PAYE, which stands for the Pay As You Earn Repayment Plan, was introduced in December 2012 to give federal student loan borrowers an affordable repayment option that capped payments based on income. REPAYE, or Revised Pay As You Earn, was introduced in December 2015 as an alternative to PAYE with similar payments, but some key differences in benefits and requirements. Since payments are basically the same on REPAYE vs. PAYE, which should you choose? Learn about the two IDR plans to help find your best option.
REPAYE vs. PAYE Similarities
Monthly payment calculation: These income-driven repayment plans calculate your monthly payment as 10% of your discretionary income, which is your adjusted gross income (AGI) minus 150% of the poverty guideline for your family size. Eligible loan types: Direct subsidized loans, unsubsidized loans, direct consolidation loans that didn’t repay PLUS loans made to a parent, and PLUS loans borrowed by the student are eligible for each repayment plan. Annual recertification: They both require you to recertify annually, at which point monthly payments are recalculated with updated income and family size information. Student loan forgiveness: Each plan offers student loan forgiveness for the remaining balance after making 20 to 25 years of payments.
REPAYE vs. PAYE Benefits
Choose REPAYE if…
You don’t meet the PAYE income or loan origination eligibility requirementsYou want a subsidy that covers 50% to 100% of unpaid interest amountsYou don’t want to worry about unpaid interest being capitalized (meaning, paying interest on unpaid interest amounts)You expect your income to remain low enough that payments won’t exceed what you’d pay on a 10-year plan
Choose PAYE if…
You want your monthly payments capped so they’re no more than what you’d pay on a 10-year repayment planYou’re married, but want payments based on your income only (you must file taxes separately)You have graduate student loans and plan to pursue 20-year forgiveness
Use the Federal Student Aid’s Loan Simulator tool to project your costs on different repayment plans, including monthly payments and total amounts repaid to help determine which repayment plan is right for you.
