PAYE vs REPAYE for Student Loan Repayment 2023 If you’re having trouble making these federal loans, you may want to consider an income-driven repayment (IDR) program, such as Pay As You Earn (PAYE) or Revised Payment As You Earn (REPAYE) .

Let’s look at the differences between PAYE vs REPAYE for Student Loan Repayment 2023:

PAYE vs REPAYE are repayment programs for repaying federal student loans. They will make your monthly payment 10% of your discretionary income. When you pay off for 20-25 years, the remaining balance is paid off.

The decision between PAYE and REPAYE is based on the severity of your financial burden, your preferred repayment period and whether or not you are married. Paying cash is generally the preferred option for couples who borrow PAYE vs REPAYE for Student Loan Repayment 2023.

CONTENT:

What is PAYE – pay as you earn your student loan?
How to apply for a PAYE student loan?
What is REPAYE – Paycheck Revised, How Do You Earn Your Student Loan?
Student loan PAYE vs REPAYE
Do I have to recertify my income and family size every year?
What is PAYE – pay as you earn your student loan?
Repayment period: 20 years

Payment amounts: 10% of your discretionary income divided by 12

Additional Qualifications: Must have a Direct Loan or Direct Consolidation Loan

Best for: Dual-income spouses; grad debt; persons with low earning potential; borrowers who are eligible for public service loan forgiveness

Are you eligible for PAYE: Check out the Loan Simulator Let’s look at the differences between PAYE vs REPAYE for Student Loan Repayment 2023:

Federal student loan borrowers with newer federal loans can use a Pay As You Earn (or PAYE) repayment plan. This limits your monthly payments to 10% of your discretionary income divided by 12, but no more than the 10-year standard payment amount PAYE vs REPAYE for Student Loan Repayment 2023  .

PAYE can also be used as a repayment plan by borrowers who qualify for Public Service Loan Forgiveness.

To be eligible for PAYE you must have Let’s look at the differences between PAYE vs REPAYE for Student Loan Repayment 2023::

borrowed his first federal student loans after October 1, 2007.
took out a direct loan or a direct consolidation loan after October 1, 2011.
borrowed money for college during the 2008-09 academic school year.
was in school in 2011-12.
Individuals who are not eligible for PAYE may be eligible for the Revised Payment As You Earn (REPAYE) repayment plan.

Pay As You Earn has a 10% cap on capitalized interest. This is a significant difference from other income-based plans. Capitalized interest is interest added to the loan balance that increases the amount you owe.

For example, consider a $100,000 loan with $15,000 in interest. You can keep PAYE and add 10% or $10,000 to your balance. You can also capitalize the full $15,000 using other plans, which would add $5,000 to your balance and allow future interest to grow on the larger balance.

How to apply for a PAYE student loan Let’s look at the differences between PAYE vs REPAYE for Student Loan Repayment 2023:

You must enroll in Pay As You Earn by sending a completed income-based repayment application directly to your student loan servicer.

However, it is easier to do the process online. You can adjust your student loan repayment plan at any time. Note that there is no application fee.

Visit Federal Student Aid. Sign in with your ID or create an account if you don’t already have one.
Choose to apply for an income-based installment plan. You can preview the form to see what documents you need, such as a tax return or alternative proof of any taxable income earned in the last 90 days.
Choose your plan. If you qualify for more than one income-based payment plan, you can choose to be automatically placed in the plan with the lowest payment PAYE vs REPAYE for Student Loan Repayment 2023.
Please fill out the application. Complete the application. Include your spouse’s information, if any, as this may affect your PAYE payments.
Your servicer may put your loans on hold while your application is being processed. Even if you don’t have to make any payments during the repayment period, your loan will accrue interest. This will increase your debt.

Can you temporarily self-report income Let’s look at the differences between PAYE vs REPAYE for Student Loan Repayment 2023:?
According to the Department of Education, borrowers can self-report their income until July 31, 2022, when they apply for or reaffirm an income-based repayment plan. This means that you do not need to submit tax documents when reporting income. You can do this online by submitting your IDR application as usual. Step 2 selects “I will submit my income information”. In December 2021, the Student Loan Servicing Alliance announced that borrowers can also self-certify over the phone.

To continue with Pay As You Earn, you must submit an income-based repayment claim each year. Your payments will also change if your income changes Let’s look at the differences between PAYE vs REPAYE for Student Loan Repayment 2023:.

If you miss your recertification deadline or earn too much to qualify for PAYE, you’ll be charged the same amount as on a standard plan. At that time, any interest earned will be capitalized or added to your principal balance.

What is REPAYE – Paycheck Revised, How Do You Earn Your Student Loan ?
Repayment period: 20 or 25 years

Amount of payment: 10% of your voluntary income

Additional Qualifications: Must have Federal Direct Loans Let’s look at the differences between PAYE vs REPAYE for Student Loan Repayment 2023:

Best for: unmarried borrowers; higher incomes; no grad debt

Revised Pay As You EARN has the biggest difference: it offers an interest subsidy. That’s how interest quickly accumulates. Most income-based plans will subsidize the difference between your repayments and accrued interest at specific points. Income-driven payments can be as low as $0 and may not offset interest accrued on your loans PAYE vs REPAYE for Student Loan Repayment 2023.

REPAYE offers a generous subsidy that is more generous than other income-based plans. It pays the total amount of subsidized loans and half of the difference of unsubsidized loans for the first three years. It covers half the difference between the two types of loans PAYE vs REPAYE for Student Loan Repayment 2023.

Let’s look at an example Let’s look at the differences between PAYE vs REPAYE for Student Loan Repayment 2023:.

We have:

$40,000 – soft loans
$120,000 – Unsubsidized Loans
5% interest rate (for both)
Your subsidized loans would earn – ($40,000*0.95)/12 = $167 per month ($2,000 for a full year)

Your unsubsidized loans would earn – ($120,000*0.95)/12 = $500 per month ($6000 for the entire year)

You will have $0 payments for the first three years of REPAYE if you are eligible.

If you are not eligible, the government will pay $167 plus half of $500 (or $250) Let’s look at the differences between PAYE vs REPAYE for Student Loan Repayment 2023:.

REPAYE offers many of the same benefits as PAYE but applies to all direct loans. REPAYE caps your monthly payments at 10% of your discretionary earnings and is a qualified repayment plan that you can use to get Public Service Loan Forgiveness.

However, if all of your loans were used for college, they will only be forgiven after 20 years of repayment. If you have any remaining debt that you didn’t use for graduate school, it will be forgiven within 25 years.

How is REPAYE different from other income-based repayment plans PAYE vs REPAYE for Student Loan Repayment 2023?
You already know that an income-based plan pays a certain percentage of your income. REPAYE is different from other plans.

There are no income requirements to join the plan Let’s look at the differences between PAYE vs REPAYE for Student Loan Repayment 2023:.
Unlike the IBR and PAYE plans, borrowers do not need to demonstrate that their income is less than their federal student loan debt to qualify for REPAYE.

We’ve helped new graduates manage and eliminate over $1.4 billion in student loans, and one topic that always causes a lot of confusion is Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE).

If you try to go to government sites, things get messy very quickly. President Biden also recently announced revisions to REPAYE that make it even more confusing PAYE vs REPAYE for Student Loan Repayment 2023.

In order to make the two options understandable, I break down the 5 main differences in this article so that you can compare PAYE vs. REPAYMENT.

I have also included the revision announced by President Biden. They are not law yet, but they have a good chance of becoming law PAYE vs REPAYE for Student Loan Repayment 2023.

I have also included a suggestion of when you should use PAYE vs. REPAYMENT Let’s look at the differences between PAYE vs REPAYE for Student Loan Repayment 2023:.

Note: If you haven’t already done so, I highly recommend reading our Guide to Income-Based Repayment before reading this article.

Content
Summary of similarities
Difference #1: Deadline
Difference #2: Marriage
Difference #3: Deferral of interest
Difference #4: Limited monthly payments
Difference #5: Calculating the cost difference between PAYE and REPAYE
PAYE vs REPAYE: How to decide which one to use
When would REPAYE be better Let’s look at the differences between PAYE vs REPAYE for Student Loan Repayment 2023:?
Rapid Fire FAQ
Summary of similarities
Before diving into the differences, let’s briefly summarize the similarities between PAYE and REPAYE PAYE vs REPAYE for Student Loan Repayment 2023:

Both are income-based student loan repayment plans;
Your payments are limited to 10% of your discretionary income (One of Biden’s revisions to REPAYE is a reduction to 5% for college loans);
They only apply to federal student loans;
Each will forgive the amount you owe after a certain period of time; and
For both PAYE and REPAYE, the amount forgiven is treated as regular income and taxed as such.
Below is a summary comparison table:

Compare PAYE vs REPAYE vs IBR
Note: If you use any of these strategies, you don’t want to refinance your student loans. If you do so, you will not be eligible to use these plans.

Difference #1: Deadline
PAYE is 20 years long for both undergraduate and graduate loans. This means that if you have this plan for 20 years, all loans are forgiven and the remaining balance is taxed Let’s look at the differences between PAYE vs REPAYE for Student Loan Repayment 2023:.

REPAYE is 20 years if you only have college loans. If any of your loans are from graduate school, the repayment period is 25 years. This would apply to all of your loans, ie your undergraduate and graduate school loans would be for 25 years.

This is extremely important when comparing PAYE vs. REPAYE because the next 5 years can cost you a lot. I will discuss costs later in the article.

Below is a screenshot of our Income Based Repayment Calculator, which will automatically determine whether your loan term is 20 or 25 years based on how you fill out your profile Let’s look at the differences between PAYE vs REPAYE for Student Loan Repayment 2023:.

PAYE vs REPAYE Difference in term
Difference #2: Marriage
When you are married, you can choose to file your taxes separately or jointly.

If you use PAYE and file separately, your monthly payment is based only on your income and the amount of federal loans. However, if you file jointly, your monthly payment is based on your combined income and federal loans.

REPAYE currently does not care about your tax return status. When you’re married, your required payments are based on your combined income and federal debt levels Let’s look at the differences between PAYE vs REPAYE for Student Loan Repayment 2023:.

When deciding on PAYE vs. REPAYE must take into account the financial situation of your spouses or future spouses. We often see people who know they will get married within a year or two. However, they do not take into account the financial situation of their husbands. Such a mistake can cost thousands of dollars over time.

In the following example, I assume that I earn $78,000 a year and that is what my husband earns as well. As you can see, having to factor in my husbands income could cost me an extra $40,000 using REPAYE versus using PAYE.

My monthly payment more than doubles using REPAYE. This would also happen on PAYE if I file jointly. However, PAYE gives me a choice while REPAYE does not.

The exact amount your monthly payment increases also affects how much federal student loan debt your spouse has. The calculation is complicated, but for those who want to dig deeper, here’s a great article on how to do it.

Note: This is how REPAYE currently works. Under Biden’s proposal, you could apply separately and have your payment based only on your income, just like PAYE Let’s look at the differences between PAYE vs REPAYE for Student Loan Repayment 2023:.

PAYE vs REPAYE Joint and separate tax filing Let’s look at the differences between PAYE vs REPAYE for Student Loan Repayment 2023:
Difference #3: Deferral of interest
In our guide to income-based repayment, we discuss how the difference between your interest and required monthly payment is put towards the loan. Therefore, most will defer interest when they are on PAYE and REPAYE.

You save 100% of the interest on unsubsidized loans on PAYE. For concessional loans, the government pays deferred interest for you for 3 years. After that, you will defer 100% of the interest even on preferential loans.

With REPAYE, the government pays 100% of the deferred interest on soft loans for the first three years, just like PAYE. However, unsubsidized deferred interest is treated separately. This is called the REPAYE interest subsidy.

With REPAYE, the government pays 50% of the deferred interest on unsubsidized loans every month. After 3 years, they do the same for soft loans. (Biden’s proposal changes this to 100% regardless of loan type or term)

To illustrate the difference between PAYE and REPAYE, I will use the following example:

Your interest is $700 per month Let’s look at the differences between PAYE vs REPAYE for Student Loan Repayment 2023:,
Your required monthly payment on both PAYE and REPAYE is $300 per month (check out our IDR calculator if you need help figuring out what your payment would be).
On PAYE, you would be different by $400 in interest per month ($700 – $300).

With REPAYE, you would put away $200 because the government pays 50% of the deferred interest each month ($700 – $300 = $400 *.50 = $200).

You can use the REPAYE interest subsidy if you are repaying your loans. If you are interested in this, see how to use the interest subsidy.

Difference #4: Limited monthly payments
On PAYE, your required monthly payments are capped. This limit is based on the original amount you owed and what your payment would be on a standard 10-year plan. As payments are capped, you must qualify for partial financial hardship to qualify for PAYE Let’s look at the differences between PAYE vs REPAYE for Student Loan Repayment 2023:.

For example, if your required payment was $1,000 on a standard 10-year plan when entering repayment, then this is the highest monthly payment that would be on PAYE. This is true no matter how high your income is.

There is no cap on REPAYE. So if your income increases significantly, so will your monthly payments.

This can have a significant impact on married couples. As we mentioned earlier, if you’re married or know you’ll be getting married relatively soon, you’ll want to factor your spouse’s income and federal student loan debt into the equation before deciding which plan to choose Let’s look at the differences between PAYE vs REPAYE for Student Loan Repayment 2023:.

There have been changes to the federal student loan program as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which was passed by Congress on March 27, 2020, to help people affected by the coronavirus.

Until June 30, 2023, borrowers have the option to suspend payments without penalty if necessary. If you’re seeking forgiveness through an income-driven repayment plan, missed payments will still count toward the time it takes to qualify.

You can learn more in our guide to federal student loans.

One of the biggest benefits of federal student loans is the ability to choose from many different repayment plans.

Two of these income-based repayment plans are Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE).

If you’re deciding between PAYE and REPAYE, it’s important to understand the differences and this guide will give you the answers you’re looking for as to which program is right for you.

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