REPAYE Makes Your Student Loan Payments More Manageable
By Dr. Teresa R. Martin, Esq.
In order to combat the rising tide of student debt, the government has tried to make repayment of student loans easier for mid to low income borrowers. Its series of income-driven repayment plans, such as the popular Pay As You Earn program (PAYE), cap your federal student loan payments at a percentage of your discretionary income- a percentage that can range from 15%, all the way down to 0%.
Plus, income-driven repayment options offer the hope of a debt free future: if you are unable to fully pay off the balance of your federal student debt after 20 years of payments, the remaining debt will be forgiven. If you work in the government or at a nonprofit organization, then there is the chance that you may qualify for Public Service Loan Forgiveness (PSLF) after only 10 years of payments.
While these plans have helped millions of Americans pay off their student debt, they have only been available to recent borrowers- those who have accepted a federal student loan on or after Oct. 1, 2011.
The Revised Pay As You Earn plan (or REPAYE) changes that. As of December 17, 2015, all borrowers with Federal Direct student loans now have access to a new repayment plan with monthly payments capped at 10% of their discretionary income. Best of all, you can enroll regardless of when you took out the loan.
If you are struggling to make your monthly student loan payments, then REPAYE may be a good option to consider. Here are a few key details of the plan:
Affordable monthly payments. With REPAYE, your monthly payment will be 10% of your discretionary income. If your income is very low, payments can be as little as $0 until your income increases. To see what your expected monthly payment would be under REPAYE, you can use the U.S. Department of Education’s handy online Repayment Estimator.
A comfortable repayment period. Like the PAYE plan, you are allowed up to 20 years to repay the debt you incurred for undergraduate studies, or up to 25 years if you took out any federal loans for graduate school. If you reach the 20 year time limit and have not yet fully repaid the balance, then what ever remains will be forgiven. Under current IRS rules, however, it will be considered taxable income. As mentioned above, if you are employed full-time by the government or a nonprofit organization, then the repayment period drops to 10 years.
Types of loans that are eligible. Under REPAYE, you can include all federal Direct student loans as long as they are not in default. Other types of federal loans, such as FFEL or Perkins Loans, can be consolidated into a Direct Consolidation Loan, which would then be eligible for REPAYE.
You can find more information about REPAYE or any other income-driven repayment plans at StudentLoans.gov. There is also an easy online application on the site.