Student Loan Repayment Options

The REPAYE plan is the latest of all the income-driven student loan repayment programs.  It was formed in December of 2015 as an addition of the previously current Pay As You Earn plan(PAYE).  The REPAYE plan was designed to exclude some limitations that were in the PAYE plan, as well as adding extra advantages.  The REPAYE plan gives loan forgiveness after 20 years of qualifying payments for undergraduate loans, and 25 years for graduate loans and caps your monthly payment at 10% of your discretionary income.

Benefits of REPAYE

• Payments qualify for Public Service Loan Forgiveness
• Capped payment at 10% of discretionary income
• Interest Forgiveness for the first three years, and half of the accruing interest after year 3
• Complete loan forgiveness after 20-25 years

Qualifying Loan Types

• Stafford
• Graduate Plus Loans
• Federal Direct Loans

The Pay As You Earn President Obama established the program on December 1st, 2012.  It was extremely popular and became the idea why people first began to associate student loan forgiveness with President Obama.  The PAYE plan was formed to work and improve against the earlier being Income Based Payment plan. The PAYE plan decreases the term required for forgiveness from 25 years in the IBR to 20 years in PAYE and caps your maximum payment at 10% of your discretionary income.

There are date limitations applying for PAYE. Your payment in the PAYE must be smaller than what your standard 10-year payment. In addition to meeting the payment requirement, to qualify for the PAYE Plan. You must have got a disbursement of a Direct Loan on or after Oct. 1, 2011. Must also be a new borrower as from Oct. 1, 2007.  

The Income Based Student Loan Repayment program is one of the earlier income was driven repayment plans. Which now has fewer benefits than the PAYE and REPAYE plans.  That being said, it’s still an excellent payment plan with great benefits for the borrower. One of them is forgiveness on the first 3 years of any unpaid interest of the time you enroll in the Income-Based Student Loan Repayment program for the subsidized part of your loan.

For the people with very small, or no income, this works out to be a great kind of “instant forgiveness” on their loans because otherwise, this interest would be due.  Such as, someone with an interest rate of 6.8%  and a loan amount of $40,000 would have $8,160 of interest forgiven in their first 3 years from when their Income-Based Repayment starts.  This is assuming you pass for a zero payment. It is possible you are not fully paying off the monthly fee, and getting forgiveness on the difference if your payment is not zero.