Pay As You Earn Repayment Plan (PAYE Student Loan)

If you’re trying to pay off federal student loans below a 10-year Standard Repayment Plan, you may qualify for a PAYE Student Loan repayment plan. The U.S. Department of Education gives various income-driven repayment plans, but PAYE Student Loan is generally considered as one of the most beneficial.

Pay As You Earn (PAYE Student Loan) assists you to pay off your loans more efficiently by modifying your monthly payments to the value you earn currently. If you pass for the program, enrolling in PAYE Student Loan can offer a lot easier loan repayment, also full forgiveness of your loan balance.

What is Pay As You Earn (PAYE )?

The Pay As You Earn program provides federal student loan borrowers the chance to pay back their student loans at a more fair pace based on their income. The main benefit of PAYE is that your monthly loan payments are based on what you currently earn, not on what you owe. Monthly payments under the PAYE Student Loan program are capped at 10% of a borrower’s discretional income.

Part two of this program is that you may not even have to pay off your whole loan. Your federal student loans can be forgiven and discharged if you make your qualifying payments for 20 years.

The most notable benefits of PAYE Student Loan are:

  • Monthly payments capped at 10% of your discretionary income.
  • Loan forgiveness offered after 20 qualified years (the discharged number is taxable).

Obama’s PAYE Student Loan Repayment Plan

President Obama passed into law The PAYE Student Loan Repayment Plan on December 21st, 2012. PAYE was part of a bigger plan to help those trying with federal student loans, usually regarded to as “Obama’s student loan forgiveness program.”

The purpose of PAYE Student Loan within the larger system of new legislation was to make loan repayment more manageable for graduates when they first join the workforce and let them increase their monthly payments as their income increased also.

The PAYE program gives more benefits than the other income-driven repayment programs, but it is also difficult to pass for.

Want to learn more about Pay As You Earn Repayment Plan (PAYE Student Loan)?

Just fill the form or click “Call Now” button.

Pay As You Earn vs. IBR

The most basic sort of income-driven repayment plan is Income-Based Repayment or IBR.  Your monthly payments could be lower with PAYE than with IBR, depending on when your loan was started, that is the main difference between IBR and PAYE. For some loans, monthly payments under PAYE are capped at a smaller percentage of your income than they would be under IBR.

IBR

  • Borrowers on or after July 1, 2014
  • Payments usually capped at 10% of your discretionary income.
  • 20-year repayment
  • Borrowers that are not new borrowers on or after July 1, 2014
  • Payments usually capped at 15% of your monthly discretionary income.
  • 25-year repayment

PAYE

  • Payments usually capped at 10% of your discretionary income.
  • 20-year repayment

Pay As You Earn vs. REPAYE

To assist student borrowers who do not fit the more stringent specifications of PAYE, the Obama administration organized the Revised Pay As You Earn, or REPAYE, program. The most significant difference among the two programs is that you can qualify for REPAYE despite when your loan was initiated. If you don’t qualify for PAYE, REPAYE can offer the equal benefits without many of the restrictions.

The repayment term is different between the two: with REPAYE, you can get loan forgiveness after 25 years of qualified payments or 20 years of qualified paymentsif you’re repaying Grad PLUS Loans.

REPAYE

  • Payments usually capped at 10% of your discretionary income.
  • 20-year repayment if all loans you’re repaying under REPAYE were got for undergraduate study
  • 25-year repayment if any loans you’re repaying under REPAYE were got for professional or graduate study
  • Interest forgiveness can be higher in REPAYE

Eligibility Requirements for PAYE

To qualify for PAYE,IBR or REPAYE, the number you would pay monthly under the plan have to be smaller than your monthly payment under a 10-year Standard Repayment Plan.

If your estimated monthly payment under PAYE is similar to or higher than what you’re paying monthly with your Standard Repayment Plan, you won’t benefit from PAYE, and you won’t qualify.

Plus to this general requirement, you as a borrower have to fit certain standards and make certain your loan passes for PAYE.

Borrower Requirements for PAYE Student Loan

To pass for the PAYE Student Loan repayment program, you have to meet these standards as a borrower:

  • Prove at least Partial Financial Hardship as set by the U.S. Department of Education
  • Have got a Direct Loan disbursement on or after October 1, 2011.
  • Be a new borrower from October 1, 2007 (determined as having no notable balance on a Direct or FFEL Loan when you get a Direct or FFEL Loan on or after October 1, 2007).

Loans That Qualify for PAYE

Plus, your loan has to be one of these examples of federal loan to qualify for PAYE:

  • Direct Consolidation Loans that don’t add PLUS Loans made to parents.
  • Direct Unsubsidized or Subsidized Loans made to undergraduate student borrowers
  • Direct Plus Loans made to graduate and expert student borrowers

PAYE Limitations:

  • Direct Plus Loans offered to parents do not qualify for PAYE.
  • When you got the loan after Oct. 1st, 2007 you must not have had a balance on a Direct Loan or FFEL Loan.
  • PAYE particularly applies to federal student loans that were disbursed on or after Oct. 1, 2007.

Benefits of PAYE

Pay As You Earn usually difficult to qualify for than other IDR plans, yet it can result in lower monthly payments and extra added benefits. If you are eligible for PAYE, it’s possible the preferred option over IBR.

Lower Payments

The primary advantage of PAYE Student Loan is decreased monthly payments. If ,you’re a new graduate with relatively low income and your monthly loan payment is high, PAYE Student Loan may be the best choice if you qualify. PAYE caps your monthly payment at 10% of discretionary income. And it can result in a notable decrease in your monthly payment, even reducing it to $0.

Loan Forgiveness

You are eligible for loan forgiveness after a span of 20 years when you qualify for PAYE, as long as you perform all of your payments. This is one of the advantages PAYE allows over IBR since IBR forgiveness is only given after 25 years to loans removed before July 1, 2014.

Public Service Loan Forgiveness (PSLF)

Forgiveness is open after 10 years of qualified payments under PSLF unlike with PAYE and IBR, and any balance forgiven is not regarded taxable income.

Enrolling in PAYE is an excellent option if you’re curious in qualifying for PSLF in the future or now. You will be a move closer to qualifying for PSLF by enrolling in a qualified IDR plan and also decrease your monthly payments as much as possible.

Drawbacks of PAYE

While PAYE may look like an easy choice, the plan does have drawbacks that are necessary to reflect before enrolling.

Tax Implication for Forgiven Loan Balance

If you still owe a balance on your federal student loans after 20 years of qualified repayment under PAYE, you can qualify for loan forgiveness. But, it’s necessary to record that this advantage doesn’t come without financial responsibility: any forgiven number under PAYE is regarded as taxable income by the Internal Revenue Service. Make sure you’re ready to pay a percentage of your forgiven balance on that year’s income taxes before applying for loan forgiveness.

Annual Recalculation and Re-Enrollment

All of the factors involved here are recalculated periodically to decide the fairest repayment number for each applicant. This can result in a lot of paperwork and hassle while it does result in monthly payments that better suit your monthly income.

You have two choices to recertify your PAYE plan: submitting a paper application through the mail or submitting a request electronically via StudentLoans.gov. To make your recertification request, you’ll need your spouse’s information if you’re married, proof of income, your signature, your family size information, and your FSA ID if you intend to use the website of Federal Student Aid.

If you’re interested in PAYE, the advantages have to outweigh the energy and time it takes to continue enrolled and retain your information timely.

Debt Prolongment

You might be debt-free in half the time if you can manage to make your monthly payments under the 10-year Standard Repayment Plan. It will need to get out of debt under a PAYE program. Getting out from under your student debt quicker may be worth it, even if it involves forgoing the forgiveness given by the PAYE program if you can manage it.

By eliminating or reducing your student debt in 10 years rather than 20, you better your financial health and probably will have more benefit when it comes to purchasing a home, taking out a line of credit, and everything that needs a credit check.

student-loan-forgiveness

Private Student Loan Consolidation

Private student loan consolidation is available through various banks we work with to combine all your student loans into one new loan. Private student loan consolidation requires a good credit score and will often have better rates than the federal student loan.

What Will My Payments Be With PAYE?

Your monthly payments under PAYE are determined by applying your discretionary income. Anything your household makes over 150% of your state’s poverty level is discretionary income. You have to determine your household’s discretionary income to know what your monthly payments would be if you qualify for PAYE.

Remember that your entire household’s income goes into this calculation, not only your own, as state poverty levels are based on household size.

The Sample of monthly payment calculation under PAYE repayment plan:

The sample of monthly payment calculation under PAYE repayment plan:

The 2018 Federal Poverty Guideline for the 48 contiguous United States and D.C. was $16,460 for a household of two.

If you’re in a household of two and living in California, making $36,000 per year as a household (both incomes included), you can find your discretionary income by these steps:

  • 150% of $16,460 (1.5 x 16,460) = $24,690
  • $24,690 is 150% of your state’s poverty level.
  • $36,000 – $24,690 = $11,310
  • $11,310 is your discretionary income.
  • 10% of $11,310 (.10 x 11,310) = $1,131
  • $1,131 is the amount you owe yearly.
  • $1,131 divided by 12 = $94.25
  • $94.25 is your monthly payment.

Trump Proposals for Student Loan Forgiveness

The president who began the PAYE and REPAYE programs are no longer in office. But, these IDR plans have yet to undergo any modifications under the new administration.

Discharged Student Loans Tax Burden

President Trump has made some modifications to the form student loan forgiveness works, as well as the Jobs Act and Tax Cuts, which made discharged student loans untaxable for people who got it for Total or Death and Permanent Disability. The action also eliminated the tuition and fees deduction, which let taxpayers decrease their taxable earnings by up to $4,000.

Changes to Student Loan Repayment Plans

Bonus to these changes which have already impacted, Trump has offered the elimination of IBR, PAYE, REPAYE, and ICR, and the statement of a single, new income-driven repayment plan.

The new plan would be an increase for any borrowers who currently qualify for PAYE and REPAYE  by capping borrowers’ monthly payments at 12.5%.

The new plan would also give student loan forgiveness at 15 years for undergraduate borrowers and 30 years for professional/graduate borrowers. It’s unsettled forgiven balances would be taxable as income or not.

Is PAYE Right for You?

If you’re fighting to make your monthly payments under a 10-year Standard Repayment Plan, PAYE isn’t your only choice. Even though PAYE might be the most reasonable income-driven repayment choice, not every candidate will qualify. Plus, PAYE might not be the best option for you if you’re not prepared to keep up with yearly enrollment or if you want to pay off your debt faster.

If you don’t qualify for PAYE or you’re curious about learning more on other income-based repayment plans, click here.

ITT-tech-loan-forgiveness

ITT Tech Lawsuit: How to Qualify for the ITT Loan Forgiveness Program

Great chance is waiting for ITT Tech students who would like to qualify for the ITT Tech Loan Forgiveness. Students can apply for Closed School Credit Discharge or transfer credits they

DeVry University Lawsuit

2019 Guide to the DeVry University Lawsuit, Loan Forgiveness & Discharge Program

DeVry University is quite famous for its history with numerous lawsuits and investigations, because of their falsely claimed employment rates and salaries of their graduates. They also provided inaccurate information

ITT Tech lawsuit

Frequently Asked Questions About the ITT Tech Lawsuit 2019

ITT Tech, which consisted of more than 100 campuses in 38 states, until the beginning of September 2016 was a large commercial college in the country. ITT Tech was shut

HRSA faculty loan repayment program

2019 Guide to the HRSA Faculty Loan Repayment Program

The HRSA Faculty Loan Repayment Program established to encourage more and more professionals who are working in the health care system to become members of healthcare faculty. For the population

Walden Student Loan Forgiveness

Walden Student Loan Forgiveness Program

Have you attended Walden University? If it is yes, then we have some good news that you might be interested in. If you are a formers student at Walden University,

Navient loan forgiveness

2019 guide to Navient refunds, forgiveness & discharges

If you happen to have a large amount of student loan, then you might be highly interested in reducing your monthly loan payments or getting out of debt as fast

federal loan cancellation

News about Heald College: Former students may be eligible for Federal Student Loan Cancellation

On December 13th, 2018 the Department of Education announced that they would approve $150,000,000 in Borrower’s Defense to Repayment Discharges. It included raising federal loan cancellation for students who attended

anthem student loan forgiveness

2019 Guide to the Anthem Student Loan Forgiveness Program

If you are reading this topic, probably you are one of the students who have a problem with Anthem college and try to get rid of current student loan debts.

loan forgiveness for volunteer work

Which student loan forgiveness options are available for volunteer work?

Student loan forgiveness for volunteer work may sound like a dream for every student with debts. Before moving to the ways of forgiveness, let’s look at the scenario. Being a

university of phoenix investigation

University of Phoenix is the latest college under investigation

Several for-profit colleges are under the control of the authority. The University of Phoenix investigation is one of them. Although it is still operating, the government began to make inquiries

student loan forgiveness

5 step guide to become debt-free in 2019

Today, Americans have nearly $16 trillion debt in total which includes mortgage loans, credit cards debt, student loans, etc. Just near to 45 million people have student loan credits. It

Westwood College refund

Find out if you are eligible for a Westwood College refund

Are struggling with your outstanding student loan debts? If you are seeking an opportunity to get your student loans forgiven, we have something to tell you that might be interesting

Heald college lawsuit

Guide to Heald College lawsuit 2019

Problematic student loans are discharging through several programs like Trump’s Forgiveness program and Borrower’s Discharge against Repayment. Heald College Lawsuit was condemning the college because of its actions which violated

itt tech lawsuit

2019 Guide to the ITT Tech Lawsuit & Student Loan Forgiveness

Department of Education had a decision about banning the for-profit vocational college from registering new students with federal student loans. After ITT Tech Lawsuit, the college has decided to close

Florida Student Loan Forgiveness Programs

Florida Student Loan Forgiveness Programs

You live in one of the most wonderful states of America, enjoy sunshine and nature. But there is no anything like student loan bill that could ruin your day, right?

Student Loan Forgiveness Program for Non-Profit Employees

Student Loan Forgiveness Program may be too good to be true. However, there are legitimate ways to get it through free government programs especially, for Non-Profit Employees. Some programs have

Closed School Loan Discharge

Closed School Student Loan Cancellation

Today, the educational system in the World is undergoing some changes. At the same time, actual problems continue to be on the agenda. The American education system for many years

Disability Loan Discharge

How to qualify for: Total and Permanent Disability Loan Discharge?

Struggling with student loans is not an easy process as it looks. If you have outstanding student loan debts, there are some news you might be interested in. Do you

Art Institute student forgiveness program

Art Institute Lawsuits,Student Loan forgiveness and discharge programs for 2019

Educational Management Corporation has been one of the hot topics for many years. It is a company which includes several Art Institutes under one central management and has been famous

brown mackie loan forgiveness

Brown Mackie Loan Forgiveness Options in 2019

The recent tendency in student loan problems is related to forgiveness, repayment plans and discharge problems. Those issues can arise if families are not well educated and they cannot evaluate