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Income-Driven Repayment Plans: PAYE and Other Options

Learn about the different income-driven repayment plans available, including Pay As You Earn (PAYE), and how they can help borrowers manage their student loan debt. This session also covers the application process, eligibility criteria, payment amounts, interest subsidy benefits, loan forgiveness, and the consequences of failing to recertify.

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Income-Driven Repayment Plans: PAYE and Other Options

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  1. Session 33 Income-Driven Repayment Plans/Pay As You Earn (PAYE) Ian Foss and Brian Smith | Dec. 2015 U.S. Department of Education 2015 FSA Training Conference for Financial Aid Professionals

  2. Details of Income-Driven Repayment Plans

  3. Overview • Income-Contingent Repayment Plan (ICR) – 1994 • Income-Based Repayment Plan (IBR) – 2009 • Pay As You Earn Plan (PAYE) – 2012

  4. Overview • Revised Pay As You Earn (REPAYE) – 2015 • Negotiations February – April, 2015 • Consensus reached • NPRM published July 9, 2015 • Final Rule published October 30, 2015 • Early implementation announced (December 2015)

  5. Eligible Borrowers

  6. Eligible Borrowers

  7. Eligible Loan Programs

  8. Eligible Loan Type

  9. Payment Amounts Most IDR plans have two formulas--for those that do, borrowers always pay the lesser of the two.

  10. Interest Subsidy Benefits

  11. Interest Capitalization

  12. Loan Forgiveness 20 years is for undergraduate borrowers and 25 years is for graduate borrowers Generally, payments on an IDR plan, 10-year standard plan, or periods of economic hardship deferment count toward forgiveness

  13. Billy Borrower • Billy Borrower: • Is single with no dependents and lives in Georgia • Has an AGI of $35,000 that rises at 5% per year • Has $50,000 in Direct Loan debt ($23,000 of which is subsidized), all of which has a 6% interest rate • Borrowed for graduate school

  14. Billy - ICR

  15. Billy – “old” IBR

  16. Billy – PAYE/“new” IBR

  17. Billy - REPAYE

  18. Billy – All IDR Plans

  19. StudentAid.gov/Repayment-Estimator 19

  20. Income-Driven Repayment Plans Application Process

  21. Income-Driven Repayment Plans Applying: Electronic or Paper ADOI = “alternative documentation of income;” not AGI.

  22. Application Process: Spouses

  23. Application Process: Spouses

  24. Billy gets Married in Year 5 • Spouse has $20,000 in income, and $40,000 in Direct Loans, all of which are unsubsidized, and which has an interest rate of 6% • Billy and his spouse decide to file separately

  25. Effect of Billy’s Marriage

  26. In Year 6, Spouse Pays Off Loans

  27. Application Process: Spouses A married borrower is not required to provide spouse’s AGI if the borrower is:

  28. Application Process: Spouses (REPAYE) REPAYE—If a borrower is separated or unable to reasonably access spouse’s income information: • The borrower’s spouse is not counted in family size • If the spouse has eligible loans, the spouse’s loans are not considered in the monthly payment amount adjustment

  29. Application Process: Income Documentation

  30. Application Process: Income Documentation

  31. Application Process: Annual Life Cycle

  32. Consequences of failing to recertify

  33. Billy Doesn’t Recertify – Year 4 End

  34. QUESTIONS? Ian Foss – Ian.Foss@ed.gov – 202-377-3681 Brian Smith – Brian.Smith@ed.gov – 202-502-7551

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