Editor's Note: For the latest developments regarding federal student loan debt repayment, check out our student debt guide.
Struggling to make your federal student loan payments? An income-based repayment plan may ease the burden. Previously, two of the primary income-based plans were Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE), but the latter has been replaced by a new plan — the SAVE Plan. In all cases, the plans adjust your monthly loan payments based on your income and family size. In this article we’ll look at how SAVE compares to the old REPAYE, as well as to the PAYE Program.
Table of Contents
PAYE vs REPAYE: An Overview
The existing PAYE and former REPAYE federal student loan payment plans were similar, but differed in a few key areas. Both of these plans had income-based repayment terms generally set at 10% of a borrower’s discretionary income.
Some borrowers may not qualify for PAYE because the initial enrollment step requires partial financial hardship as determined by one’s annual discretionary income and family size. You cannot enroll into PAYE if your federal student loan monthly payment would be lower under the Standard Repayment Plan. You also cannot enroll into PAYE after a certain date.
No new PAYE enrollments will occur after July 1, 2024, although current PAYE enrollees can remain on the plan after that date. The 2023 debt ceiling bill officially ended the three-year Covid-19 forbearance, requiring federal student loan interest accrual to resume on Sept. 1 and payments to resume in October 2023 under any federal student loan repayment plan.
Some federal student loan borrowers who did not qualify for PAYE may have been eligible for REPAYE. Note that REPAYE no longer exists and has been fully replaced by the SAVE Plan as of July 2023.
Here are the key differences between the existing PAYE and former REPAYE plans:
• PAYE requires partial financial hardship to sign up for first-time enrollment
• REPAYE did not require low-income, moderate-income, or partial financial hardship to enroll
• No new PAYE enrollments will occur after July 1, 2024
• Borrowers already enrolled in PAYE can continue repaying under that plan after July 1, 2024
• REPAYE no longer exists as a federal student loan repayment plan
SAVE vs REPAYE
Saving on a Valuable Education (SAVE) Plan is the federal income-driven repayment (IDR) plan that replaced REPAYE in July 2023. If you were enrolled on the REPAYE Plan at that time, you’ve been automatically enrolled into the SAVE Plan.
The SAVE Plan is essentially a major upgrade to the former REPAYE Plan, as shown in the table below:
| SAVE | REPAYE |
|---|---|
| $0 monthly payment if your income is within 225% of the federal poverty guideline (or less than $32,805 for a single borrower and $67,500 for a family of four in 2023). | Fewer borrowers qualified for a $0 monthly payment because the threshold was set at 150% of the federal poverty guideline. |
| Your loan balance won’t grow over time if your monthly payment amount is less than the interest accruing. | It was possible for borrowers to see their loan balances grow over time if their monthly payment was insufficient to pay the accrued interest. |
| Inclusion of your spouse’s income is not required if you file your taxes separately. | Inclusion of your spouse’s income was required |
| Beginning July 2024, payment amounts are based on 5% of discretionary income for undergraduate loans, 10% for graduate loans, and a weighted average for borrowers who have both. | Payment amounts were based on 10% of discretionary income |
| Beginning July 2024, borrowers with original principal balances of less than $12,000 can have their remaining loan balance forgiven after 10 years of monthly qualifying payments. | Loan forgiveness would only occur after 20 years of monthly qualifying payments for undergraduate loans and 25 years for graduate loans |
SAVE vs PAYE
Both SAVE and PAYE are federal income-driven repayment plans not available to private student loan borrowers. New enrollments in PAYE will end in July 2024.
The below table highlights the key differences between SAVE and PAYE:
| SAVE | PAYE |
|---|---|
| Annual adjusted gross income does not determine your eligibility for this IDR plan. | Enrolling into this plan typically requires low or moderate income, also known as a partial financial hardship. |
| You don’t have to pay if your income is below 225% of the federal poverty guideline. | You don’t have to pay if your income is below 150% of the federal poverty guideline. |
| Beginning July 2024, payment amounts are based on 5% of one’s discretionary income for undergraduate loans, 10% for graduate loans, and a weighted avera.ge for borrowers who have both. | Payment amounts are generally 10% of one’s discretionary income, but never more than the 10-year Standard Repayment Plan amount. |
| Also beginning July 2024, borrowers with original principal balances of less than $12,000 can have their remaining loan balance forgiven after 10 years of monthly qualifying payments. | Your remaining loan balance is forgiven after 20 years of monthly qualifying payments. |
| There’s no deadline to enroll and make payments on this plan. | No new enrollments will occur after July 1, 2024, but current enrollees can remain on this IDR plan after that date. |
Depending on your original principal balance amount, student loan forgiveness on the SAVE Plan can occur after 10 to 25 years of monthly qualifying payments beginning in July 2024.
If you’re a federal student loan borrower working toward Public Service Loan Forgiveness, you may qualify for forgiveness of any remaining loan balance after 10 years of qualifying payments.
Recommended: Student Loan Forgiveness Programs
💡 Quick Tip: Ready to refinance your student loan? With SoFi’s no-fee loans, you could save thousands.
What Is the Interest Subsidy?
The SAVE Plan has a permanent interest subsidy, whereas the PAYE Plan offers a temporary interest subsidy to eligible borrowers.
If you’re on the SAVE Plan, 100% of your unpaid accrued interest is not charged if your monthly payment is less than the interest accruing. The effect of this permanent interest subsidy is that your loan balance won’t grow over time if your SAVE Plan monthly payment is less than the interest accruing.
Under the PAYE Plan, the U.S. Department of Education may provide an interest subsidy if your monthly payment is less than the interest accruing. This PAYE Plan interest subsidy is discontinued after the first three years of repayment and only applies to Direct Subsidized Loans and the subsidized portion of Direct Consolidation Loans.
Some borrowers on the PAYE Plan may see their loan balances grow over time. This can happen if you’re not covered by an interest subsidy when making a monthly payment that’s insufficient to pay the accrued interest. (Effective July 1, 2023, your unpaid accrued interest is not capitalized if you switch from PAYE to another repayment plan, fail to recertify your income, or no longer have a partial financial hardship.)
Recommended: Direct vs. Indirect Student Loans: What’s the Difference?
Answers to Common Questions
How do I apply for a federal IDR plan?
You only need to submit one application for any federal income-driven repayment plan and will need to supply financial information. It will take about 10 minutes. The Federal Student Aid Office also will recommend a repayment plan based on your input. Remember that private student loans are not eligible for federal IDR plans.
I want to apply for PAYE. How is partial financial hardship defined?
A general rule of thumb: If your debt exceeds your income, you likely demonstrate hardship under PAYE.
More specifically, your loan servicer will compare your monthly payment under the standard plan and PAYE. If you’d pay more under the standard plan, you have a partial financial hardship. Remember there’s no option to apply for PAYE after July 1, 2024.
What if I’m in PAYE and no longer demonstrate hardship?
Your loan payments will stop being based on your income. Instead, your monthly payment will be based on the amount you would pay under the 10-year Standard Repayment Plan. Your maximum required payment in PAYE will never be higher than the 10-year standard payment amount.
What if I forget to recertify my income and family size?
If you’re on the SAVE Plan, failing to recertify your income and family size may switch you to an alternative repayment plan with a larger monthly payment.
If you’re on the PAYE Plan, failing to recertify by the annual deadline may give you a larger monthly payment resembling what you would pay under the Standard Repayment Plan.
Auto-recertification will be available in July 2024 if you agree to securely share your tax information with the U.S. Department of Education.
Does a Parent PLUS Loan qualify for PAYE or SAVE?
No. Federal Parent PLUS Loans are not eligible for either the PAYE or SAVE plans.
Recommended: Types of Federal Student Loans
Income-Driven Repayment Alternatives
One of the alternatives to federal income-driven repayment is student loan refinancing. You can refinance your student loans — private and federal — with a private lender and potentially qualify for a lower interest rate. (Note: You may pay more interest over the life of the loan if you refinance with an extended term.)
The federal Direct Consolidation Loan program combines federal student loans into a single federal loan, but the interest rate is the weighted average of the original loans’ rates rounded up to the nearest eighth of a percentage point, which means the borrower usually does not save any money. Lengthening the loan term can decrease the monthly payment, but that means you may spend more on total interest.
Federal IDR plans like SAVE or PAYE offer federal protections and benefits, such as access to the Public Service Loan Forgiveness program. Any loans you refinance with a private lender will not be eligible for PSLF, Teacher Loan Forgiveness, or federal IDR plans. A student loan refinancing calculator can help you determine whether student loan refinancing is right for you.
💡 Quick Tip: When refinancing a student loan, you may shorten or extend the loan term. Shortening your loan term may result in higher monthly payments but significantly less total interest paid. A longer loan term typically results in lower monthly payments but more total interest paid.
The Takeaway
The SAVE Plan is generally the most affordable federal student loan repayment plan. It replaced the former REPAYE Plan and offers a permanent interest subsidy, among other perks that you can’t get with PAYE.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
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SoFi Student Loan Refinance
If you are a federal student loan borrower, you should consider all of your repayment opportunities including the opportunity to refinance your student loan debt at a lower APR or to extend your term to achieve a lower monthly payment. Please note that once you refinance federal student loans you will no longer be eligible for current or future flexible payment options available to federal loan borrowers, including but not limited to income-based repayment plans or extended repayment plans.
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