REPAYE is Here! How You Can Give Yourself Flexibility with the New Income Based Repayment Plan

REPAYE - Income Based Student Loan Repayment Plan

Good news, everyone! Student loans just got way easier to pay off.

There’s a new plan in place that’s going to help a lot of people pay down their student loans successfully, without breaking the bank in the meantime! The goal of the plan is simple: put a cap on the maximum percentage of income that can be paid towards student loans.

What is the REPAYE Student Loans plan?

On October 27th, the federal government opened new horizons for student loan repayment plans. Snowballing off of the Income Based Repayment Plans with the REPAYE (Revised Pay As You Earn) plan they’ve been working on.

Following the same basic guidelines of the Income Based Repayment Plan, they’ve added one major new option for all student loan holders: you can opt to max your payments out at 10% of disposable income.

Previously, the plans tended to cap out at 15% (but some were as high as 20%) of disposable income, which for many was a fair chunk of change, and often led to financial hardship resulting in deferment or forbearance as they struggled to make payments.

How does the REPAYE Plan Work?

Starting December 16, 2015, the new plan will become available as a repayment option.

Of course there will be qualifications that must be met to be eligible for the new plan (anyone who borrowed prior to 2010 might have to jump through an additional few hoops), but the federal government is expecting the plan to be of great help to millions of Americans struggling with their student loan debt and help through repaye interest subsidy options. 

The plan will be open to any person who borrowed federal funding for education, excluding Parent PLUS Loans.

What Are the Perks of this Student Loan Repayment Plan?

Once this plan is implemented as an option for borrowers, they will have a total of eight repayment plans to choose from on their federal loans. Four of the plans have been developed under the Obama Administration in the hopes of easing the burden of student loans.

Developers of the plan are hopeful that it will increase the use of income based plans, helping millions to pay off their loans more effectively and offer revised pay plans.

Additionally, REPAYE will erase outstanding debts after 20 years of payment for undergraduate debt, and 25 years for graduate debt.

The flexibility that the “pay as you earn” plans provide should prove invaluable for those whose income is unsteady or varies. The option to pay based on your income, rather than a set monthly payment allows a bit of relief to be offered to those with student loans, whether they change jobs, move, or have a temporary loss of income.

The ability to pay (at most) 10% of expendable income means that more options are available regarding early career and life decisions.

The early stages of a career are very uncertain, and you never know what life will throw at you. But it’s nice to know that as far as your student loans are concerned, you have options!

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