Department of Education Launches New Income-Based Repayment Plan

Learn more about the new income-based repayment plan, REPAYE.

By Kathryn Knight Randolph

November 12, 2015

Department of Education Launches New Income-Based Repayment Plan Department of Education Launches New Income-Based Repayment Plan

For years, President Obama has advocated for college students and graduates, and one of his biggest proposals to help the student loan debt crisis has become a reality for millions of borrowers. This summer, both President Obama and Secretary of Education, Arne Duncan, called for changes to the current student loan repayment system, and as of the end of October, a new set of regulations have been passed, according to the U.S. Department of Education.

The new plan is referred to as Revised Pay as You Earn, or REPAYE. While other income-based repayment plans are contingent on guidelines like when student loans were borrowed or payment amounts, REPAYE is a lot less rigid. Here are the terms:

• Eligible loans are Stafford, graduate PLUS and direct consolidation loans that do not contain Parent PLUS loans.

• Like other plans, there is no maximum payment. Rather, 10% of your discretionary income will be collected.

• There is also no payment amount limit for eligibility.

• Interest does not capitalize unless you leave REPAYE.

• If you’re married, both you and your spouse’s income and student loan debt will be considered in determining eligibility – unless there is an issue of domestic violence or the two of you are separated.

• The remaining loan balance is forgiven after 20 years for undergraduate loans (25 years for graduate loans), and the forgiven amount will be taxed as income.

To qualify for this plan – or any income-based repayment plan, for that matter – your income and student loan debt amount will be taken into account. If your monthly payment under REPAYE is less than what it would be under a Standard Repayment Plan, you will most likely be able to take advantage of REPAYE.

The new repayment plan will be made available to borrowers starting December 16 of this year. If you borrowed before 2010, you may need to take an additional step and consolidate your loans before applying, as stated by TIME.

U.S. News & World Report warns that if you’re already 10 years into making payments on your student loans, it may not be worth switching to this plan. Fortunately, you can determine if it’s the right move at StudentLoans.gov. There, you’ll find tools like the Repayment Estimator as well as information for which department to contact in order to switch to REPAYE.

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