REPAYE = 10% (AGI - 150% x Poverty Line) / 12
When monthly budgets are stretched thin, income-driven repayment plans are designed to help you affordably pay your federal student loans. The new Revised Pay As You Earn (REPAYE) Repayment Plan — launched on December 17, 2015 — offers one of the most generous repayment benefits to date. And it is available to all Federal Direct Loan borrowers with eligible loan types. In a nutshell, the plan allows you to pay 10% of your discretionary income each month, and your remaining undergraduate student loan balance, if any, will be forgiven after 20 years (or 25 years if you have graduate student loan debt) of qualifying repayment. Now for the part that gets really interesting…how it works.
Discretionary Income: Discretionary income is the amount by which the borrower’s adjusted gross income (AGI) exceeds a minimal standard of living, such as the amount by which the borrower’s AGI exceeds 150 percent of the poverty line.
Let’s look at a quick example:
|Subsidized Loan||Unsubsidized Loan|
|Monthly interest that accrues
|Portion of REPAYE payment that covers accrued interest||$35||$35|
|Amount of interest government pays within first 3 years
|Amount of interest government pays after 3 years
Question: What if I currently have no income?
Answer: Technically, your payments can be zero if you have no income. But remember that your loan balance does not decrease until you begin making payments and the payment amounts are enough to begin reducing the principal balance.
Question: Will my payments under REPAYE count towards the 120 payments required for the Public Service Loan Forgiveness Program (PSLF)?
Question: What if I’m married? Will REPAYE consider my spouse’s income?
Answer: Under the REPAYE plan, your spouse’s income will count towards your monthly payment calculation, regardless of whether or not you file your taxes jointly or separately.
Question: Are PLUS Loans eligible for REPAYE?
Answer: Parent PLUS Loans and consolidation loans that included Parent PLUS loans are not eligible. But Direct PLUS loans for graduate students are eligible.
Question: How do I apply for REPAYE?
Answer: Go to www.studentloans.gov and have your Federal Student Aid ID handy. (It is easy to create an FSA ID if you don’t have one). Click on the link for “Complete Income-Driven Repayment Plan Request” and choose REPAYE in the “Income-Driven Repayment Plan” section. Submit the online form or print the paper version and mail it to your loan servicer.
Question: How can I estimate my monthly payment under REPAYE?
Answer: Use the Repayment Estimator on the Federal Student Aid website.
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