Lana Oconnell
The Revised Pay As You Earn (REPAYE) plan is an income-driven repayment (IDR) plan that assists eligible federal Direct loan borrowers in managing their student loan debt. On REPAYE, your monthly student loan payment is proportional to your income, with a minimum monthly payment of 10% of your discretionary income. To remain on this repayment plan, you must recertify and renew your IDR each year. This can be done by submitting the Income-Driven Repayment Plan application on StudentLoans.gov or by indicating that you have no taxable income. With federal student loans, you have the option to change your repayment plan if you are unhappy with your current option.
| Characteristics | Values |
|---|---|
| Renewal Process | To renew, resubmit the income-driven repayment application every year, unless tax information access consent was given during the application process, in which case, recertification will be automatic. Alternatively, click "recertify" instead of "apply." |
| Renewal Frequency | Annually |
| Requirements | Submission of income documentation each year to the loan service provider |
| Payment During Renewal | Not required during forbearance, but interest will accrue, increasing the amount owed |
| Payment Amount | Based on income, ranging from 10% to 20% of discretionary income, with a maximum monthly payment equal to the amount under a 10-year Standard Repayment Plan |
| Interest | Variable and fixed annual percentage rates (APR) available; interest accrues during forbearance |
| Eligibility | Direct Subsidized and Unsubsidized Loans, PLUS Loans to students, Direct Consolidation Loans; must demonstrate partial financial hardship |
| Benefits | Potential for $0 monthly payments; remaining loan balance forgiven after 20 or 25 years of payments, provided on-time payments |
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What You'll Learn
Income-driven repayment application
To renew a Pay As You Earn student loan, you must submit an income-driven repayment application every year, unless you gave consent for your tax information to be accessed during the initial application process. If you provided consent, your recertification will automatically renew, and you will receive a notice before a new payment amount takes effect.
The income-driven repayment application requires financial and personal information. There is no fee to process this application, and you do not need to pay anyone to apply on your behalf. Applying online at studentaid.gov is typically faster and easier than submitting a paper form. You can also download a paper request form and submit it to your student loan servicer. After you submit your application, your servicer will confirm receipt via email or letter.
Due to the SAVE lawsuits, servicers are not currently processing IDR applications. Once processing resumes, servicers may place your loan into processing forbearance, meaning you won't need to make payments, but interest will accrue. Under normal circumstances, servicers process IDR applications within about four weeks. Upon completion, you will receive a new bill with the amount you owe, and payments will restart.
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Interest accumulation
Although the Australian government does not charge interest on student loans, the original loan is indexed to inflation. This means that indexation will be applied to the part of your accumulated study loan that has remained unpaid for more than 11 months. Indexation maintains the real value of the loan by adjusting it in line with changes to the Consumer Price Index (CPI) or Wage Price Index (WPI)—whichever is lower.
The Australian Taxation Office applies indexation on 1 June each year, and your loan will grow over time if you don't make any compulsory or voluntary repayments. For example, in 2023, debts were indexed at 7.1%, up from 3.9% in 2022 and 0.6% in 2020. This means that for people with an average student debt of $24,770, their debt increased by $1,759.
In addition to annual indexation, the total amount of debt can be difficult to reduce. For example, one person who graduated with a $27,000 debt in 2018 had paid off $2,907 by 2023, but due to indexation, their total debt had only reduced by $300.
The Australian government has passed legislation to reduce Higher Education Loan Program (HELP) debt by 20%, removing over $16 billion in HELP and other student debt. This legislation also caps indexation applied to student loans to the lower of the Wage Price Index or the Consumer Price Index, so that indexation will never be higher than the changes in wages.
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Loan forgiveness
To renew a Pay As You Earn student loan, you must resubmit the income-driven repayment application every year, unless you gave consent for your tax information to be accessed during the application process. If you did, your recertification will automatically renew.
There are several ways to achieve loan forgiveness or have your loan discharged. Firstly, if you work full time for a government or not-for-profit organisation, you may qualify for forgiveness of the entire remaining balance of your Direct Loans.
Secondly, if you have a disability that severely limits your work ability, now and in the future, you can apply for a TPD discharge. This can be a physical or mental disability, and if you are successful, you won't have to repay any federal student loans.
Thirdly, if you are a teacher, there are forgiveness programs specifically for you. For example, you may be eligible for forgiveness of up to $17,500 if you teach full time for five complete and consecutive academic years in certain elementary or secondary schools.
Finally, if you are a member of the military with federal student loans, the U.S. Department of Defense offers special benefits for loan forgiveness.
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Eligibility
To be eligible for the Pay As You Earn (PAYE) plan, you must submit income documentation each year to your loan service provider. Your monthly payment will be adjusted if your income increases year-on-year, but it will never exceed what you would have paid under the 10-year Standard Repayment Plan. If payments increase significantly, you can switch to a Standard Plan to finish paying off the remainder of your loan.
To remain on the PAYE plan, you must resubmit the income-driven repayment application annually, unless you gave consent during the application process for your tax information to be accessed. If you did provide consent, your recertification will automatically renew.
The PAYE plan is best for those with partial financial hardship. It is not eligible for uninsured private loans, loans in default, or Perkins Loans. Direct Subsidized and Unsubsidized Loans, PLUS Loans made to students, and Direct Consolidation Loans are all eligible.
The Revised Pay As You Earn (REPAYE) repayment plan is an income-driven repayment (IDR) plan that assists eligible federal Direct loan borrowers in managing their debt. On REPAYE, your monthly student loan payment is 10% of your discretionary income. To remain on this repayment plan, you must recertify and renew your IDR each year.
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Recertification
To renew a Pay As You Earn (PAYE) student loan, you must first apply for the loan and then recertify and renew your income-driven repayment (IDR) plan each year.
Application
To apply for a PAYE loan, you must first determine that it is the right income-driven plan for you. You won't be automatically enrolled in the program, so it's important to talk to your loan servicer first and submit the Income-Driven Repayment Plan application. This can be done on StudentLoans.gov and should take around 10 minutes. During the application process, you will need to submit your income and verification to determine if you qualify for PAYE. If you haven't filed a tax return, you can provide alternate documentation, such as a current pay stub, or indicate that you have no taxable income.
To stay on PAYE, you must resubmit the income-driven repayment application every year, unless you gave consent during the initial application process for your tax information to be accessed, in which case your recertification will automatically renew. You will receive notice before a new payment amount goes into effect. If you miss the recertification deadline, your payments will switch to the amount you would pay under the standard plan, and any interest will be capitalized and added to your principal balance.
Repayment
On a PAYE plan, your monthly student loan payment is 10% of your discretionary income. For federal student loan purposes, this is the difference between your yearly income and 150% of the poverty guideline for your family size and state. The government will calculate this for you when you apply. One of the benefits of PAYE is its interest subsidy, where the government will pay some or all of your remaining interest if your minimum monthly payment doesn't cover it.
Alternative Options
If income-driven repayment isn't right for you, the federal government offers extended repayment and graduated repayment plans, which lower your payments but aren't based on your income. You may pay more interest under these plans, and they do not offer loan forgiveness. You may also be able to pay less by refinancing your student loans.
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Frequently asked questions
The Revised Pay As You Earn (REPAYE) program is an income-driven repayment (IDR) plan that helps eligible federal Direct loan borrowers manage their student loan debt. On REPAYE, your monthly student loan payment is 10% of your discretionary income.
To renew your Pay As You Earn student loan, you must resubmit the income-driven repayment application every year, unless you gave consent during the application process for your tax information to be accessed. If so, your recertification will automatically renew.
To qualify for the Pay As You Earn repayment plan, you need to submit the Income-Driven Repayment Plan application. You can do this on StudentLoans.gov. You won't be automatically enrolled in the program, so you must first talk to your loan servicer.
Other income-driven repayment plans include the Revised Pay As You Earn (REPAYE) program and other IDR plans that offer various repayment options that are more affordable and based on your income.
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