Revised Pay As You Earn: How It Works and Whom It’s Best For for 2025

by Alex Hillsberg , MA

Student Finance & Loan Expert

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Around 43.2 million individuals have outstanding student loans in the U.S. (Hanson, 2024). A key aspect of financial responsibility is strategizing how to manage student debt effectively. As a career planner for over a decade, I’ve seen firsthand how overwhelming this can be for graduates trying to establish their careers. 

The Revised Pay As You Earn (REPAYE) Plan—now replaced by the Saving on a Valuable Education (SAVE) Plan—offers a practical and more affordable solution by aligning your loan payments with your income. With a revised pay plan (SAVE), borrowers can focus on their career growth and personal goals without being swamped with high monthly payments. 

In this guide, we’ll explain how REPAYE works, detail its transition to the SAVE Plan, and provide the latest updates on its implementation. As the U.S. Department of Education slowly transitions into the SAVE Plan, we’ll use the names REPAYE and SAVE interchangeably throughout the article. In addition, we’ll discuss the interest waivers, pros and cons, and eligibility requirements to help you determine if it’s the right fit for your repayment needs. 

Key Things You Should Know About Choosing REPAYE/SAVE for 2025

• The REPAYE/SAVE Plan offers an interest subsidy that can reduce the accrued interest on your loan balance.
• Under the new REPAYE/SAVE plan, some qualified borrowers’ monthly payments can be as low as $0.
• Depending on your terms and loans, you can be eligible for forgiveness after 10 years of consistent repayment, instead of 20 or 25 years.

Table of Contents

1. Is REPAYE the same as SAVE?
2. How does REPAYE/SAVE work?
3. What is the interest subsidy under the REPAYE/SAVE Plan?
4. How does the REPAYE/SAVE differ from other income-driven repayment plans?
5. Who is eligible for the REPAYE/SAVE Plan?
6. What are the pros and cons of REPAYE/SAVE?
7. How do I apply for the REPAYE/SAVE Plan?
8. What Should Borrowers Consider When Federal Plans Fall Short?
9. What should I do if I can’t afford my REPAYE/SAVE payments?
10. How will new legislation affect REPAYE/SAVE?
11. How Will the SAVE Plan Impact My Long-Term Financial Stability?
12. How does the transition from REPAYE to SAVE affect current enrollees?
13. Will the SAVE Plan affect my credit score?
14. Are there alternatives to REPAYE/SAVE for trade school students?
15. When Should I Apply for Student Loans?
16. Should I Consider Consolidating or Refinancing My Loans?
17. Can a condensed master's program drive better financial outcomes with the SAVE Plan?
18. Can accelerated degree programs complement the benefits of the SAVE Plan?
19. What mistakes should I avoid with the SAVE Plan?
20. How do private student loans compare to the SAVE Plan?
21. What tax considerations should I be aware of under the SAVE Plan?
22. Other Things You Should Know About Revised Pay As You Earn/SAVE

Is REPAYE the same as SAVE?

These two plans are not the same; rather, SAVE is an enhanced version of REPAYE. Considering how much has college tuition increased, students turn to federal loans to minimize overall expenses and explore more flexible repayment terms. This was what revised pay (REPAYE) offered then.

REPAYE was introduced in 2015 by the U.S. Department of Education (ED) as an income-driven repayment (IDR) plan. In this program, your monthly payment will always be 10% of your discretionary income—the money left over after paying bills and necessities—regardless of how high your income grows. Its main features included the following:

• Financial hardship proof was not required.
• The income protection ceiling was 150%. This means if your annual income was approximately $15,000 (family of one), your discretionary income is $0, and that would make your monthly payment $0. In a family of four, if you had an income of $35,000 or less, you would also pay $0 monthly.
• With no payment cap, borrowers could pay more than what was typically required under the Standard Repayment Plan.
• There was no loan date restriction, so borrowers with older loans could enroll.
• A 100% interest subsidy was applied on accrued unpaid interest on subsidized loans in the first three years of repayment. Subsequently, the subsidy is 50% of the accrued unpaid interest.
• A 50% interest subsidy was given to accrued unpaid interest on unsubsidized loans during all periods.
• Undergraduate loans were repaid in 20 years. Borrowers with graduate/professional and undergraduate loans must repay the loan in 25 years. After those years, students could get loan forgiveness.
• Your income and your spouse’s income were both calculated into the monthly payment even if you file taxes separately.

According to the College Board, federal loans accounted for 32% of undergraduate aid in 2016–2017, which is the largest source of financial funding. By 2022–2023, this percentage dropped to 25% as more students turned to institutional grants (Ma & Pender, 2023). Despite this dip, it’s evident that students still heavily depend on federal loans to finance their education, highlighting the importance of affordable repayment plans.

In August 2023, the Biden administration started to open preliminary enrollment of the SAVE Plan, which aimed to replace REPAYE with better benefits (The White House, 2024). The Federal Student Aid (FSA) also promised several other features by July 2024, during the plan’s full launch.

The chart below provides a detailed breakdown of financial aid distribution for undergraduates. 

How does REPAYE/SAVE work?

Now, with SAVE replacing REPAYE, you might be wondering how it differs from the 2015 revised pay plan. According to the FSA (n.d.), the SAVE Plan offers the following features:

• The income protection is raised from 150% to 225% of the poverty line. This means more of your income is shielded from loan repayment.
• If your monthly payment doesn’t cover all the interest, the government provides a subsidy for the unpaid interest. Therefore, no additional interest accrues over the life of the loan, leaving you responsible only for the principal balance.
• Married borrowers with separate tax filings are no longer required to include their spouse’s income to calculate the monthly payment. Your payment will be based solely on your income if you and your spouse file taxes separately.

Following the 225% of the Poverty Guideline threshold, a single person’s income equals $32,800. If you earn that amount or less than that, it puts your discretionary income at $0. This results in a $0 monthly loan payment. 

Likewise, if you’re a family of four with an annual income of $67,500 or less, that would make your discretionary income $0, again putting your monthly repayment at $0. In other words, you do not need to repay anything.

Putting it into perspective, let’s say you have a loan balance of $25,000. You’re enrolled in a Direct Subsidized Loan with a 5% interest rate and earn $38,000 each year. Your monthly payment under SAVE will be $43. Under REPAYE, you would have to pay $134; this saves you $91. 

According to the Department of Education, these are the other benefits of the SAVE Plan:

• Payments for undergraduate loans will be halved, from 10% to 5% of borrowers’ discretionary incomes above 225% of the poverty line.
• Borrowers with original loans amounting to $12,000 or less may be forgiven after 10 years, unlike the usual 20 to 25 years. 
• Individuals with both undergraduate and graduate loans will pay a weighted average between 5% and 10% of their income, depending on the original principal balances of their loans.
• Borrowers who have not paid for 75 days will automatically be enrolled in the SAVE Plan (upon approval).
• IBR borrowers in default may be moved to good standing upon providing information on their payment status, making them eligible for SAVE. 
• Borrowers will receive credit toward loan forgiveness for certain deferments and forbearances, including unemployment, cancer treatment, military service, and natural disasters.
• If borrowers are in a deferment or forbearance that doesn’t count toward forgiveness, they have three years to make additional payments to receive credit toward forgiveness for those periods.
• Borrowers will receive credit for payments made before consolidating their loans. This credit will be based on a weighted average of the principal balances of the consolidated loans rather than resetting their progress toward forgiveness.

What is the interest subsidy under the REPAYE/SAVE Plan?

If your monthly payment does not cover the accrued interest, the government provides an interest subsidy to offset this shortfall. Specifically, the SAVE Plan covers 100% of the remaining unpaid interest on subsidized and unsubsidized loans as long as you make the scheduled payment.  

For example, if your monthly interest is $50, but your payment only covers $30, the SAVE Plan will cover the remaining $20. Unlike the 2015 REPAYE Plan and other IDR plans where unpaid interest is added to the loan balance, the SAVE Plan ensures your loan balance does not increase due to unpaid interest.

To give another example, a bachelor’s degree graduate with a low income on the 25th percentile can save as much as $8,400 after five years because of this interest benefit. Once they reach the 20-year end of repayment, their total (principal) balances will be approximately $25,000 lower than what they would have been with the accrued unpaid interest (The White House, 2023).

Additionally, if you qualify for $0 monthly payments, the government will cover the full amount of your interest. This means no interest will accrue each month, and your principal balance amount will stay the same. According to the ED (2021), around 70% of IDR plan borrowers will benefit from this subsidy, demonstrating that the SAVE Plan offers significantly more advantages than the 2015 revised pay (REPAYE) plan.

How does the REPAYE/SAVE differ from other income-driven repayment plans?

The SAVE Plan, formerly the 2015 revised pay (REPAYE) Plan, is the FSA’s most generous and affordable IDR program. However, you should still compare it with other plans to ensure that you’re managing your loan repayment responsibly. 

Since these are income-driven programs, they all follow the same foundational purpose. Repayment is typically calculated based on a portion of your discretionary income and the size of your family. The amount will also depend on the interest rate of your chosen loan and your balance.

Generally, these plans are lower than the amount of your loan payments, making them more budget-friendly for graduates. However, if you extend the repayment period or submit lower payments, your interest might accumulate over time. 

Lastly, IDR plans take either 20 or 25 years to pay. If you meet some conditions, you may be eligible for Public Service Loan Forgiveness (PSLF) after 10 years. However, under the SAVE Plan, low-balance borrowers attain forgiveness as soon as possible. Those with an original principal balance above $12,000 will add one year to repayment with each $1,000 until they reach the 20 or 25-year cap. So, if you have an original balance between $13,001 and $14,000, you can expect forgiveness on year 12 of repayment (144 monthly payments).

Consider SAVE’s differences from the Pay As You Earn (PAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR) Plans below.

Who is eligible for the REPAYE/SAVE Plan?

The SAVE Plan, which builds upon the 2015 revised pay (REPAYE) plan, maintains the same broad eligibility criteria. It is available to students with undergraduate or graduate loans, new and older borrowers, and borrowers in any income bracket.

In addition, the following loans are eligible for this program (*eligible if consolidated):

• Direct Subsidized/Unsubsidized Loans
• Direct PLUS Loans (Graduate)
• Direct Consolidation Loans (did not repay any PLUS loans made to parents)
• Subsidized Federal Stafford Loans*
• Unsubsidized Federal Stafford Loans*
• FFEL PLUS Loans* (Graduate)
• FFEL Consolidation Loans* (did not repay any PLUS loans made to parents)
• Federal Perkins Loans*

While the REPAYE/SAVE Plan is indeed beneficial, it may not be a long-term solution for certain borrowers. For instance, if you wish to repay in less than 20 years or you only wish to pay a fixed amount, then a Standard Repayment Plan may be a better fit. Moreover, some graduates with higher incomes may benefit more from other fixed repayment plans over time.

What are the pros and cons of REPAYE/SAVE?

The replaced revised pay or SAVE Plan offers several benefits for managing student loan payments, but it also comes with certain drawbacks. Understanding the pros and cons can help you make an informed decision about whether or not this option is right for you. Below is a detailed look at the key advantages and disadvantages of the SAVE Plan.

Pros:

• There are no strict eligibility requirements.
• There are lower monthly payments, especially for borrowers with low incomes.
• Undergraduate loan borrowers can expect to pay as low as 5% of their discretionary income.
• There is a full subsidy on accrued unpaid interest if monthly payments do not cover the full interest.
• Low-income borrowers may have access to early loan forgiveness.
• Married borrowers who file taxes separately can use their sole income in repayment.

Cons:

• As of July 19, 2024, all benefits of the SAVE Plan are pending and on hold due to ongoing court decisions, creating significant uncertainty among borrowers.
• Parent borrowers are not qualified for this plan.
• The plan does not set a maximum payment limit, so borrowers with higher incomes pay more under SAVE than other plans in the long run. A solution to this, though, is switching to a different plan when they gain a wage increase, which can help them make consistent payments.

The College Board records that in 2023, 10 million borrowers—around 22%—owed an average loan balance of $28,300, with others having a balance ranging from $20,000 to $39,000 (Ma & Pender, 2023). The chart below further shows the distribution of borrowers by outstanding balance. This demonstrates the significant financial burden many students face and underscores the importance of effective repayment plans to alleviate student debt.

How do I apply for the REPAYE/SAVE Plan? 

If you used to be in the 2015 revised pay (REPAYE) plan, you will be automatically placed in the SAVE Plan. Other borrowers may apply by creating an FSA account and ID and completing the IDR application. You must provide your personal and financial information, such as your address, loan amount, tax records, income and employment records, and Social Security Number.

Every year, you need to update your income and family size information. This process, called recertification, is used to recalculate your monthly repayment matrix. Even if this information does not change, you still need to recertify.

You can set up automatic annual recertifications to ensure you don’t face penalties. If you fail to recertify, you’ll be removed from SAVE and placed in a different plan. In extreme cases, you may lose your eligibility to avail of IDR plans.

What Should Borrowers Consider When Federal Plans Fall Short?

When federal repayment plans like SAVE are insufficient to address your financial needs, alternative loan solutions may provide a more practical pathway. For borrowers still pursuing education or considering trade schools, private loans can bridge funding gaps. While federal plans excel in offering income-driven repayment options, private loans can offer tailored terms for specific circumstances, particularly for individuals who might not meet federal eligibility criteria or require additional funding for non-traditional pathways.

If you're a student considering private loans, look for options that align with your financial capability and long-term career goals. One standout option includes student loans no cosigner programs, which are particularly helpful to those who might not have access to a guarantor. These loans cater to a broader range of students, including those with limited credit history, and streamline the approval process while maintaining competitive terms.

It is also critical to weigh the interest rates, repayment periods, and any borrower protections offered by private lenders. Some lenders may provide flexibility by allowing deferred payments while you complete your education or enter a training program. Understanding these nuances ensures that you avoid unnecessary financial strain while building a stable foundation for your future. Always compare terms and ensure the lender prioritizes transparency.

What should I do if I can’t afford my REPAYE/SAVE payments?

While the replaced revised pay plan, now called SAVE, ensures that your monthly contributions are affordable, there might still be times when you face difficulties. This is why part of planning for college loans is developing safety nets. Taking these steps can help you avoid defaulting on your loan payments or facing severe financial consequences that can bury you in debt. 

• Understand Your Repayment Options: Familiarize yourself with deferment or forbearance options, so you know what to do if you encounter difficulties.
• Contact Your Provider: Discuss your options with your loan servicer. They can provide advice and may offer temporary relief measures.
• Seek Financial Counseling: Professional advice can help you create a long-term financial plan, manage your debt effectively, and make informed decisions about your loan repayment strategy.
• Establish an Emergency Fund: Save a portion of your income to cover unexpected expenses or temporary income loss, which can help you maintain loan payments during financial hardships.
• Regularly Review Your Budget: Keep track of your income and expenses to ensure you can make your loan payments and adjust your budget as needed to stay on top of your financial commitments.

Remember that defaulted loans are not eligible for the SAVE Plan and instead will be placed under the IBR Plan (Direct Loans) by September 2024. Borrowers can utilize the Fresh Start initiative to get out of default and re-qualify for a new IDR plan.

Alternatively, before taking out any type of educational loan, be sure to explore options that do not require repayment. A Sallie Mae report (2023) finds that a typical family pays for college mainly through the parent’s income and savings, as well as scholarships and grants. 

Meanwhile, a family who borrowed has sourced 23% of their funding from student loans and 18% from parent loans. The chart below shows the differences in the college funding sources. Therefore, maximizing scholarships, grants, and family contributions can significantly reduce the need for borrowing.

How will new legislation affect REPAYE/SAVE?

On July 18, 2024, the 8th Circuit Court of Appeals blocked the full implementation of the SAVE Plan, halting the plan’s services. In a statement, the U.S. Department of Education outlined what this means for borrowers enrolled in the previously revised pay (REPAYE)/SAVE Plan:

• Borrowers will enter a forbearance period, so they do not need to send monthly payments.
• Loans will not accrue interest during this period. 
• This forbearance period will not be counted toward PSLF or IDR loan forgiveness. 
• Borrowers who received their August bill receive an interest-free forbearance (payments are not required).
• Borrowers who have not received their August bills are also in forbearance and will not receive their bills.
• There is no set timeline for the end of this forbearance period, as the case is still ongoing.
• Borrowers will receive information about the forbearance and continue to get updates from their loan providers and the Department.

Likewise, as of July 1, 2024, enrollments for the SAVE Plan have been suspended. 

While this puts many borrowers’ loan repayment statuses in limbo, there is still hope as the Department remains committed to fighting for the SAVE Plan.

It is best to monitor the Federal Student Aid’s and Department of Education’s communication channels to stay updated on the latest developments of the SAVE Plan.

How Will the SAVE Plan Impact My Long-Term Financial Stability?

While the SAVE Plan offers immediate payment relief and predictable budgeting, borrowers should also evaluate its implications for overall financial well-being. Extended repayment periods may influence credit profiles and delay long-term wealth-building goals. It is essential to factor in how balancing repayment responsibilities with potential investments in advanced education or career development could affect your financial trajectory. For example, aligning your repayment strategy with opportunities to pursue the quickest masters degree can provide insight into optimizing both educational and financial growth.

How does the transition from REPAYE to SAVE affect current enrollees?

On its website, the ED notes that while you can still apply for the SAVE Plan, services have paused the processing of such applications. Meanwhile, current enrollees under the SAVE Plan whose accounts are in forbearance can only sit tight and wait for updates. Qualified borrowers may also "buy back credit" for missed PSLF payments during forbearance by making extra payments to cover those months.

As you wait, consider double-checking the following points to ensure a smooth transition and prepare for what's to come after court proceedings:

• Update Documentation: Always update your personal information. Communicate with your servicer and notify them of any changes in income, address, or family size, to ensure your loan payments are calculated correctly once operations resume.
• Check for Errors: If the transition pushes through, review your loan statements carefully to ensure that the new terms of the SAVE plan are properly applied. Look for any discrepancies in your monthly payment amount, interest subsidy, or other details.
• Assess Impact on Forgiveness Timeline: If you’re close to reaching forgiveness under REPAYE, understand how the transition to SAVE might impact your timeline. Remember that under the new plan, original loan balances of $12,000 or less can be forgiven after 10 years. For every additional $1,000 above $12,000, one year is added to the 10-year period, up to the 20- or 25-year forgiveness threshold.
• Prepare for Payment Fluctuations: As the SAVE plan adjusts your payment based on income and family size, be prepared for potential fluctuations in your payment amounts. Have a budget in place that can accommodate these changes, especially if your income is variable.
• Financial Advisor Consultation: If your loan balance is significant or your financial situation is complex, consider consulting with a financial advisor who specializes in student loans. They can provide personalized advice on how to navigate the transition and optimize your repayment strategy.

Will the SAVE Plan affect my credit score?

The SAVE Plan’s structure—with income-adjusted, affordable payments and interest subsidies—can influence your credit profile indirectly. Consistently meeting recertification deadlines and payment schedules can help maintain a positive credit history, whereas missed updates or irregular payments may negatively affect your score. Borrowers should monitor their credit reports to address any discrepancies quickly and consider consulting financial professionals for personalized advice. For those seeking additional guidance on balancing education costs and credit-building strategies, exploring schools for working adults may provide valuable insights.

Are there alternatives to REPAYE/SAVE for trade school students?

For students pursuing trade or vocational education, managing loan repayment can pose unique challenges. While the REPAYE/SAVE Plan offers significant benefits, some borrowers may find alternatives tailored to trade school funding more suitable. Trade school loans often come with different repayment structures and terms compared to traditional four-year college loans.

For example, private student loans designed for trade schools may offer flexibility that better aligns with the shorter duration and specific career paths of vocational training. Exploring the Best Student Loans for Trade Schools can provide insights into funding options that may not require long-term repayment commitments or income-driven plans like SAVE. These loans might include benefits geared toward certification programs or apprenticeships, making them a viable alternative for students in these specialized fields.

Ultimately, borrowers should carefully evaluate their financial circumstances, loan terms, and career prospects to determine the most effective repayment strategy. In many cases, combining federal plans like SAVE with other funding options can offer added financial flexibility.

When Should I Apply for Student Loans?

Determining the optimal time to apply for student loans is vital to secure the best terms and to align your funding with academic schedules. Borrowers should evaluate application timelines in relation to college admission processes, financial aid assessments, and changes in federal or legislative policies. It is essential to complete the application well in advance to ensure all supporting documentation is processed on time and to take advantage of any favorable interest rates or repayment options. Reviewing the deadline for student loan application can help you pinpoint critical submission dates and avoid last-minute complications.

Should I Consider Consolidating or Refinancing My Loans?

Consolidation or refinancing might offer benefits like reduced interest rates or modified payment terms, but these options require careful evaluation. Borrowers in REPAYE/SAVE must assess whether combining loans could affect the interest subsidy or modify repayment forgiveness timelines. It is essential to compare your current plan’s advantages against potential changes in eligibility for income-driven benefits. Analyze your credit history, income stability, and long-term financial objectives before deciding to consolidate or refinance. For professionals in specialized fields, such as nursing, alternative financing options may provide more tailored support through avenues like nursing student loans.

Can a condensed master's program drive better financial outcomes with the SAVE Plan?

Completing a condensed master's program can offer a rapid pathway to enhanced earning potential, thereby positively influencing your discretionary income calculation under the SAVE Plan. Accelerating your education in a shorter timeframe may lead to an earlier career advancement, enabling more robust loan repayment capabilities. Evaluating focused programs can help you balance the immediate benefits of increased earnings with the long-term aim of reducing your overall debt burden. For instance, exploring options like 1 year masters programs online might provide an expedited route without compromising academic quality.

Can accelerated degree programs complement the benefits of the SAVE Plan?

Leveraging accelerated education can boost your earning potential while reducing the time needed to complete a degree. Enrolling in programs such as fast track bachelor's degree online provides a pathway to acquire critical skills swiftly. Carefully assess program quality, duration, and career alignment to ensure it supports your repayment strategy and long-term financial goals without altering your current federal plan benefits.

What mistakes should I avoid with the SAVE Plan?

Borrowers should avoid common errors that could undermine the benefits of the SAVE Plan. Misreporting income or neglecting the annual recertification process is one such mistake, as failing to update your financial information in time can result in lost subsidies or a switch to less favorable repayment options. Overlooking the specific terms of the plan—such as the impact of extra payments or the conditions for credit buyback—may also lead to unintended financial repercussions. Additionally, not monitoring changes in your financial situation can hinder proactive adjustments, causing missed opportunities to optimize repayment strategies. For those exploring complementary measures, consider reviewing our article about the easy certifications that pay well as part of a broader career and financial planning approach.

How do private student loans compare to the SAVE Plan?

When evaluating private student loans alongside the federal SAVE Plan, borrowers should consider factors such as interest rates, repayment flexibility, and eligibility criteria that differ significantly from income-driven options. Private loans often come with fixed or variable interest rates, which may lead to fluctuations in repayment amounts over time, and require a detailed assessment of credit history and co-signer requirements. It is essential to compare loan terms closely, weighing aspects like origination fees, prepayment options, and customer service support before making a decision. For a detailed comparison of lender offerings, review our guide on Which banks offer student loans?.

What tax considerations should I be aware of under the SAVE Plan?

Borrowers should note that while the SAVE Plan offers affordable monthly payments and interest subsidies, any future loan forgiveness might carry tax implications depending on prevailing regulations. Professional tax advice is recommended to understand how forgiven balances or adjustments in repayment terms could affect taxable income. Additionally, integrating proactive financial planning—such as exploring options like the cheapest online bachelor's degree—may provide broader fiscal benefits without compromising repayment strategies.

Key Findings

• REPAYE was replaced by the SAVE Plan in 2023 to offer more affordable repayments.
• Under SAVE, the income protection was raised from 150% to 225% of the poverty line. This means more of your income is shielded from loan repayment.
• One of SAVE’s extensive benefits includes halved payments for undergraduate loans, from 10% to 5% of borrowers’ discretionary incomes above 225% of the poverty line.
• In 2023, 10 million borrowers—around 22%—owed an average loan balance of $28,300, with others having a balance ranging from $20,000 to $39,000.
• On July 18, 2024, the 8th Circuit Court of Appeals blocked the full implementation of the SAVE Plan, halting the plan’s services.

Other Things You Should Know About Revised Pay As You Earn/SAVE

Is the REPAYE plan still available?

Technically, the revised pay (REPAYE) Plan is no longer available because it was replaced by the Saving on a Valuable Education (SAVE) Plan in 2023. REPAYE borrowers were automatically placed in the SAVE Plan. As of writing, the SAVE Plan’s full rollout has been suspended due to a federal appeals court’s motion for an administrative stay on July 18, 2024. All borrowers under the REPAYE/SAVE Plan are in forbearance until further notice.

What’s the difference between REPAYE and PAYE?

The 2015 REPAYE Plan and the PAYE Plan both adjust loan repayments based on 10% of the discretionary income. However, REPAYE is for borrowers with any qualifying federal loan while PAYE borrowers must have taken their loans after Oct. 1, 2007, and didn’t have a federal loan balance during that time or received a direct loan on or after Oct. 1, 2011. Moreover, the old REPAYE Plan counts your spouse’s income even if you file taxes separately; the PAYE Plan does not if they are separately filed. Keep in mind that REPAYE has been replaced by SAVE, which has more affordable offers and extensive benefits.

Which is better, SAVE Plan or PAYE?

The SAVE Plan is best suited for undergraduate borrowers or individuals with low incomes. Meanwhile, the PAYE Plan may be more beneficial for professionals with graduate school debt and low incomes. However, if the SAVE Plan’s full features get approved, borrowers with graduate school debt will receive better repayment options, including a discretionary income portion between 5% and 10% (if they have both undergraduate and graduate loans), faster paths to loan forgiveness, and overall lower payments.

References:

1. Federal Student Aid. (n.d.). The Saving on a Valuable Education (SAVE) Plan Offers Lower Monthly Loan Payments. Retrieved July 22, 2024, from https://studentaid.gov/announcements-events/save-plan
2. Hanson, M. (2024, June 27). How many people have student loans? Education Data Initiative. https://educationdata.org/how-many-people-have-student-loans
3. Ma, J., & Pender, M. (2023). Trends in college pricing and student aid 2023. College Board. https://research.collegeboard.org/media/pdf/Trends%20Report%202023%20Updated.pdf
4. Sallie Mae. (2023). How America pays for college 2023. https://www.salliemae.com/about/leading-research/how-america-pays-for-college
5. The White House. (2023, August 22). New student loan repayment plan benefits borrowers beyond lower monthly payments. Council of Economic Advisers. https://www.whitehouse.gov/cea/written-materials/2023/08/22/new-student-loan-repayment-plan-benefits-borrowers-beyond-lower-monthly-payments
6. The White House. (2024, March 27). Real-world examples of the benefits of SAVE. Council of Economic Advisers. https://www.whitehouse.gov/cea/written-materials/2024/03/27/real-world-examples-of-the-benefits-of-save
7. U.S. Department of Education. (2021). How the new SAVE Plan will transform loan repayment and protect borrowers. https://www2.ed.gov/policy/highered/reg/hearulemaking/2021/idrfactsheetfinal.pdf