly loan payments, either. The program also promises to forgive student debt if certain requirements are met. Here’s a closer look at how the program works.
Who is eligible for the REPAYE program?
All Direct Loan, Stafford, and Graduate PLUS borrowers are eligible for REPAYE, regardless of when the money was borrowed. Other types of student loans that are consolidated into Direct Loans can also qualify.
However, Parent PLUS loans, or consolidated loans that include Parent PLUS loans, are not eligible. Private loans and defaulted loans are ineligible as well.
How much are monthly payments?
With the REPAYE program, payments are capped at 10 percent of your discretionary income. Your discretionary income is calculated using your adjusted gross income minus 150 percent of the state poverty guideline for your family size.
Although it’s possible to qualify for a monthly payment of $0, there is also no cap on payments — a major change from the original PAYE and IBR programs. So if your income increases significantly, so could your payments.
Another potential drawback of the REPAYE program is that if you’re married, your spouse’s income and existing federal student loan debt are considered when determining the monthly payment. This is true even if you file taxes separately, although exceptions are made for domestic abuse victims.
When is remaining student loan debt forgiven?
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.
The IRS says forgiven student loans are taxable income, though. So if you qualify for student loan forgiveness under REPAYE, plan ahead and prepare for the potential tax bill you will end up with.
What about interest on your student loans?
Another concern with any income-driven plan is the fact that 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.
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 DOE will cover 50 percent of unpaid interest.
The government also covers 50 percent of accrued interest charges on unsubsidized loans throughout the REPAYE repayment period.
If you leave the REPAYE program, interest will capitalize. That means it will be added to your balance and you will have to repay that amount as part of your loan.
How does REPAYE work with Public Service Loan Forgiveness (PSLF)?
One of the questions that often comes up is how REPAYE works with PSLF. The good news is that you can be on the REPAYE program and still take advantage of PSLF.
REPAYE payments count toward the 120 payments required for PSLF, a program that forgives federal student loan debt belonging to borrowers who work full-time for certain public service or non-profit jobs.
Eligible employers include AmeriCorps, Peace Corps, non-profits involved in public interest law, and health and disability services.
If you work in a low-paying job that qualifies, you can use REPAYE to manage your student loan debt, and then take advantage of PSLF later.
REPAYE and additional student loan forgiveness programs
In many cases, it’s also possible to use REPAYE in conjunction with other student loan forgiveness programs. Once you get on REPAYE to manage your monthly budget, you can look to see what forgiveness programs you qualify for.
Still, always double-check the requirements of the state and federal repayment programs to make sure that they are compatible with REPAYE.
Is REPAYE right for you?
The good news is 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 or not to pay down your student debt quickly is up to you.
Use a REPAYE calculator to get an idea of what your monthly payment would be under REPAYE to decide if it’s the right step to take. If you’re still unsure, learn more about the other income-driven repayment plans and refinancing and do what makes sense for your situation.
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for 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 will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.97% APR (with Auto Pay). 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 10 years or less. For loan terms of 10 years 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 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, 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 08/21/18. 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 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 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.
5 Important Disclosures for 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. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.57% – 6.97%1||Undergrad & Graduate|
|2.47% – 6.99%3||Undergrad & Graduate|
|2.68% – 8.77%4||Undergrad & Graduate|
|3.24% – 6.66%2||Undergrad & Graduate|
|2.61% – 7.35%5||Undergrad & Graduate|
|3.01% – 9.75%6||Undergrad & Graduate|