You might want to consider enrolling in an income-based repayment plan such as PAYE or REPAYE if keeping up with your federal student loan payments is becoming increasingly challenging, In general, you’re more likely to qualify for REPAYE, but the solution for you may not be cut and dried. By that we mean, PAYE just might work better for you – or not. Understanding PAYE versus REPAYE is the key to making an informed decision. For help with that, read on.
What are PAYE and PAYE?
Acronyms for Pay as You Earn and Revised Pay as You Earn, respectively, PAYE and REPAYE are government income-driven repayment plans that elongate your student loan term and put your payments at 10 percent of your discretionary income. They also forgive, after the payment period, any remaining balance.
Which One is Best?
Overall, married borrowers do better with PAYE – IF both spouses are employed. Typically, REPAYE is the best fit for single folks and those who aren’t eligible for PAYE. However, as they say: the devil is in the details. You’ll need to run the numbers to figure out which plan would work best for you.
Note that private plans do not qualify for any income-driven repayment programs. However, if you have high-interest private student loans and need some relief, you can always do a student loan refinance to save money. If you’re wondering what is refinancing, it’s when you take out a new loan – with a better rate – to cover your existing loans.
Why Would I Choose PAYE or PAYE?
In the main, you should consider one or the other income-driven plans if you can no longer comfortably swing payments on the standard 10-year repayment plan, or if you’re going for public service loan forgiveness.
Am I Eligible for PAYE?
The requirements for PAYE are these:
- You must’ve gotten your federal loan on or after Oct. 1, 2007, and, at the time, had no outstanding federal loans.
- You are required to have a partial financial hardship. What does that mean? Your PAYE payment would be less than what you’d pay on the 10-year repayment plan.
- You got a loan payout on or after Oct. 1, 2011, or you consolidated on or after that date.
Now, if you are not eligible for PAYE, then REPAYE is your option. No worries here since all federal loan borrowers are eligible for REPAYE. However, if you earn enough, your REPAYE payments might exceed those under the standard 10-year repayment plan.
How Can I Compare Monthly Payments for Each?
The government has a student financial aid loan simulator you can use to help you. All you must do is include your and your spouse’s student loan types, plus interest rates and balances. In addition, you’ll need to include your tax filing status and the state in which you live. Lastly, make sure you enter your household’s adjusted gross income. After you’ve done all that, size up the monthly payments under each repayment plan, then pick the one that’s the lowest. And that’s pretty much it!
Understanding PAYE vs REPAYE means getting into the nuances, running your numbers, and figuring out the best option for YOU. There’s a student loan simulator that can help. And it’s very much worth remembering: if you have some private loans that you just can’t handle, consider having your refinance done through JUNO. We’ve found its programs can get you the best rates.