Paye Vs. Reply: Which Is Better To Pay Off Student Loans?

Your federal student loan payments might be easier, if you get on an income-driven repayment plan, such as Pay As You Earn (PAYE) or Revised Pay As You Earn (REPAYE).

A federal student loan repayment arrangement called PAYE or REPAYE sets student loans at 10% of their income.

It is possible to get your remaining balance forgiven after 20 or 25 years of repaying.

Whether you choose PAYE or REPAYE depends on how much money you need to borrow, the length of time you want to return it, and your marital status.

Single borrowers tend to prefer REPAYE over PAYE. Married borrowers tend to prefer PAYE over REPAYE.

When it comes to federal student loan payments, an income-driven repayment plan may be a realistic alternative for people who are experiencing difficulties.

In addition to Pay As You Earn (PAYE) and its more recent cousin Revised Pay As You Earn (REPAYE), there are four other possibilities.

Most people can qualify for REPAYE, however, depending on your position, PAYE could be a better choice for you as well.

PAYE and Revised Pay As You Earn (REPAYE) are two of the IDR schemes.

As well as differences in terms of how much you possibly may spend — and for how long — they also differ in terms of the student loans.

So, in this PAYE Vs. REPAYE review, we’ll compare these both to find out which is perfect for you.


PAYE Vs. REPAYE – What Are They?


Both PAYE and REPAYE decrease your monthly student loan payment to only 10 percent of your discretionary income.

Each of them also qualifies as a repayment plan under student debt forgiveness programs.

You may learn more about each plan by reading the most crucial details below:


Some people may have a tougher time getting PAYE than they do for REPAYE.

For those who owe money on graduate student loans or who are married, PAYE offers advantages that REPAYE doesn’t.

Certain facts concerning PAYE should be understood:

Payment Each Month:

Payment Each Month

Your monthly payment will be set at 10% if you have surplus income.

You can not pay more each month than what you would under a 10-year payback plan.

Pay attention to the fact that your spouse’s income will not be included in the total if you are married but file separately.


Since Oct. 1, 2011, most federal Direct Loans are eligible for PAYE.

Applicants must additionally show a partial financial hardship.

Repayment Period:

Repayment Period

To pay off your debts, you will have another 20 years to do so.

Depending on your circumstances, PAYE may be a better choice than REPAYE, as you may have a smaller monthly payment and a shorter repayment.

It is important to keep in mind, however, that you will not be eligible for PAYE unless you can show proof of financial hardship.

In the PAYE plan, partial financial hardship is determined as your yearly student loan payments being more than 10percent of the difference between 1.50 percent of the poverty level for your living standards and your taxable income.


In general, REPAYE is available to most people who have taken out a federal loan.

Due to the fact that no proof of financial hardship must be provided, this is the better option.

REPAYE’s advantages, on the other hand, are not as generous as PAYE’s.

Certain facts concerning REPAYE should be understood:

Monthly Payment:

Monthly Payment

However, unlike PAYE, your monthly payment can be higher than your typical 10-year monthly payment because it is limited to 10percent of expendable income.

The earnings of your partner are included in your overall income, even if you pay your taxes independently.


REPAYE is open to any borrower with a qualifying loan.

Repayment Period:

Repayment Period

Your student debts will need to be repaid over a 20-year time frame.

Graduate student loans have a 25-year repayment period.

For the first three years, is there a method to eliminate the interest on federal loans?

REPAYE will offer a 50 percent subsidy on Direct Unsubsidized Loan amounts.

The 50 percent subsidy on subsidized loan amounts will remain in effect even after the three-year period has ended.

The only thing to keep in mind, however, is that if you quit the REPAYE plan, any accumulated interest that has not been paid will capitalize and be added to your loan.

In the event that you opt-out of the PAYE scheme, just 10 percent of the remaining interest shall capitalize.

What You Need To Know About Income-Driven Repayment:

Driven Repayment

Loan repayment plans that are based on your wage are known as Income-Driven Repayment Plans (IDRs).

If you have been paying your federal loans for 20 or 25 years, an IDR can reduce your monthly rate and result in partial forgiveness.

You will pay a portion of your expendable income, which is your annual salary minus 150 percent of your state’s poverty line.

Aside from that, it is the money that is left over after paying for your family’s normal (rent, utilities, food, taxes, etc.).

IDR programs are only available for certain types of federal student loans.

Eligibility may also be affected by factors such as family income. For an IDR application to be approved, it must indicate financial hardship.

Every year, you must correct your continuing eligibility if you are using an IDR plan.

As a consequence of developments in your salary or life expectancy, the Department of Education may need to modify your terms of the loan, or you may no longer be eligible to participate in your current plan.

Is There Any Impact Of The Coronavirus On Income-Driven Repayment?

Student loans owed by the United States Department of Education are eligible for a payment delay and interest waiver until September 30, 2021, due to the coronavirus epidemic.

Suspended payments will still count towards income-driven payback forgiveness if you are currently in a repayment plan based on income.

Your employment may have been affected by the coronavirus epidemic.

As soon as the regulatory moratorium period finishes, you may be liable for a lower proportion if you update your data prior.

Also Read: 11 Short-Term Financial Goals You Should Achieve This Year

Paye Vs. Repaye – Key Differences:

Paye Vs. Repaye - Key Differences

Repayment Plan:

Pay as you go (PAYE) has a 20-year repayment plan.

As a result of REPAYE, your repayment period is decided by your education term.

If all of your loans were for undergraduate studies, you will have a repayment period of 20 years, and a loan period of 25 years if you were a postgraduate.

You will never pay more than you would under a normal repayment plan with PAYE.

REPAYE, on the other hand, has no payment cap.

Eligibility Criteria:

REPAYE is available to you regardless of when you originally took out a federal direct loan.

However, only new direct loan borrowers can use PAYE.

Investing In The Future:

Your repayment plan will determine how interest is handled.

For non-subsidized loans under REPAYE, the government pays half of the interest owed.

According to the Pay As You Earn (PAYE) tax system, if you have federally subsidized loans then you’ve got to pay interest rates.

Marital Status:

In spite of the fact that you and your spouse record different tax returns, the loan officer will use your spouse’s information in an attempt to calculate your repayment plan.

Pay As You Earn (PAYE) only counts your income if you file separate tax returns.

Both PAYE and REPAYE are ineligible for Parent PLUS Loans. Federal debt payments can be amalgamated.

However, if you merge your loans into a Direct Consolidation Loan, they will be liable for Earnings Repayments.

What is A Subsidy On Interest?


If you utilize PAYE or REPAYE, you may not be able to pay back the loan. There is a deleterious depreciation as a result.

It is worth noting that the interest subsidies given by both programs might be helpful to debtors who find themselves.

Interest payments on college loans are not capitalized by PAYE. By adding it to the loan’s principal, interest is capitalized.

The first three years of your plan’s coverage are covered by a government grant.

A limited amount of interest may be taken from your account if you decide to terminate your participation.

In the REPAYE plan, if your payments are too modest to cover the interest, the Department of Education will cover it for up to three years.

Interest subsidy will continue to cover half of your loan’s excess interest charges after three years.

For eligible unsubsidized loans, REPAYE offers an interest subsidy of up to 50 percent from the first day of the loan.

To sum it all up, the REPAYE interest subsidy comes out on top for the majority of borrowers.

Paye Vs. Repaye – How To Choose Which Is Right For You:

Paye Vs. Repaye

When deciding between REPAYE and PAYE to change your student loan payments, there are various variables to consider.

Qualification Standards:

Compared to other systems, REPAYE has If you join in the plan, for example, you don’t have to verify that you’re in financial need.

However, you are if you are concerned that you won’t qualify for PAYE, then go for REPAYE.

Payment Cap:

Payment Cap

PAYE imposes a limit on your payment plan. However, if you don’t comprise your payment plan around their terms, then they won’t approve you.

Marital Status:

REPAYE is ideal for those who are single.

However, it is possible that your monthly payment under REPAYE will increase if you are married or plan to be married in the future since they will count your spouse’s income too.

Graduation Debt Is Forgiven Earlier By PAYE:

As part of the Pay As You Earn program, eligible student loans for graduate school can be written off after a period of time.

To be eligible for debt forgiveness, you must participate in REPAYE for 25 years.

What Do You Need To Do To Enroll In PAYE or REPAYE?

Enroll In PAYE or REPAYE

  • Choose the one that appeals to you.
  • Your loan officer can help you apply for the income-driven repayment schedule.
  • Until you get confirmation that your application for income-driven payment has been accepted, continue to make your scheduled loan payments.
  • You will need to make your new monthly payments.

Can You Switch Between REPAYE And PAYE?


It is important to note that you can pick from any of the repayment options offered by the federal government, according to Karlowitz.

You should contact your loan officer if you wish to change your repayment arrangement.

In order to transfer your plans, you must still satisfy certain requirements.

Investigate each program to determine if moving between them is financially favorable. Any chance, that will assist.

People who foresee a significant increase in income may benefit from a transition from REPAYE to PAYE, says Freedom Financial Network’s Michael Micheletti, director of corporate communications.

This would allow them to use the 10-year Standard Repayment Plan payment limit, which reduces the overall loan amount (including interest) when income grows.

It does not make sense to transfer for someone with a big loan and who may never reach the 10-year Standard Repayment Plan maximum.”

Use a loan calculator to crunch the figures or speak with your loan servicer about your plan to transfer programs, since there are numerous aspects to consider. 

Refinancing Your Student Loan:

Refinancing your student loans might be a possibility if you need to decrease your monthly payments and have acceptable credit.

Moreover, refinancing a federal student loan into a private student loan would result in the loss of federal advantages, including access to income-driven repayment programs.

The greatest price will be found if you browse around and evaluate all private student loan lenders.

Using Credible, you may compare rates from a variety of lenders in just a few minutes by filling out a single form (instead of several applications).

Alternatives to Income-Driven Repayment:

Alternatives to Income-Driven Repayment

Borrowers of federal direct loans have various repayment options than PAYE and REPAYE, including:

Income-based Repayment (IBR):

If you got into debt in the past, your IBR installments will be 10 percent or 15 percent of your expendable spending for 20 or 25 years, based on when you took out the loan.

Income-contingent Repayment (ICR):

ICR is the only IDR option available to borrowers of parent loans.

For those without direct loans or ineligible for an IDR plan, there are many government repayment options.

Long-term Repayment Plan:

You must either probably owe $30,000 to be considered for prolonged repayment.

Due to this, your payback time is prolonged to 25 years, and your repayments might be set in stone.

Graduate Student Loans:

For all federal loan debtors, progressive repayment allows you to pay off your loans in 10 years or less (or up to 30 years for consolidated loans).

Despite the fact that your salary remains the same, your monthly payments increase every two years.

Also Read: Mezzanine Loan: What Is It? – Definition & Overview

When Should You Consider Refinancing?

It is possible that income-driven repayment arrangements might be a viable answer for a large number.

It is crucial to highlight that not everyone will profit from PAYE, REPAYE, and other IDR schemes.

Personal student debts are not covered by the federal IDR schemes. As a last resort, if you have federal student loans, try consolidating them.

As a last resort, if you have federal student loans, try consolidating them.

However, your income is too high for you to apply for the Pay As You Earn program (or too high for REPAYE to make sense).

Because of the coronavirus outbreak, interest rates have fallen to near-record lows.

Reducing interest rates may help you save money and get rid of your debt.