Pay As You Earn Repayment
What is Pay As You Earn Repayment?
The Pay As You Earn repayment plan was created for student loan borrowers who had no outstanding Federal (Direct Loan or FFEL) student loan balance as of October 1, 2007 and who had a loan disbursed on or after October 1, 2011. The monthly payment on this plan is based on your income and can often result in a lower payment.
How do I qualify for Pay As You Earn Repayment?
You have to qualify for a partial financial hardship. This means that your monthly payment on the Standard Repayment Plan is higher than the amount you have to pay under Pay As You Earn. Visit StudentAid.gov to see if you qualify!
What types of loans are eligible to be repaid under Pay As You Earn Repayment?
Only Federal Direct Loans can be repaid through Pay As You Earn repayment plan, although your FFELP loans can be taken into account to determine whether you qualify for partial financial hardship.
The following Direct Loans are eligible to be repaid through Pay As You Earn.
- Direct Subsidized Loans
- Direct Unsubsidized Loans
- Direct PLUS Loans for graduate or professional students
- Direct Consolidation Loans without underlying Parent PLUS Loans
How is my payment calculated under Pay As You Earn?
Under this plan, your monthly payment would be equal to 10% of your discretionary income, but never more than the 10-year Standard Repayment Plan amount.
Your payment will be adjusted each year based on changes to your income and family size. The repayment period for Pay As You Earn Repayment is 20 years, after which your remaining balance will be forgiven.
What else do I need to know about Pay As You Earn Repayment?
- The Department of Education will pay any unpaid accrued interest on your Direct Subsidized Loans for up to three consecutive years from the date you start paying under Pay As You Earn.
- If your determined monthly payment doesn’t cover your monthly interest, the interest will not be capitalized while you have a partial financial hardship.
- If you work full-time in a public service organization, you may qualify for Public Service Loan Forgiveness after you make 120 on-time, full payments under Pay As You Earn.
- Due the extended terms of this plan, you may pay more interest over the life of your loan.
- If you qualify for forgiveness after 20 years, the write-off amount might be considered taxable income.
How do I apply for Pay As You Earn Repayment?
The easiest way to apply for Pay As You Earn is to complete the electronic version of the form at StudentLoans.gov. It’s quick, easy and allows you to automatically retrieve your income information reported to the IRS. Alternatively, you can manually complete the Income-Driven Repayment Plan Request Form and mail it to our correspondence address.
If you have any questions about the Pay As You Earn repayment plan, please contact one of our loan specialists today!