Paye vs Repaye: What's The Better Payment Option For Your Student Loans

Paye vs Repaye: What's The Better Payment Option For Your Student Loans

Paye vs Repaye: What's The Better Payment Option For Your Student Loans

Paye vs Repaye: What's The Better Payment Option For Your Student Loans

August 10, 2023

August 10, 2023

August 10, 2023

August 10, 2023

Ad Disclosure

Ad Disclosure

Ad Disclosure

Ad Disclosure

paye vs repaye
paye vs repaye
paye vs repaye
paye vs repaye

A college education can open many doors, but it can also come with a hefty price tag. Many graduates are left with a significant amount of debt that can take years to pay off. In order to prepare for student loan payments, it’s important to fully understand all of the repayment options. 

Two of the more popular student loan repayment plans are Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE). We’re going to explore how they are similar, what their differences are, and which might be best for you based on your needs. Continue reading to learn more about PAYE vs REPAYE. 

What is PAYE?

PAYE was introduced by the government in 2012 to give students an affordable way to repay their loans. This federal student loan is based on family size and income, capping your monthly payments at 10% of your discretionary income. In doing so, you can save a decent amount of money each month. Under PAYE, payments are calculated based on the amount of your federal student loans and income. If you make $3,000 per month, the max you’d wind up paying is $300/month. 

In order to qualify for this repayment option, you’ll have to demonstrate partial financial hardship, meaning the monthly payment must be less than what you would pay under the Standard repayment plan. You’ll also have to have borrowed loans after October of 2007 and have federal Direct Loans. PAYE also offers loan forgiveness after 20 years of consistent payments, but the forgiven amount is considered taxable income. Lastly, PAYE is only available for Direct loans.

what is paye

A college education can open many doors, but it can also come with a hefty price tag. Many graduates are left with a significant amount of debt that can take years to pay off. In order to prepare for student loan payments, it’s important to fully understand all of the repayment options. 

Two of the more popular student loan repayment plans are Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE). We’re going to explore how they are similar, what their differences are, and which might be best for you based on your needs. Continue reading to learn more about PAYE vs REPAYE. 

What is PAYE?

PAYE was introduced by the government in 2012 to give students an affordable way to repay their loans. This federal student loan is based on family size and income, capping your monthly payments at 10% of your discretionary income. In doing so, you can save a decent amount of money each month. Under PAYE, payments are calculated based on the amount of your federal student loans and income. If you make $3,000 per month, the max you’d wind up paying is $300/month. 

In order to qualify for this repayment option, you’ll have to demonstrate partial financial hardship, meaning the monthly payment must be less than what you would pay under the Standard repayment plan. You’ll also have to have borrowed loans after October of 2007 and have federal Direct Loans. PAYE also offers loan forgiveness after 20 years of consistent payments, but the forgiven amount is considered taxable income. Lastly, PAYE is only available for Direct loans.

what is paye

What is REPAYE?

REPAYE is a newer version of PAYE and was introduced in 2015. Just like PAYE, the payment amount is based on your family size and income as well. This federal student loan repayment plan also caps your monthly payments at 10% of your discretionary income. 

However, unlike PAYE, REPAYE is available to all federal borrowers since there are no limits, regardless of when they took out their loan. Under the REPAYE payment plan, loan forgiveness comes after 25 years of consistent payments, but the forgiven amount is considered taxable income.

What is REPAYE?

REPAYE is a newer version of PAYE and was introduced in 2015. Just like PAYE, the payment amount is based on your family size and income as well. This federal student loan repayment plan also caps your monthly payments at 10% of your discretionary income. 

However, unlike PAYE, REPAYE is available to all federal borrowers since there are no limits, regardless of when they took out their loan. Under the REPAYE payment plan, loan forgiveness comes after 25 years of consistent payments, but the forgiven amount is considered taxable income.

Similarities and Differences between REPAYE vs PAYE Plans:

Similarities between PAYE and REPAYE:

Both PAYE and REPAYE repayment plans have a handful of similarities. The first way these plans are similar is that they both cap monthly payments at 10% of discretionary income. No matter how much money you make, you’ll only have to pay 10% of your income. Another way that PAYE and REPAYE are similar is that both plans will factor in your spouse’s income and loans if you are married and will file taxes jointly. If for some reason you want to go ahead and pay off your loans early, you can do so without getting charged any additional fees or being penalized.

Differences between REPAYE vs PAYE Plans:

One of the main differences between PAYE and REPAYE is that PAYE requires you to fall under a certain income threshold, while REPAYE doesn't. You need to be financially struggling a little bit to qualify for PAYE repayment plans. Another difference between the two is that REPAYE taxable income forgiveness is due after 25 years, while for PAYE it's due after 20 years. 

When it comes to being married and filing taxes with your spouse, PAYE will only consider your spouse’s income and loans if you file alternative paperwork for it. REPAYE, on the other hand, always factors them in. The last difference between the two repayment plans is that REPAYE offers interest subsidies for both subsidized and unsubsidized loans, while PAYE only offers them for subsidized loans.

Similarities and Differences between REPAYE vs PAYE Plans

Pros and Cons of PAYE:

PAYE Pros:

  • You pay less each month because it requires partial financial hardship

  • You can receive loan forgiveness after 20 years of consistent payments.

  • PAYE plans offer interest subsidies for subsidized loans.

PAYE Cons:

  • It’s only available for Direct loans.

  • You need to have a certain financial hardship in order to qualify.

  • You can get taxed on the total amount of money that is forgiven if you make the 20 years of consistent payments.

Advantages and Disadvantages of REPAYE

REPAYE Advantages:

  • Any Direct loan borrower can get access to REPAYE, regardless of eligibility criteria.

  • It offers loan forgiveness after 25 years of consistent payments.

  • It offers interest subsidies for both subsidized and unsubsidized loans.

REPAYE Disadvantages:

  • You’re required to make payments for five more years than PAYE before forgiveness is allowed on your loans

  • Both subsidized and unsubsidized loans accrue interest subsidies, which means more interest capitalization.

What’s The Better Payment Option To Go With?

Choosing between the two repayment options really depends on your personal financial situation. If you’re under some hard financial circumstances and qualify for PAYE, you’ll only have to pay a max of 10% of your income. However, if you don’t qualify for this payment option, you can still consider REPAYE since there isn’t any specific criteria needed to qualify. Both PAYE and REPAYE offer loan forgiveness after 20 or 25 years of repayment which means that if you can’t afford to make payments for a long time, there’s a good chance that you’ll be eligible for loan forgiveness.

What’s The Better Payment Option To Go With?

Conclusion:

Paying off your student loans can be a long and challenging process. However, by being aware of your options, you can make the process smoother and more manageable. Understanding the difference between PAYE and REPAYE is essential when determining which plan works best for your financial situation. Remember that both plans can offer loan forgiveness after 20-25 years, which is especially important if you are experiencing financial hardship. Take some time to research and learn about your options, create a budget, and make consistent payments. By doing so, you can take control of your student loan repayment process and one day be debt-free.

Similarities and Differences between REPAYE vs PAYE Plans:

Similarities between PAYE and REPAYE:

Both PAYE and REPAYE repayment plans have a handful of similarities. The first way these plans are similar is that they both cap monthly payments at 10% of discretionary income. No matter how much money you make, you’ll only have to pay 10% of your income. Another way that PAYE and REPAYE are similar is that both plans will factor in your spouse’s income and loans if you are married and will file taxes jointly. If for some reason you want to go ahead and pay off your loans early, you can do so without getting charged any additional fees or being penalized.

Differences between REPAYE vs PAYE Plans:

One of the main differences between PAYE and REPAYE is that PAYE requires you to fall under a certain income threshold, while REPAYE doesn't. You need to be financially struggling a little bit to qualify for PAYE repayment plans. Another difference between the two is that REPAYE taxable income forgiveness is due after 25 years, while for PAYE it's due after 20 years. 

When it comes to being married and filing taxes with your spouse, PAYE will only consider your spouse’s income and loans if you file alternative paperwork for it. REPAYE, on the other hand, always factors them in. The last difference between the two repayment plans is that REPAYE offers interest subsidies for both subsidized and unsubsidized loans, while PAYE only offers them for subsidized loans.

Similarities and Differences between REPAYE vs PAYE Plans

Pros and Cons of PAYE:

PAYE Pros:

  • You pay less each month because it requires partial financial hardship

  • You can receive loan forgiveness after 20 years of consistent payments.

  • PAYE plans offer interest subsidies for subsidized loans.

PAYE Cons:

  • It’s only available for Direct loans.

  • You need to have a certain financial hardship in order to qualify.

  • You can get taxed on the total amount of money that is forgiven if you make the 20 years of consistent payments.

Advantages and Disadvantages of REPAYE

REPAYE Advantages:

  • Any Direct loan borrower can get access to REPAYE, regardless of eligibility criteria.

  • It offers loan forgiveness after 25 years of consistent payments.

  • It offers interest subsidies for both subsidized and unsubsidized loans.

REPAYE Disadvantages:

  • You’re required to make payments for five more years than PAYE before forgiveness is allowed on your loans

  • Both subsidized and unsubsidized loans accrue interest subsidies, which means more interest capitalization.

What’s The Better Payment Option To Go With?

Choosing between the two repayment options really depends on your personal financial situation. If you’re under some hard financial circumstances and qualify for PAYE, you’ll only have to pay a max of 10% of your income. However, if you don’t qualify for this payment option, you can still consider REPAYE since there isn’t any specific criteria needed to qualify. Both PAYE and REPAYE offer loan forgiveness after 20 or 25 years of repayment which means that if you can’t afford to make payments for a long time, there’s a good chance that you’ll be eligible for loan forgiveness.

What’s The Better Payment Option To Go With?

Conclusion:

Paying off your student loans can be a long and challenging process. However, by being aware of your options, you can make the process smoother and more manageable. Understanding the difference between PAYE and REPAYE is essential when determining which plan works best for your financial situation. Remember that both plans can offer loan forgiveness after 20-25 years, which is especially important if you are experiencing financial hardship. Take some time to research and learn about your options, create a budget, and make consistent payments. By doing so, you can take control of your student loan repayment process and one day be debt-free.

Ready to save money?

Ready to save money?

Sign up for Hiatus and get control of your money.

Join the Hiatus Family today

Sign up for Hiatus and cancel those unwanted subscriptions in a few taps.

Advertiser Disclosure:


Hiatus may receive compensation when you click on links associated with this Hiatus Learn Center. Hiatus is not being compensated for any application, quotation, or the purchase of any financial products.


Hiatus has partnered with MyBankTracker for our coverage of savings account products. Hiatus and MyBankTracker may receive compensation from advertisers when you click on links associated with these savings account products. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MyBankTracker does not include all companies or all savings products. 


Hiatus has partnered with CardRatings for our coverage of credit card products. Hiatus and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are Hiatus' alone, and have not been reviewed, endorsed or approved by any of these entities.


Hiatus is not an insurer or insurance producer. Savvy is the licensed insurance producer supporting the Hiatus/Savvy program. All insurance information and underwriting is provided by Savvy and its licensed insurance partners.


Hiatus has partnered with AmONE for our coverage of personal loan products. Hiatus and AmONE may receive compensation when you click on links associated with personal loan products. In certain situations, compensation may impact where products appear on the site (including the order in which they appear). AmONE does not include all loan companies or all types of loan products.


You are being referred to ADVR LLC’s website ("Advisor") by Hiatus, a solicitor of Advisor ("Solicitor"). The Solicitor that is directing you to this webpage will receive compensation from Advisor if you enter into an advisory relationship or into a paying subscription for advisory services. Compensation to the Solicitor may be up to $2,000. You will not be charged any fee or incur any additional costs for being referred to Advisor by the Solicitor. The Solicitor may promote and/or may advertise Advisor’s investment adviser services and may offer independent analysis and reviews of Advisor’s services. Advisor and the Solicitor are not under common ownership or otherwise related entities. Additional information about Advisor is contained in its Form ADV Part 2A available here.

© 2024 Hiatus, Inc. All rights reserved

Advertiser Disclosure:


Hiatus may receive compensation when you click on links associated with this Hiatus Learn Center. Hiatus is not being compensated for any application, quotation, or the purchase of any financial products.


Hiatus has partnered with MyBankTracker for our coverage of savings account products. Hiatus and MyBankTracker may receive compensation from advertisers when you click on links associated with these savings account products. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MyBankTracker does not include all companies or all savings products. 


Hiatus has partnered with CardRatings for our coverage of credit card products. Hiatus and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are Hiatus' alone, and have not been reviewed, endorsed or approved by any of these entities.


Hiatus is not an insurer or insurance producer. Savvy is the licensed insurance producer supporting the Hiatus/Savvy program. All insurance information and underwriting is provided by Savvy and its licensed insurance partners.


Hiatus has partnered with AmONE for our coverage of personal loan products. Hiatus and AmONE may receive compensation when you click on links associated with personal loan products. In certain situations, compensation may impact where products appear on the site (including the order in which they appear). AmONE does not include all loan companies or all types of loan products.


You are being referred to ADVR LLC’s website ("Advisor") by Hiatus, a solicitor of Advisor ("Solicitor"). The Solicitor that is directing you to this webpage will receive compensation from Advisor if you enter into an advisory relationship or into a paying subscription for advisory services. Compensation to the Solicitor may be up to $2,000. You will not be charged any fee or incur any additional costs for being referred to Advisor by the Solicitor. The Solicitor may promote and/or may advertise Advisor’s investment adviser services and may offer independent analysis and reviews of Advisor’s services. Advisor and the Solicitor are not under common ownership or otherwise related entities. Additional information about Advisor is contained in its Form ADV Part 2A available here.

© 2024 Hiatus, Inc. All rights reserved

© 2024 Hiatus, Inc. All rights reserved

Advertiser Disclosure:


Hiatus may receive compensation when you click on links associated with this Hiatus Learn Center. Hiatus is not being compensated for any application, quotation, or the purchase of any financial products.


Hiatus has partnered with MyBankTracker for our coverage of savings account products. Hiatus and MyBankTracker may receive compensation from advertisers when you click on links associated with these savings account products. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MyBankTracker does not include all companies or all savings products. 


Hiatus has partnered with CardRatings for our coverage of credit card products. Hiatus and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are Hiatus' alone, and have not been reviewed, endorsed or approved by any of these entities.


Hiatus is not an insurer or insurance producer. Savvy is the licensed insurance producer supporting the Hiatus/Savvy program. All insurance information and underwriting is provided by Savvy and its licensed insurance partners.


Hiatus has partnered with AmONE for our coverage of personal loan products. Hiatus and AmONE may receive compensation when you click on links associated with personal loan products. In certain situations, compensation may impact where products appear on the site (including the order in which they appear). AmONE does not include all loan companies or all types of loan products.


You are being referred to ADVR LLC’s website ("Advisor") by Hiatus, a solicitor of Advisor ("Solicitor"). The Solicitor that is directing you to this webpage will receive compensation from Advisor if you enter into an advisory relationship or into a paying subscription for advisory services. Compensation to the Solicitor may be up to $2,000. You will not be charged any fee or incur any additional costs for being referred to Advisor by the Solicitor. The Solicitor may promote and/or may advertise Advisor’s investment adviser services and may offer independent analysis and reviews of Advisor’s services. Advisor and the Solicitor are not under common ownership or otherwise related entities. Additional information about Advisor is contained in its Form ADV Part 2A available here.

App

© 2024 Hiatus, Inc. All rights reserved

Advertiser Disclosure:


Hiatus may receive compensation when you click on links associated with this Hiatus Learn Center. Hiatus is not being compensated for any application, quotation, or the purchase of any financial products.


Hiatus has partnered with MyBankTracker for our coverage of savings account products. Hiatus and MyBankTracker may receive compensation from advertisers when you click on links associated with these savings account products. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MyBankTracker does not include all companies or all savings products. 


Hiatus has partnered with CardRatings for our coverage of credit card products. Hiatus and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are Hiatus' alone, and have not been reviewed, endorsed or approved by any of these entities.


Hiatus is not an insurer or insurance producer. Savvy is the licensed insurance producer supporting the Hiatus/Savvy program. All insurance information and underwriting is provided by Savvy and its licensed insurance partners.


Hiatus has partnered with AmONE for our coverage of personal loan products. Hiatus and AmONE may receive compensation when you click on links associated with personal loan products. In certain situations, compensation may impact where products appear on the site (including the order in which they appear). AmONE does not include all loan companies or all types of loan products.


You are being referred to ADVR LLC’s website ("Advisor") by Hiatus, a solicitor of Advisor ("Solicitor"). The Solicitor that is directing you to this webpage will receive compensation from Advisor if you enter into an advisory relationship or into a paying subscription for advisory services. Compensation to the Solicitor may be up to $2,000. You will not be charged any fee or incur any additional costs for being referred to Advisor by the Solicitor. The Solicitor may promote and/or may advertise Advisor’s investment adviser services and may offer independent analysis and reviews of Advisor’s services. Advisor and the Solicitor are not under common ownership or otherwise related entities. Additional information about Advisor is contained in its Form ADV Part 2A available here.

Join the Hiatus Family today