After College: Revised Pay As You Earn — Could It Be The Best Plan for Repaying Your Student Loans?

This concludes our review of the Federal Direct Loan Program‘s (FDLP’s) conventional repayment plans and income-driven repayment plans, including Income-Based Repayment, Income-Contingent Repayment, and Pay As You Earn. Today we’ll examine the last of those income-driven plans, Revised Pay As You Earn (REPAYE).

There’s a simple way to project what REPAYE can do for you. Just use the Federal Student Loan Repayment Estimator to find out:

  • Your monthly loan payment amount, at least for your first year in REPAYE (to use REPAYE for any 12-month period, you need to apply for it and certify your latest Adjusted Gross Income (AGI),
  • How many months REPAYE gives you to zero out your debt;
  • The total amount you could end up spending to eliminate your FDLP debt;
  • Whether any of your debt will be forgiven; and
  • How REPAYE compares to other FDLP repayment plans.

Here are REPAYE’s details . . .

REPAYE can significantly lower your monthly FDLP payments, especially if those payments would be unaffordable given your income. To do this, REPAYE will schedule you to eliminate your FDLP debt in 20 years if you borrowed your student loans as an undergraduate, and 25 years if what you borrowed was for graduate or professional school. So as with other income-driven plans, the downsides of REPAYE are debt that’s outstanding longer and costlier to pay off.

But REPAYE also puts you in line for Public Service Loan Forgiveness (PSLF) if you’re otherwise qualified for it. Not PSLF-qualified? REPAYE forgives what you still owe the FDLP after making monthly payments for 20 years.

REPAYE is the only income-driven repayment plan that’ll limit your monthly FDLP payments to no more than 10% of your discretionary income. But your discretionary income varies with your family and tax situation. It always includes your AGI minus 150% of the federal poverty level for your family size. However, if you’re married and you file a joint tax return, it also includes your spouse’s AGI. Your spouse’s student loan debts are also used to set your monthly payment amount under REPAYE if you’re married and filing jointly.

You may use REPAYE for any loans you borrowed from a federal postsecondary educational loan program as a student. This includes student loans you borrowed from the FDLP and any FDLP Consolidation Loan that eliminated and took the place of your FDLP student loans. It also includes your student loan debts that began in the Federal Family Education Loan and Federal Perkins Loan Programs provided you consolidated them into the FDLP. Unfortunately, Parent PLUS Loans and FDLP Consolidation Loans that absorbed Parent PLUS Loan debts aren’t REPAYE-eligible.

Remember, there are eight different repayment plans for paying off FDLP debt. You need to think carefully about your career, financial, and personal circumstances, then select the plan that best meets your needs. Do this and you’ll find that your monthly FDLP debt payments will be much more affordable!

If you graduated last spring, you’ll be soon required to begin repayment on your federal student loan debt. But do all the repayment plans out there boggle you? Could you could some professional advice? College Affordability Solutions can help you with four decades experience in running federal college loan programs. Call at (512) 366-5343 or email us at collegeafford@gmail.com to arrange a free consultation.

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