Refinancing 14 March 2023

PAYE Vs REPAYE: Which Repayment Plan Is Most Suited To You

Learn the key differences between PAYE and REPAYE to make an informed decision about which one best suits your needs when it comes to repaying student loan debt.

You can be on top of your loan payments and debt by choosing an appropriate repayment plan. Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE) offer two options allowing borrowers to manage their loan debt in a more effective manner. Both plans provide access to loan forgiveness but vary in terms of eligibility criteria and repayment structure. Understanding the key differences between them is essential in order to make an informed decision. We have detailed on differences and eligibility of PAYE vs REPAYE so you can determine which one best suits your needs. 

What are PAYE and REPAYE Repayment Plans?

First of all, understanding what is a repayment plan is important. Repayment plans are offered by the federal government and some private lenders that allow borrowers to manage their loan debt effectively. These plans provide access to various benefits like loan forgiveness, and interest rate reductions, along with easier management of monthly payments.

There are different types of repayment plans and we have a detailed PAYE vs REPAYE analysis below so that you can make an informed decision. You can also read more about other repayment plans further below. 

Pay As You Earn (PAYE)

Pay As You Earn (PAYE) is a federal student loan repayment plan that sets borrowers’ payments based on their income and family size, making it easier to manage monthly payments. It also makes it easier for borrowers to access loan forgiveness after 20 years of qualifying payments. However, only certain borrowers are eligible for the PAYE plan.

Eligibility requirements of PAYE repayment plan:  

  • You Borrowed loans after October 2007 
  • You are able to Demonstrate financial hardship 
  • Have an adjusted gross income that falls below a certain threshold, determined by family size and state of residence 
  • Have eligible federal Direct Loans, including subsidized and unsubsidized loans

Revised Pay As You Earn (REPAYE)

A newer version of PAYE federal student loan repayment plan is the Revised Pay As You Earn (REPAYE) introduced in 2015. Like PAYE, it sets payments based on income and family size, but there are no limits to who can apply, making it more flexible for the borrowers. It also offers access to loan forgiveness after 20 or 25 years of qualifying payments, depending on the type of loan. One major drawback of REPAYE is that interest can accrue faster compared to other plans. 

Eligibility requirements of the REPAYE plan:

You should have an eligible student loan, including Direct Loans, FFEL Program loans, and Federal Perkins Loans

  • Should have a partial financial hardship or no financial hardship at all 
  • Be on an active repayment plan for any eligible student loans. 

PAYE vs REPAYE Comparison

Here are some key differences and similarities between the two plans.

EligibilityBorrowers who demonstrate financial hardship and borrowed after October 2007No limits on eligibility, partial financial or no financial hardship 
Loans EligibleDirect Loans, FFEL Program loans, and Federal Perkins loans Direct Loans, FFEL Program loans, and Federal Perkins loans 
Interest AccrualCapped at 10% of the borrower’s discretionary income.Interest can accrue faster
Interest SubsidyThe government pays all of the unpaid interest accrued on subsidized loans for the first three years of repayment.The government pays 100% of the surplus interest charges on subsidized loans for three years. It also pays 50% of the accrued interest in the subsequent years too.
Loan ForgivenessOffered after 20 or 25 years of qualifying payments depending on the type of loan. Also offered after 20 or 25 years of qualifying payments depending on the type of loan. 
Insurance PremiumsOption to pay insurance premiums No option

Which One is Better PAYE or REPAYE?

The answer depends on your individual circumstances and each has its viable features. If you are married then PAYE is better while REPAYE is a great option for single borrowers. REPAYE also is easier to qualify for and if you can prove financial hardship then you are eligible for PAYE. PAYE allows you to sign up for loan forgiveness in 20 years whereas in REPAYE you only qualify after 25 years. So consider these facts while deciding which plan to apply for.

Can You Switch Between PAYE and REPAYE?

It is possible to switch between the PAYE and REPAYE plans. You can decide based on your financial situation. It is important to remember that switching plans does not reset the timeline for loan forgiveness eligibility – borrowers will still have to make 20 or 25 years of qualifying payments regardless of the plan chosen. 

Alternative Repayment Plans

There are a few options available to borrowers if they dont want to choose PAYE or REPAYE plans. Two of these options are different repayment plans and others include loan forgiveness, forbearance or deferment and refinancing. All of these options are discussed in detail below: 

Income-Based Repayment (IBR)

Income-Based Repayment (IBR) bases your monthly payment amount on your income and family size. This type of repayment option is available for federal student loans such as Direct Loans, FFEL Program Loans, and Perkins Loans. IBR can help lower your payments if you have a low income or are experiencing financial hardship.

To be eligible for IBR, your monthly payment must be less than what it would be under the Standard 10-Year Repayment Plan. Your payments won’t exceed 15% of your discretionary income and can extend over a longer period of time (up to 25 years). In addition, any remaining balance may be forgiven after 25 years of qualifying payments. All borrowers must reapply for IBR annually and update their income information. 

Income Contingent Repayment (ICR)

Income Contingent Repayment (ICR) bases monthly payments on your income, family size, and total amount borrowed. ICR allows you to have flexible payment amounts based on your financial situation each year and provides longer terms for repayment than the Standard 10-Year Repayment Plan.

In ICR your payments are capped at 20% of your discretionary income and can extend up to 25 years, with any remaining balance forgiven after 25 years of qualifying payments. ICR is also an annual process in which you must reapply each year and update your income information.

Loan Forgiveness Programs

Loan forgiveness programs are designed to help borrowers become debt-free by forgiving some or all of their remaining loan balance after making a certain number of payments. These programs are typically offered by the federal government and offer advantages such as reduced payments, interest rate reductions, and potential loan forgiveness after 20 or 25 years (depending on the type of loan). However, they are difficult to qualify for and can have a long processing time for approval. 

Common loan forgiveness programs include Public Service Loan Forgiveness (PSLF) for qualifying public service employees, Teacher Loan Forgiveness for teachers in low-income schools and certain other educators, and Perkins Loan Cancellation for borrowers employed in a variety of professions. It is important to research the eligibility criteria and application requirements for each program carefully before applying. 

Forbearance & Deferment

Forbearance and deferment are great options that allow borrowers to temporarily pause or reduce their loan payments if they cannot make the full payment due on a given month. Forbearance allows borrowers to temporarily stop making payments, while deferment allows borrowers to temporarily reduce their payments (or even pay nothing) if they meet certain criteria.

Both forbearance and deferment are available to most borrowers, although the criteria for each may vary. Forbearance is typically granted for up to 12 months at a time, while deferment can last much longer depending on the type of loan and the individual’s circumstances. However, you should note that interest will continue to accrue during forbearance and deferment. You can do a detailed analysis of both options before choosing the one that fits you best.


Refinancing is a process whereby borrowers take out a new loan to pay off an existing loan or loan. This can be done with either federal loans, private loans, or both. Refinancing typically involves taking out a lower-interest-rate loan, which reduces the borrower’s monthly payments and overall cost of borrowing.

You should remember that refinancing a federal loan means forfeiting certain benefits associated with the federal loan, such as access to income-driven repayment plans and potential loan forgiveness. You should carefully consider your circumstances and the pros and cons of each option before deciding whether or not to refinance. 


Difference between PAYE and REPAYE plans?

The main difference between the PAYE and REPAYE plans is that PAYE is only available to borrowers who first borrowed a federal student loan on or after October 1st, 2007 and before October 1st, 2011, while REPAYE is open to all borrowers regardless of when they first took out a loan. Also, PAYE offers an interest subsidy to borrowers with certain loans, while REPAYE does not. Finally, PAYE requires borrowers to submit annual income documentation in order to stay on the plan, while REPAYE has no such requirement.

What type of repayment plan is best?

The simple answer is that it depends on your financial situation and individual circumstances. Each repayment plan has its eligibility criteria that you may or may not qualify for. Also, consider options like loan forgiveness or forbearance when considering different plans.

Do all repayment plans qualify for PSLF?

No, only certain repayment plans qualify for the Public Service Loan Forgiveness (PSLF) Program. To be eligible for PSLF, you must have an eligible repayment plan such as Income-Based Repayment (IBR), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), or Income-Contingent Repayment (ICR). Also, you must make 120 qualifying payments over a period of 10 years while employed full-time in the public service sector. You can refer to the Department of Education’s website for more information about which repayment plans qualify for PSLF and how to apply.

Final Thoughts

In conclusion, deciding on the best repayment plan for you is a complex and important decision. You should carefully consider your circumstances before making any decisions about how to approach repayment. It is essential to understand all of your options, as well as any potential tax implications associated with the chosen plan.