REPAYE, Revised Pay-As-You Earn, is the newest Federal Repayment Plan. Monthly payments will be based upon your how much money you make and limited to 10% of your monthly discretionary income.
Unlike PAYE, the original income based plan that only required 10% of your income, the date you took out your first student loan doesn't matter. This plan is ideal for people who are currently on IBR and paying 15% of their monthly income.
REPAYE goes into effect December 16, 2015. This timing should allow lenders time to get the necessary paperwork and procedures in place. (Update 12/3/15: Some loan servicers may not be rolling out REPAYE support until after the first of the year).
How much could I save?
- Savings under REPAYE will depend upon your current income, your amount of debt, and your existing repayment plan.
- If you are currently on PAYE, you won’t save anything. If you are on IBR, your payment will drop by 33% (so if you are currently paying $150 per month, it will drop to $100 per month).
- Like the other income driven repayment plans, if your income is less than 150% of the Federal Poverty Level, your monthly payment could be $0 per month.
What about student loan forgiveness?
- Like IBR and PAYE, REPAYE is eligible for Public Service Student Loan Forgiveness, meaning your debt could be forgiven after 10 years of on-time payments.
- If you don’t work in public service your debt can still be forgiven. Forgiveness comes after 20 years for people who only borrowed for undergraduate education; it takes 25 years for graduate students.
What about married couples?
- This plan may not be the best option for married couples.
- Under IBR and PAYE, if the couple filed their taxes separately, spousal income was not factored into the payments.
- Under REPAYE, the money your spouse makes factors into your monthly payments, no matter how you file your taxes.
Should I sign up for REPAYE?
- If you are married and you currently file you taxes separately so that your spouses income isn’t counted towards you student loan payments, REPAYE may not be your best option.
- If you are currently enrolled in PAYE and have federal loans from graduate school, it is probably best to stay where you are.
- If you wish you could be on PAYE but are stuck with IBR because you took out your first student loan before October 1, 2007, REPAY could be exactly what you are looking for.
How do I sign up?
- At this point in time, the lenders are still getting the procedures into place.
- In December contact your lender so that you can submit the necessary forms.
- You will have to certify your income, so be prepared to provide your most recent tax return, or at least your two most recent pay stubs.
- The sign up process should be very similar to signing up for PAYE, which means it will be a pretty simple, but possibly slow, process.
Sherpa Tip:Before you sign up for REPAYE, call your loan servicer to talk through your plans and what you hope to accomplish.
How was REPAYE created?
- REPAYE came into existence through a directive from President Obama to the Secretary of Education.
- REPAYE is the result of an executive order and can be changed by the President the comes into office after President Obama.
If you are interested in learning more about REPAYE and your Federal Repayment Options be sure to check out the Department of Education’s page on Income Driven Plans.