PAYE and REPAYE are both payment plans offered to pay off federal student loans.
Hence, the goal of these payment plans is to ensure that student loans are paid based on their income.
Thus Pay as You Earn (PAYE) was the first payment plan, then the REPAYE was the revised version.
However, PAYE is mainly for those with high loan payments, whereas REPAYE is for anyone.
But, the question remains which of these payment plans should you go for?’
In this article, we will tell you all you need to know about the PAYE and REPAYE payment plans.
So, if you’re looking for a payment plan to pay off your student loan, read this article thoroughly.
Having said that, let’s dive into all we have for you about PAYE and REPAYE payment plans.
What is PAYE?
PAYE (Pay as You Earn) is a payment option for four types of federal student loans.
Hence, these loans include; subsidized Direct Loans and Unsubsidized Direct Loans.
And also Direct PLUS Loans for Students and Direct Consolidation Loans.
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Eligibility
Your eligibility for the PAYE payment plan depends on when you borrowed.
Hence, you must have gotten a Direct Loan after October 1, 2011. Also, you cannot get any previous Direct Loans issued before October 1, 2007. And this is with an outstanding balance.
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PAYE Payments
When you choose the PAYE payment plan, you will be charged 10% of your monthly income.
However, note that the payment is less than what you would pay under the standard repayment plan.
Hence, if your income is high, you’ll be transferred to the standard repayment plan
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Repayment Timeline
You will be approved for forgiveness after 20 years of approved payments under PAYE.
What is REPAYE?
REPAYE (Revised Pay as You Earn) is also a payment option for four types of federal student loans.
Thus, these loans include; subsidized Direct Loans and Unsubsidized Direct Loans.
And also Direct PLUS Loans for Students and Direct Consolidation Loans.
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Eligibility
The PAYE payment plan is open to all borrowers of federal student loans.
Hence, anyone can go for this payment plan regardless of when they took the loan, loan amount, and income.
Also, REPAYE offers a more flexible payment plan. Thus, it allows you to stretch your repayment timeline.
That’s not all, you can still qualify for this plan if your payment is above the payment under the standard plan.
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REPAYE Payments
If you choose the REPAYE payment plan, you will be charged 10% of your monthly income.
Hence, under this plan, your payment could go higher than it would be under the Standard plan.
Also, if you’re married, your spouse’s income can be combined when calculating your payment.
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Repayment Timeline
You will be approved for forgiveness after 20 years if you only have undergraduate loans.
Hence, if you have a postgraduate loan, your forgiveness will be approved after 25 years.
Which Plan Should You Go For?
Because PAYE and REPAYE payment plans are quite similar, making a choice can be difficult.
However, the REPAYE plan is more flexible compared to the PAYE plan. If you have a higher income, PAYE may not be the best option for you.
Thus, this is because your monthly payment would not cover your payment.
For this reason, you’ll need an income-driven repayment plan, thus, this is when PAYE comes in.
The PAYE payment plan is the best option for you if you have just a small debt. And also if your focus is on getting the lowest payments.
Before choosing PAYE or REPAYE, note that both plans will result in you paying more interest on your loan.
Hence, this is because you pay longer interest over a longer period. Thus, note that this can result in your interest costs going up.
Also, note that when you get a loan forgiven, you’ll be taxed the amount forgiven as if it were income.
Conclusion
To sum up this article, note that you’re to report your income at least once a year. And this is regardless of your payment plan.
Hence, this is to check if your payment amount should be recalculated up or down.
So, if your income reduces between the periods you’re to report. Hence, you can reach out to your loan servicer earlier to have your loan reduced.
But, if between the periods your income increases, you’re not to report earlier than the standard time.
Hence, we’ve been able to provide you with all you need to know about PAYE and REPAYE.
So, read through to find the payment plan best to pay off your federal student loan.
But, if you have any questions about PAYE or REPAYE, leave them in the comment below.
Having said that, thank you for reading!!