IBR, PAYE & REPAYE - What Are The Differences?

When talking about affordable student loan repayment options, the first three names that come to the mind are REPAYE, IBR, and PAYE. 

IBR, also known as Income-Based Repayment, is a specific type of IDR (income-driven loan), which covers almost any type of federal loans for students. To acquire the benefits of IBR, you will need to have sufficient liabilities relative to your overall income. 

Conversely, with PAYE, or Pay As You Earn, the amount of funds that you have to allocate will be based on your discretionary earnings. 

For example, when you have just entered the workplace, your payments will be a lot less than usual. 

However, as you gradually move on to a higher post and earn more, the amount of compensation will increase as well. 

Lastly, unlike the other plans, REPAYE caps the amount of loan payment at around 10% of your discretionary income. 

Nonetheless, it usually lasts for almost 20 to 25 years.   

The Differences And What They Mean

Each of these student loan payment options has its own distinctive features and benefits. Thus, some of them work perfectly for a few conditions, while others shine in different areas. Take a closer look at their differences to learn more about them.

• Eligibility Criteria: Almost all the federal students, both FFEL and direct, who have a PFH are eligible for the IBR loan payment option. On the other hand, PAYE is only an option for borrowers who took a loan after September 30th, 2007, and another one after September 30th, 2011. On the contrary, REPAYE can cater to any student loan borrower. With it, you would also not require any partial financial hardship (PFH) certification. 
• Monthly Payment Plan: With REPAYE, you will have to pay around 10% of your monthly discretionary income. However, with IBR, you will have to pay 15% of your monthly income. Finally, with PAYE, you would have to allocate the same 10% of your discretionary monthly income. 
• Discharging: If you are paying undergraduate debt, then REPAYE would last for 20 years. However, in the case of graduate financing, it will end after 25 years. On the other hand, PAYE is discharged after 20 years, and IBR lasts between 20-25 years. 

Monthly Payments Under Each Plan

After covering the fundamental differences between IBR, REPAYE, PAYE, it is important to note the amount that you will have to pay when selecting an option. Here is a detailed view of each of these repayment plans:

In both PAYE and IBR, the amount of payment will be fixed for the first ten years. However, REPAYE does not feature any of the payment caps. So, with it, you will always have to pay 10% of your overall discretionary income. 

How To Use The Repayment Estimator?

The Repayment Estimator from the Federal Student Aid site can help you calculate the amount that you will have to pay to cover your outstanding student loan balances. Unlike its complex-sounding name, these calculators are quite straightforward to use. Simply input a few crucial details about your debt as well as the plan that you have chosen to calculate the figures. The steps are as follows: 

1. Log in with your FSA ID or create an account on the website by providing essentials such as your name, Social Security number, email, and date of birth. 
2. Once you are done creating an account, you will have to log in and go straight to the page of loan details. 
3. Here, you will be able to find some options, such as the interest rate, current balance, and, lastly, the repayment term. If you have all the available information on these fields, then make sure to add them to their rightful place accurately.
4. After you have filled up all the necessary fields, you can then view the amounts to be paid on both a monthly and annual basis.

Bottom Line

Be it an undergraduate debt or a graduate student loan balance, covering the repayments can be quite a challenge for anyone. Accordingly, compare your options and build a proper plan for tackling the debt before selecting the repayment initiative that suits you best.