New REPAYE program helps millions more student loan borrowers

Written by Terry Lawson

In December 2015, the Department of Education announced that a new student loan repayment program became available to borrowers who qualify.  Known as Revised Pay as You Earn, or REPAYE, this program aims to help borrowers manage their payments even when they have Direct Loans that are too old to be considered for PAYE (Pay as You Earn).  There are several key things you should consider to determine if REPAYE is good for you. Here are a few:

  1. Do you have a Direct Loan?  Only these loans are eligible for REPAYE.  If you have a different kind of loan, you may be able to consolidate it into a Direct Loan and become eligible.
  2. Are you on IBR, but the payment is still too high? REPAYE differs from IBR in that your payment is only 10% of your discretionary income instead of 15% as with IBR.  So Switching to REPAYE from IBR could reduce your monthly payment by a third. If money is tight every month, that can make a real difference.
  3. Do you have undergrad and grad school loans?  If you have Direct Loans for undergrad only, then your repayment period under REPAYE is only 20 years.  But if you have even one Direct Loan from graduate or professional school, then you will have a 25 year repayment period before forgiveness.

If you have Direct Loans, or you can consolidate your loans into a Direct Consolidated Loan, you should at least look at how REPAYE would affect you.  Check the Department of Education’s Repayment Estimator to get an idea of how your loan payment could change.

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