switching from ibr to repaye

Saturday, April 4, 2016

National TRIO Day Celebration at Tyler Junior College

Switching from ibr to repaye

Switching from ibr to repaye

Switching from ibr to repaye


Your Federal Student Loans Just Got Easier to REPAYE

Beginning today, Federal Direct Loan borrowers can take advantage of a new repayment plan: REPAYE (the Revised Pay As You Earn Plan).

Some of you may be familiar with the Pay As You Earn (PAYE) Repayment Plan, which caps payments at 10% of a borrower’s monthly income and forgives any remaining balance on your student loans after 20 years of qualifying repayment. But this plan is only for recent borrowers.

REPAYE solves this problem. Like the name implies, REPAYE has some similarities to PAYE. First and foremost, REPAYE, like PAYE, sets payments at no more than 10% of income. However, REPAYE—unlike PAYE— is available to Direct Loan borrowers regardless of when they took out their loans.

Should I switch to REPAYE?

If you can’t afford your monthly payment under your current repayment plan, you should consider REPAYE or one of the other income-driven repayment plans. These plans can offer needed relief by ensuring that you will never pay more than a certain percentage of your income. If you can afford to pay more on your loan, you should, since this will save you more on interest costs over the life of your loan.

If you’re pursuing Public Service Loan Forgiveness, you should consider REPAYE. REPAYE is an eligible repayment plan for the Public Service Loan Forgiveness (PSLF) Program. If you’re working toward PSLF and considering consolidating your loans in order to qualify for REPAYE, you should read this first.

If you’re currently on Income-Based Repayment (IBR) because you weren’t eligible for PAYE, you should consider whether REPAYE might be a better option for you. REPAYE could lower your payments by one-third, from 15% to 10% of income. Before making your decision, use our repayment estimator to compare what your monthly payment would be under REPAYE and all of our other plans. Under any income-driven repayment plan, you’ll need to “recertify” your income and family size each year.

How is REPAYE different from the other income-driven repayment plans?

So, you already know that your payment under an income-driven plan is a percentage of your income. But REPAYE is different from the other plans. Here are a few differences:

There’s no income requirement to enter the plan: Unlike with the PAYE and IBR plans, borrowers don’t have to show that that their income is low compared to their federal student loan debt in order to enter REPAYE. In simple terms, that means that the amount of your debt and your income level won’t keep you from qualifying.

Borrowers with only undergraduate loans will have a different repayment period than those with graduate loans: Income-driven repayment plans forgive any remaining loan balance after a specific number of years of qualifying repayment—either 20 or 25 years, depending on the plan. REPAYE is a little different than the other income-driven repayment plans. With REPAYE, if you’re only repaying loans you received as an undergraduate student, you’ll repay your loans for up to 20 years. However, if you’re repaying even one loan that you received as a graduate or professional student, you’ll repay your loans (including any loans you received as an undergraduate) for up to 25 years. Of course, this difference doesn’t matter if you later qualify for Public Service Loan Forgiveness, since your loans would be forgiven after 10 years of qualifying payments.

Married borrowers’ payments are calculated differently: The other income-driven repayment plans use the combined income of you and your spouse to set your payment amount only if you file a joint federal income tax return. If you and your spouse file separate tax returns, your payment amount is based on only your income. REPAYE (with limited exceptions) uses the combined income of you and your spouse to set your monthly payment amount, regardless of whether you file a joint tax return or separate returns. This could increase your monthly payment amount. For more information, read our Q&A.

REPAYE payments are not capped at the 10-year standard payment amount: Generally, your payment amount under an income-driven repayment plan is a percentage of your discretionary income. However, this isn’t always the case with the PAYE and IBR plans. Under PAYE and IBR, your payment will never be higher than what it would have been under the 10-year Standard Repayment Plan, no matter how much your income increases. With REPAYE, there’s no cap on your monthly payment amount. Your payment will always be 10% of your discretionary income, no matter how high your income grows. This means that if your income increases significantly, your REPAYE payment could be higher than what you would have to pay under the 10-year Standard Repayment Plan.

REPAYE provides a more generous interest benefit: If your payment doesn’t cover all of your interest, REPAYE pays more of the remaining interest than PAYE or IBR. This can help prevent your loan balance from ballooning and limit the total cost of your loans.

What else should I consider before applying?

Determine whether you have Direct Loans before attempting to switch to REPAYE. If you’re not sure which type of loans you have, you can log in to StudentAid.gov to find out. Loans labeled “Direct” qualify for REPAYE, loans with other labels, like “Stafford” or “Perkins” don’t qualify for REPAYE unless you consolidate them. You can apply for a Direct Consolidation Loan on StudentLoans.gov.

Special considerations for borrowers who are currently on IBR:

• If you don’t have Direct Loans, but you’ve been repaying your other loans under IBR for a while and you’re thinking of consolidating to take advantage of REPAYE, it’s important to understand that you’ll lose any credit toward IBR loan forgiveness that you received before consolidating—you’ll have to start over with a new 20- or 25-year repayment period on the Direct Consolidation Loan. So, carefully consider whether having a lower monthly payment amount matters more than the additional time you may spend repaying your loans.

• Any outstanding interest will be capitalized (added to your loan principal balance) when you leave IBR.

How do I apply for REPAYE?

You can apply for REPAYE—or any other income-driven repayment plan—onStudentLoans.gov. We’ve made some improvements to the way the electronic application works, so give it a spin. Looking for the lowest monthly payment? With four income-driven repayment plans, it’s easy to overlook a plan or confuse a feature of one plan with another. Let us do the hard part for you. If you’re looking for the lowest monthly payment, there’s a box you can check on the application to request that your loan servicer evaluate you for all income-driven repayment plans, and put you on the plan with the lowest initial payment.

Where can I get more information?

There’s more to know about REPAYE than what you see in this blog post.

• Get more information about REPAYE and income-driven repayment plans atStudentAid.gov/idr.

• You can estimate your REPAYE payment using the Repayment Estimator atStudentAid.gov/repayment-estimator.

• Get more information about Public Service Loan Forgiveness atStudentAid.gov/publicservice.

Have a question that our resources can’t answer? Contact your servicer. They’re the best option for individualized advice.

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• 3 Important Financial Considerations for College Students

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Application For Income-Driven Repayment Plans (IBR, ICR, PAYE, And REPAYE)

Federal student loan borrowers may be eligible for repayment plans that base their monthly payments on their income and family size. You can apply for these plans at StudentLoans.gov or by filling out the form on this page.

If you do not want to use the online application at StudentLoans.gov, fill out this form to apply for plans that take your income into account when determining your monthly payment: income-based repayment (IBR), income-contingent repayment (ICR), Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE).

Note: The related income-sensitive repayment (ISR) plan for Federal Family Education Loan Program (FFELP) borrowers has no specific application form. Talk to your servicer if you want to apply for ISR.

  • A list of all your student loans, and whether they are in the Direct Loan or FFEL program. If you complete your application online, all of your federal loans will be populated in the form for you. If you opt to complete the form by hand, be sure to double check the National Student Loan Data System (NSLDS ® ) to make sure you don't leave any loans out.
  • Proof of income, including copies of IRS Form 4506-T or 4506T-EZ, which will allow your loan holder to verify your income with the IRS. If you aren't required to file taxes or if your economic situation has changed substantially since your last filing, pay special attention to section 5 of this form, which covers other ways to document your income.

All married borrowers (including those who file separate federal income tax returns) must provide documentation of their spouse's income (certain exceptions do apply).

For this form, income means adjusted gross income, which is calculated in your annual tax return. Be sure to get the actual number—the "adjusted" part means it may be very different from what you normally think of as your income.

Submit this form to your servicer (the company that sends you the bills). If you don't know who this is, you can go to the NSLDS to find out.

Note: You can ensure that you receive the lowest possible income-driven payment by selecting "I request that my loan holder determine which of the above plans I am eligible for, and place me on the plan with the lowest monthly payment amount" under part 1a of Section 2 in this form

Solicitud de planes de devolución basada en ingresos (IBR, ICR, PAYE y REPAYE)

If you do not want to apply online at StudentLoans.gov, you can fill out this form to apply for the income-based (IBR), income-contingent (ICR), Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE) income-driven repayment plans.

Los prestatarios de préstamos estudiantiles federales pueden ser elegibles para planes de devolución que basan los pagos mensuales en sus ingresos y en el tamaño de la familia. Puedes solicitar estos planes ingresando en StudentLoans.gov o llenando el formulario que se encuentra en esta página.

Nota: El plan de devolución conforme al ingreso (ISR) relacionado para los prestatarios del Programa Federal de Préstamos para la Educación de la Familia(FFELP) no tiene un formulario de solicitud específico. Habla con tu administrador de préstamos si quieres presentar una solicitud para el plan de ISR.

  • Una lista de todos los préstamos estudiantiles que especifique si están en el programa FFEL o Direct Loan. Si completas la solicitud en línea, todos tus préstamos federales aparecerán en el formulario. Si prefieres completar el formulario a mano, asegúrate de consultar el Sistema Nacional de Información sobre los Préstamos Estudiantiles (NSLDS®) para verificar que no hayas omitido ningún préstamo.
  • Comprobante de ingresos, incluidas las copias del Formulario del IRS 4506-T o 4506T-EZ, los cuales le permitirán al acreedor verificar tus ingresos con el IRS. Si no tienes que presentar impuestos o si tu situación económica ha cambiado considerablemente desde la última vez que lo hiciste, debes prestar especial atención a la sección 5 de este formulario, ya que cubre otras formas de documentar tus ingresos.

Todos los prestatarios casados (incluidos los que presentan declaraciones de impuesto a la renta por separado) deben proporcionar documentación de los ingresos del cónyuge (aunque se aplican algunas excepciones).

Para fines de este formulario, "ingresos" significa ingresos brutos ajustados, los que se calculan en tu declaración anual de impuestos a la renta. Asegúrate de tener el número correcto. "Ajustado" significa que puede ser muy diferente a lo que normalmente considerarías como tu ingreso.

Envía este formulario a tu administrador de préstamos (la empresa que te envía las facturas). Si no sabes quién es, puedes acceder al NSLDS para averiguarlo.

Nota: Puedes comprobar que has recibido el pago basado en ingresos más bajo posible seleccionando "Solicito que mi acreedor determine para cuál de los planes anteriores soy elegible y que me coloque en el plan con el monto de pago mensual más bajo" en la parte 1a de la Sección 2 de este formulario.

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