How to Set Up Your Student Loans on REPAYE

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Have you looked into the Pay As You Earn (PAYE) Repayment Plan offered by the U.S. Department of Education, only to realize you don’t qualify? Then you’ll be interested to know about the Revised Pay As You Earn (REPAYE) Repayment Plan.

PAYE is only available to borrowers who took out student loans from the Federal government after October 2007. Unfortunately, that restriction excluded about 5 million borrowers that could have otherwise benefitted.

The solution for those 5 million borrowers is REPAYE. Regardless of when you took out student loans, you can apply for this Income-Driven Repayment Plan.

What’s the Difference Between PAYE and REPAYE?

Other than the eligibility requirements, there are a few differences to be aware of. Under PAYE, your monthly payment is capped at 10 percent of your discretionary income, and it will never exceed your payment under the 10-year Standard Repayment Plan. REPAYE, on the other hand, only caps your monthly student loan payment at 10 percent of your discretionary income, there is no guarantee to keep you from paying more than what you would under a 10-year Standard Repayment Plan .

This is an important distinction. According to the U.S. Department of Education, if your income were to rise substantially, you may eventually pay more under REPAYE than you would under the 10-year Standard Repayment Plan.

You may know that Income-Driven Repayment Plans qualify for forgiveness after 20 or 25 years. The same holds true for REPAYE. If you hold an undergraduate degree, your loan balance will be forgiven after 20 years, and if you hold a graduate degree, your loan balance will be forgiven after 25 years. Under PAYE, loan balances are forgiven after 20 years. Just remember that the amount forgiven may be subject to tax.

If you’re married, it doesn’t matter whether you file jointly or separately. Income documentation for your spouse and yourself is required upon applying. With PAYE, you only need to supply income documentation for you and your spouse if you file jointly.

[Lowering a student loan payment after filing a joint tax return]

One last difference occurs in what happens when your payment isn’t enough to cover the interest that accrues on your balance. On subsidized loans under REPAYE, you’re not responsible for paying the difference between your monthly payment and the remaining interest that accrues for the first 3 consecutive years. Further, after those 3 years have passed, you’re still only responsible for paying half the difference. PAYE only offers the benefit of not having to pay the difference for the first 3 consecutive years.

Why Should I Sign Up Under the REPAYE Repayment Plan?

There’s no reason not to see if you qualify for REPAYE, as it doesn’t have extra income eligibility requirements like other Income-Driven Repayment Plans. As with any repayment plan, you want to make sure it’s a good solution for you.

How do you do that? Use the Repayment Estimator offered by the Department of Education. At a glance, it will tell you what repayment plans are available to you, and what your estimated monthly payments would be under each.

If you’re already on an Income-Driven Repayment Plan, but didn’t qualify for PAYE, make it a point to see how your payments would change under REPAYE.

[How to set up IBR, PAYE and ICR repayment plans]

REPAYE is the Best Repayment Plan for me – How do I Sign Up?

The government has been working to make it as easy as possible to switch repayment plans, and you can do so by filling out a form online.

To start, you’ll need your FSA ID to sign in. If you know your login information, head to the main page of studentloans.gov here. There will be a small box with a green “Log In” button – click this to enter your username/email and password.

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If you haven’t created an FSA ID, or don’t remember your information, don’t worry. You can have a security code sent to your email, or you can answer 3 of 5 challenge questions correctly to reset your password. Creating an FSA ID requires you to fill out a short form.

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Once you’re in, you may be prompted to review your account settings. Give those a look over; agree to the terms, and then save your changes.

You should get sent to a page that looks like this, with your personal information on the right side:

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You’ll then be on a page that briefly explains what Income-Driven Repayment Plans are. Click the green “Start Application” button if you’re ready to apply, or use the link above the button to preview the application to make sure you have everything you need.

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As you can see from step 2, the most important information to have on hand when filling out the application is your Adjusted Gross Income (AGI). The application allows you to import that information using the IRS Data Retrieval Tool, but it’s good to be aware of in case there’s a discrepancy.

If you’re unable to use the IRS Data Retrieval Tool, you’ll have to fill out a paper application. There’s another note that says: “If you are married, file a joint federal tax return with your spouse, and have separated from your spouse or can no longer access your spouse’s income information, then do not complete this request on StudentLoans.gov. Instead, call your servicer and request special instructions.”

Assuming you can continue, you’ll notice the application is divided into four parts: Application Information, Income Information, Personal Information, and Review & Sign.

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Application information should take you seconds to fill out:

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Next up is importing your income information from the IRS. Click “Link to IRS” to continue with your application:

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You’ll be taken to IRS.gov, and you’ll find some of your basic information is already filled out. Complete the rest of the application as needed.

Once that’s done, you have the option to transfer the information over to your application. Review your AGI before transferring to ensure that it’s accurate.

When you’re back to the application, you’ll be asked if your income has drastically changed since you filed your last tax return – choose yes or no depending on your situation.

At this point during the application process, you’ll see which repayment plans you qualify for (if any). As REPAYE doesn’t have income eligibility requirements, you should see estimated monthly payment amounts listed there. Double check that the “current loan balance” listed for your student loans is correct, too.

If you’re not familiar with Income-Driven Repayment Plans, take a moment to look at the explanations about each on this page. Several questions are answered in the “more information” links:

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Happy with your results? Then you can scroll to the bottom and choose to enroll in the plan that will grant you the lowest monthly payment amount, or manually select which repayment plan you want to be considered for.

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You’ll notice that your loan servicer is mentioned here. As an alternative to filling out this application, you can call your loan servicer and request to be put on a different repayment plan as well. They’ll be able to educate you on the options available so you can make the best repayment decision for your situation.

Once you move on, you’ll be asked to review your personal information such as your address, email, and phone number. Make sure these are all up to date before continuing.

You’ll have one final chance to review all the information you’ve given, and there are additional notes at the bottom if you want to read the “fine print.” If all the information is accurate, electronically sign the application and submit it for consideration.

Overall, the application isn’t very difficult to fill out – it took me around 10 minutes. Take your time in understanding what you’re signing up for, and reach out to your student loan servicer if you have any questions about the different repayment plans available. Keep tabs on your student loan accounts as well – it may take some time for the new payments to go into effect, and you don’t want to accidentally miss a payment or pay less while your request is processing.

Did You Get Approved? You’ll Have to Reapply Next Year

One last thing – if you’re approved for an Income-Driven Repayment Plan, you’ll need to “recertify” your income each year. This makes sense, since your payments are based off of your AGI. If it changes, your monthly payment will change.

You’ll go through the exact same process, but be sure to set a reminder for yourself so you don’t forget to renew.

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