Summary of Change: Adds a new income-contingent repayment plan, called the Revised Pay As You Earn (REPAYE) plan, to §685.209 of the Direct Loan Regulations. The REPAYE plan is modeled on the Pay as You Earn (PAYE) repayment plan, and would be available to all Direct Loan student borrowers regardless of when the student borrowers received their Direct Loans.
To target the plan to the neediest borrowers, the REPAYE plan has several new features not in the PAYE plan (terms related to PSLF are bolded; see also, our post on REPAYE and PSLF) :
- For married borrowers filing separately, the AGI of both the borrower and the spouse are used to determine whether the borrower has a PFH and to calculate the monthly payment amount. A borrower who is separated from his or her spouse or is unable to reasonably access their spouse’s income, is not required to provide their spouse’s AGI.
- For subsidized loans, if a borrower’s monthly payment is not sufficient to pay the accrued interest (negative amortization), the Secretary does not charge the borrower the remaining accrued interest for a period not to exceed three consecutive years from the repayment start date under the REPAYE plan, the same as under the PAYE plan. Following this three-year period, under the REPAYE plan, the Secretary charges 50 percent of the remaining accrued interest on subsidized loans during periods of negative amortization.
- For unsubsidized loans (including Direct PLUS Loans made to graduate students), and for subsidized loans for which the borrower has become responsible for accruing interest due in accordance with Section 685.200(f) of the Direct Loan regulations, the Secretary charges 50 percent of the remaining accrued interest during periods of negative amortization.
- A borrower whose loans being repaid under the REPAYE plan include only loans the borrower received as an undergraduate student or a consolidation loan that repaid only loans the borrower received as an undergraduate student may qualify for forgiveness after 20 years.
- A borrower whose loans being repaid under the REPAYE plan include a loan the borrower received as a graduate or professional student or a consolidation loan that repaid a loan received as a graduate or professional student may qualify for forgiveness after 25 years.
- After 20 or 25 years of qualifying repayment, as applicable, the remaining balance of the borrower’s loans that have been repaid under the REPAYE plan is forgiven.
- For each year a borrower is in the REPAYE plan, the borrower’s monthly payment amount is recalculated based on income and family size information provided by the borrower (If a process becomes available in the future that allows borrowers to give consent to access their income and family size from the Internal Revenue Service or another Federal source, the proposed regulations would accommodate use of such a process for recalculating a borrower’s monthly payment amount). There is no cap on the monthly payment amount.
- For each subsequent year after a borrower’s initial year on the REPAYE plan, the Secretary determines whether the borrower has a Partial Financial Hardship (PFH). If the borrower does not have a PFH, accrued interest is capitalized.
- If the borrower does not provide the income or family size information needed to recalculate the monthly repayment amount, the borrower is removed from REPAYE and placed in an alternative repayment plan. The monthly payment amount under the alternative repayment plan equals the amount required to pay off the loan within 10 years from the date the borrower begins repayment under the alternative repayment plan, or by the end date of the 20- or 25-year REPAYE repayment period, whichever is earlier.
- The borrower may return to the REPAYE plan if the borrower provides the income and family size information for the period that the borrower was on the alternative repayment plan. If the payments the borrower was required to make under the alternative repayment plan are less than the payments the borrower would have been required to make under the REPAYE plan, the monthly REPAYE payment amount is adjusted to ensure that the excess amount owed by the borrower is paid in full by the end of the REPAYE repayment period.
- Payments made under the alternative repayment plan do not count toward Public Service Loan Forgiveness, but may count for forgiveness under the REPAYE plan or another income-driven repayment plan if the borrower returns to the REPAYE plan or changes to another income-driven repayment plan.
For more details, see this.
Check out our other REPAYE blog posts: