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REPAYE Student Loan Repayment Plan Adds Options to Make Repayment More Affordable

December 17, 2015

Some students hesitate to borrow for school because they aren’t sure they will be able to make their payments. It helps when they know there are repayment options to fit their circumstances. Today, Federal Student Aid (FSA) implemented a new student loan repayment plan to help students struggling to make payments.

As a financial aid officer, you might already have heard about this new repayment plan and are waiting for details. We want to give you a high-level overview, so you can share the information with your students.

New Revised Pay As You Earn (REPAYE) Repayment Plan

The new Revised Pay As You Earn (REPAYE) Repayment Plan is for most Direct loans (see Ineligible Loans section for reference). You will see similarities to the Pay As You Earn (PAYE) Repayment Plan, as well as other repayment plan options available to borrowers. A few differences include:

  • Borrowers aren’t required to meet partial financial hardship requirements to qualify for the plan. On this plan, the regular monthly payment would generally be equal to 10% of the borrower’s discretionary income, divided by 12.
  • If a borrower misses their annual recertification deadline on REPAYE, their loans are exited from the plan and placed on a special Alternative Repayment Plan, which will likely raise their regular monthly payment amount. If the annual recertification date is missed for any of the other Income-Driven Repayment Plans, the borrower’s loans are still exited, but they are moved to the Standard Repayment Plan, which also has a higher regular monthly payment amount.
  • If the borrower wants to re-enter REPAYE, the regular monthly payment amount is adjusted to make up the difference between the amount they paid under the Alternative Repayment Plan and the amount they would have paid under REPAYE if the amount of the REPAYE payments would have been more than the Alternate Repayment Plan.
  • Forgiveness is granted after 20 years of qualifying payments if the borrower took out loans for their undergraduate studies, or 25 years of qualifying payments if the borrower has any loans for their graduate or professional-level studies.
  • As with the Income-Based Repayment Plan and the PAYE Repayment Plan, students do not have to pay the accrued interest (interest not covered by their regular monthly payment amount) on subsidized loans for the first three consecutive years of repayment on REPAYE.
  • After the first three consecutive years of repayment on subsidized loans, and for the full REPAYE repayment period on unsubsidized loans, students only have to pay 50% of accrued interest (interest not covered by their regular monthly payment amount).

Ineligible Loans:

  • Direct PLUS Loan made to a parent borrower
  • Direct Consolidation Loan that repaid at least one Direct or Federal PLUS Loan made to a parent borrower
  • Direct Loan in default
  • FFELP loans

Click here to learn more about REPAYE.

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