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Is REPAYE the Best Payment Plan for Your Federal Student Loan?

If you are looking for the best repayment plan, the one that will give you the lowest, most affordable payment, for your federal student loans, then there is a new option available. Effective on December 16, 2015, the Revised Pay As You Earn (REPAYE) plan helps borrowers of federal student loans with a third income driven repayment option. In effect, it extends the benefits of the PAYE plan, but does have some downsides.

The PAYE plan modified the Income Based Repayment (IBR) plan by shortening the repayment period from 25 to 20 years and lowering the cap on monthly payments from 25 years to 20 years. In addition, you would never pay more per month than a 10 year fixed repayment plan. But this deal is not available to everyone. What REPAYE does is make PAYE available to everyone by removing these restrictions.

How is REPAYE Different Than PAYE?

But all the news is not good. The REPAYE plan is not for everyone, and should be considered carefully. This is because there are some downsides that need to be considered. They are:

  • There is no cap on the monthly payment equal to the payment on a 10 year fixed repayment plan; it will always be 10% of your disposable income. So if your income rises to the point where you can pay more than that amount, you will be required to do so.
  • If you are married, your spouse’s income must be included in the calculations. You cannot avoid this by filing separate tax returns.
  • The 20 year repayment period in REPAYE only applies to undergraduate loans; loans for professional schools (e.g. law or medicine) or graduate schools have a 25 year repayment period.

The REPAYE plan can be helpful to some people, but not for everyone. Anyone considering it should consult with a student loan professional to see if it is right for them, as every situation is different.

I Can Help

If you live in southern New Jersey and are looking for a more affordable repayment plan, please feel free to call my office at 856-432-4113 or contact me through this site to schedule an appointment in my Woodbury office to discuss your case.

If you would like more information about student loans, you can dowload my free book, I Graduated; Now What? A Guide to Dealing with Your Student Loans.

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Steven J. Richardson
Bankruptcy, Collections, Student Loan, DUI and Traffic Court attorney in Woodbury, NJ.