And you could significantly reduce how much PSLF forgiveness you end up receiving. With PAYE, you’re only allowed to join the plan if your monthly payment would be lower than it would be on the 10-Year Standard Repayment Plan. Let’s say that you’ve been making payments for three years on REPAYE. Fortunately, there are federal programs designed to ease the burden. Close. FitBUX student loan help, IBR, IDR, PAYE, REPAYE, Student Loan Forgiveness, Student Loans, 10 Best Student Loan Refinance Companies – December 2020, Income-Based Repayment: Your Questions Answered, Public Service Loan Forgiveness – The Complete Guide, Difference #5: Calculating The Cost Difference Between PAYE and REPAYE, PAYE vs REPAYE: How To Decide Which One To Use. If you took out your student loans before 2011, then the PAYE vs REPAYE discussion becomes much simpler. 5 Side Hustles That Could Become Your Full-Time Job, 6 Best Ways to Invest in Real Estate (And Where to Start as a 100% Beginner), The Complete Guide to Graduating Without Student Loans, The Ultimate Guide to Student Loan Forgiveness, Income-Driven Repayment Plans: Everything You Need to Know, 5 of the Most Sickening Student Loan Scams, Refinance Student Loans: The 7 Best Lenders. But beyond that core similarity, these plans have several important differences. This is not really beneficial to you if you plan to do PSLF as your balance is forgiven anyway. But, unfortunately, that’s a question that only the Department of Education can answer. And if you’re wondering whether joining an income-based repayment is the right choice in the first place, check out our guide to income-driven repayment. In order to understand REPAYE, we must first review the Pay As You Earn Repayment Plan (PAYE): To qualify for PAYE, you must be a new borrower as of 10/1/2007 AND have received a Direct Loan disbursement on or after 10/1/2011. Trying to manage several student loans and their various billing cycles can, At this point, it seems like the coronavirus has affected nearly every, On Friday, March 13th, President Trump and his coronavirus task force held, If you have federal student loans, you could be eligible for an. Below is a screen shot of our Income-based repayment calculator that automatically detects if your loan term is 20 or 25 years based on how you complete your profile. Since the payments are capped, you must qualify for partial financial hardship to qualify for PAYE. __CONFIG_colors_palette__{"active_palette":0,"config":{"colors":{"62516":{"name":"Main Accent","parent":-1}},"gradients":[]},"palettes":[{"name":"Default Palette","value":{"colors":{"62516":{"val":"var(--tcb-skin-color-0)"}},"gradients":[]}}]}__CONFIG_colors_palette__, {"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}, PAYE vs REPAYE: The 5 Differences Between These Plans, Note:  If you are using either of these strategies, you do not want to. your undergrad and graduate school loans would be on a 25 year term. (Note: This problem only exists for Grad students. The percentage of discretionary incomefor PAYE may depend on when the borrower obtained their loans. La conjugaison du verbe payer sa définition et ses synonymes. But REPAYE offers an expanded interest subsidy—it pays 50% of remaining interest charges on unsubsidized loans (during all periods) and on subsidized loans after the three-year period ends. Yes. But don’t worry. There are two kinds of “pay as you earn” plans: Pay As You Earn (PAYE) and Revised Pay as You Earn (REPAYE). For some borrowers, PAYE would be their best choice. If you want to learn more about maximizing your money, be sure to check out our FitBUX Blog. PAYE vs. REPAYE: The differences. REPAYE for Married Couples – REPAYE treats spousal income dramatically different than PAYE and IBR. In the meantime, it’s up to each person to do their own homework to understand PAYE vs REPAYE and their respective pros and cons. REPAYE when both spouses have student debt. It has a shorter term and cost less in the long-run. But REPAYE doesn’t have this requirement. They both generally enable eligible Direct Subsidized and Unsubsidized Loan borrowers to cap their monthly student loan payments at 10% of their monthly discretionary income. Older borrowers could also consider PAYE’s predecessor IBR (Income-Based Repayment). For undergrads they are both 20 year plans.). Your email address will not be published. Below is a summary of the first 4 differences between PAYE and REPAYE: It is tricky to calculate the true cost difference between PAYE and REPAYE. Most importantly, it also gives you options should you get married when it comes to selecting your tax filing status. Here are five questions that you’ll want to ask yourself before you choose. But REPAYE doesn’t have either of these restrictions so it could be a good choice. For subsidized loans, the government pays the deferred interest for you for 3 years. On REPAYE, your tax filing status doesn’t matter. And you’d still receive a significant amount of PSLF forgiveness five years down the road. In our income-based repayment guide, we discuss how the difference between your interest charge and the required monthly payment is deferred onto the loan. This means if you are on this plan for 20 years, all loans are forgiven and the remaining balance is taxed. Before diving into the differences, let’s briefly summarize the similarities between PAYE and REPAYE: Note:  If you are using either of these strategies, you do not want to refinance your student loans. Therefore, if your income increases significantly your monthly payments will as well. We break it down in this article … So PAYE won’t even allow you to join. Unfortunately, the rules can get rather complicated, and they aren’t exactly easy reading. This would apply to all your loans, i.e. However, President Obama made PAYE available to new borrowers as of October 1, 2007 who have at least one loan disb… IDR payments for this plan would be $300 for PAYE vs. $1,560 for REPAYE. PAYE VS. REPAYE are both good options to get out of your student loan debt. "}},{"@type":"Question","name":"Can you switch from REPAYE to PAYE?","acceptedAnswer":{"@type":"Answer","text":"Yes. But then you get a big pay raise in your fifth year that no longer qualifies you for income-driven payments on PAYE. If you haven’t done so already, I highly recommend reading our Income-Based Repayment Guide before reading this article. When you are married, you may choose to file your taxes separately or jointly. With PAYE, graduate loans are given the same treatment as undergraduate loans. PAYE payments are capped at the 10 year standard repayment amount. If you need help, our FREE student loan planners have helped thousands of Young Professionals manage and eliminate over $1 billion in student loans. Download new episodes for your car rides, work out time, and free time. You can take advantage of the REPAYE interest subsidy if you are paying off your loans. And even if your income rises to the point that you no longer qualify for income-based payments, you can still stay on the plan. Therefore, most will be deferring interest when they are on PAYE and REPAYE. Many are enticed to use REPAYE because of the 50% interest subsidy mentioned previously. However, with PAYE, your payment can be based on your income alone if you and your spouse file choose to file your taxes separately. Good question. Comparing PAYE to REPAYE For example, if their average interest rate was 6%, this couple would be accruing approximately $24,000 in interest annually on their $400,000 in combined debt. Freelance Writing vs. Blogging: Which is Best? One reason would be that you’re afraid you may have an income drop in the near future. And here’s why. I will discuss the cost later on in the article. This would also happen on PAYE if I filed my taxes jointly. The monthly repayment calculation is based on your income and your debt. In addition to this site, my work has been featured on several major publications including Business Insider, Forbes, Credit Karma, and U.S. News and World Report. PAYE Vs. REPAYE: Key Differences. So if you have graduate student loans, you may want to stick with PAYE. REPAYE may be 25 years long and has an interest subsidy. Conjuguer le verbe payer à indicatif, subjonctif, impératif, infinitif, conditionnel, participe, gérondif. If you can’t afford the recommended minimum tax savings amount on PAYE to cover your tax liability at the end of your IDR plan. In this case, making the wrong PAYE vs REPAYE decision could literally cost you tens of thousands of dollars. Obama unveiled the plan at Colorado University, telling students about his own personal struggle, paying off $120,000 in student loans when he and his wife, Michelle, married. This holds true regardless of how high your income goes up. Such a mistake may cost a couple thousands of dollars over time. Let’s say that you spend four years on PAYE. As we mentioned earlier, if you are married or you know you will be married relatively soon, you want to factor your spouse’s income and Federal student loan debt into the equation before deciding which plan to select. 10 Steps I Took to Become a Full-Time Freelance Writer. PAYE is 20 years for all borrowers and can have a lower monthly payment when you are married. Now, you’re paying a $1,260 monthly … On REPAYE, the government pays 100% of the deferred interest on subsidized loans for the first three years just like PAYE. Most students seeking their medical degree can … This seemed like a fair arrangement to me. You must have received a Direct Subsidized Loan, Direct Unsubsidized Loan, or a Direct PLUS Loan or after Oct. 1, 2011. In this guide, I’ll show you everything you need to know about PAYE vs REPAYE to help you make the best choice. However, both PAYE and REPAYE provide a subsidy that pays any outstanding interest on subsidized student loans (after payments are applied) for the first three years on either plan. A super majority of the time PAYE is better because it cost less and gives you flexibility when you are married that can lower your monthly payment. We often see people who know they are going to get married within a year or two. With both the PAYE and REPAYE plans, your monthly payment will generally be 10% of your discretionary income. However, they fail to take into account their spouses’ financial situation. PAYE is 20 years long for both undergrad and graduate loans. If you are only going to be using a loan forgiveness plan in the short-run: Even if you’re paying off your loans, you may find yourself in a situation where you need to use an IDR plan temporarily to benefit from lower monthly payments. After logging in you can close it and return to this page. Then you get married and your joint income doubles. My monthly payment more than doubles using REPAYE. There is a lot of confusion about Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE). Why do we need multiple IDR plans? The calculation is complex but for those you you that want to deeper dive into it, here is a great article doing so. Some would point out that you’d also have slightly smaller payments on REPAYE since your payment schedule would be extended by five years. check out how to take advantage of the interest subsidy. If any of your loans are from graduate school, the term is 25 years. Anyone can join REPAYE, no matter their income level. Well, that stipulation could make REPAYE the wrong choice if you meet two conditions: If you meet both of those requirements, you’d better choose PAYE. "}},{"@type":"Question","name":"What is the difference between REPAYE & PAYE? The exact amount your monthly payment increases also factors in how much Federal Student loan debt your spouse has. But why would you want to join REPAYE if your payment would be higher than the 10-Year Standard Repayment Plan? Using PAYE vs REPAYE is a big decision for new grads. Here’s why. This rule is especially important if you’re pursuing Public Service Loan Forgiveness (PSLF). If one is planning on going for PSLF or IDR loan forgiveness, then probably don’t need to keep multiple loans instead of one consolidation, unless she already has payments made counting toward forgiveness with the other eligible loans, in which case … But I’d rather you be rid of your student loans sooner. Refinancing: How to Choose, Coronavirus Student Loan Stimulus: What You Need to Know, Trump’s Student Loan Interest Waiver: What You Need to Know, check out our guide to income-driven repayment. My hope is that you'll be able to find plenty of helpful information and inspiration on this site to help you reach your financial goals. On REPAYE the government pays 50% of the deferred interest each month for unsubsidized loans. Or perhaps you just like the idea that your payment will always be based on your income, and that the more money you make, the faster you’ll pay off your student loans. On PAYE, you defer 100% of the interest for unsubsidized loans. If you received qualifying loans during graduate or professional study, you have 25 years before you get forgiveness, compared to 20 years with PAYE. PAYE and REPAYE are both income … Why Finding A Student Loan Planner Is Hard, The Best Student Loan Refinance Companies. To see how to calculate the cost difference be sure to check out our article detailing how to use our Income Driven Repayment Plan tool. This means if you are on this plan for 20 years, all loans are forgiven and the remaining balance is taxed. Should You Drive For Uber Eats, Postmates, or Others? But which one will give you the best bang for your buck? In seven more years, you’d be eligible for PSLF. This article breaks down the 5 primary differences between them & when to use them. The Highlights of REPAYE vs PAYE vs IBR. When it comes to PAYE vs REPAYE, there’s no one-size-fits-all answer. IBR VS PAYE VS REPAYE : IBR: PAYE: REPAYE: Eligible Loans-All federal Family Education Loan Program, Stafford and Grad Plus Loans-All FFELP and direct loan consolidation loans that do not contain parent PLUS Loans-All Stafford loans or Grad Plus Loans disbursed on or after October 1, 2011. PAYE is better for married borrowers when both spouses have an income and REPAYE is typically better for single borrowers when comparing PAYE vs. REPAYE. I graduated law school in May of this year with 200k of student debt (undergrad+law school) in the form of 14 unsubsidized loans. … Yes. PAYE vs. REPAYE. To illustrate the difference of PAYE vs REPAYE, I’ll use the following example: On PAYE you would differ $400 of interest per month ($700 – $300). However, when you do so any interest that has accrued is capitalized which increases your tax liability when the loans are forgiven. As you can see, having to take into account my spouses’ income could cost me an additional $40,000 using REPAYE vs using PAYE. Hi, I'm Clint! However, because REPAYE is 5 years longer, it can become much more expensive when doing an “apple to apple” comparison. The repayment … But let’s take a step back: If you’re reading this post, you may already know the relevant facets of income-driven […] Suppose that both of you have a combined discretionary income of $100,000. On REPAYE you would defer $200 because the government pays 50% of the deferred interest each month ($700 – $300 = $400 *.50 = $200). PAYE caps your payment size. 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