Pay As You Earn

The Pay as You Earn, or PAYE plan, is an income driven repayment plan for Federal Student loans. Through the PAYE program, the amount repaid will never be more than the amount required to pay on a Standard Repayment plan. This type of plan is based on discretionary income, or the difference between your income and 150 percent of the poverty line. The poverty guideline is based on the borrower’s state and family size.  The max your payment will be is 10% of your income.

To qualify for this type of repayment plan the borrower’s loans must be originated as of October 1, 2007 and they must have a new disbursed Direct Loan on or after October 1, 2011. The term will never be longer than 20 years. The REPAYE is a qualifying repayment plan and may lead to loan forgiveness. This plan does require annual recertification.

The PAYE program is best for borrower’s who began to take out student loans in 2008 and graduated in 2012. There are some very strict requirements to be approved for this program but it is a great option for those who do qualify for it.

There are only certain loans that are eligible. These include Direct Subsidized/Unsubsidized loans and Direct Loans. If a borrower does not have these types of loans, they may be eligible for the PAYE plan if the loans are consolidated. Such loans include but are not limited to Subsidized Stafford Loans, Unsubsidized Stafford Loans and Federal Perkins Loans. Direct Parent Plus loans will are not eligible for this type of repayment plan.

Another qualification for the Pay as You Earn program is that borrower’s must be able to show that they have a partial financial hardship based on the state’s income guidelines.  This is based not only on income, but also on family size.  Your payment on the Pay as You Earn program will need to be less than what your payment on a Standard repayment program would be.  Borrowers will typically meet the income eligibility if the amount of student loan debt they owe is higher than your discretionary income or “represents a significant portion or your annual income.” Just like all income driven repayment plans, if your income and situation were to change, your payment would be reflected upon renewal of your application.

We want to assure you that our primary objective is to help you understand the options available to you in repaying your student loan debt. Our organization, which is a nonprofit Consumer Credit Counseling Organization has over twenty years of experience helping individuals live debt free and understand their complete financial picture. The consultation is free and the help and guidance we’ve provided individuals throughout the years has been invaluable. We encourage you to learn more about our organization by visiting Debt Reduction Services or calling us toll free at 1-877-688-3328. Our certified student loan counselors are ready to help you today!