Spread the Word: REPAYE Now Available

Submitted by: Shannon Cross, USA Funds account executive
The new Revised Pay as You Earn (REPAYE) repayment option now is available to borrowers. How are you sharing the news about this new income-driven student loan repayment plan with your current and former students?

Unlike with most other repayment plans whose payments are tied to income, Direct Loan borrowers may select REPAYE without regard to income or when the borrower received the loan.

REPAYE basics
Arming your borrowers with all the facts about student loan repayment is critical in helping them stay out of default. And there are some great ways that you can share the specifics about REPAYE — and other loan repayment options — with your borrowers. But first, some key points to keep in mind regarding the REPAYE repayment plan:

• As with the Pay as You Earn repayment option, payments are limited to 10 percent of a borrower’s discretionary income.

• Borrowers of all Direct Loans (except parent PLUS loans or consolidation loans that repaid a parent PLUS loan) are eligible. Federal Family Education Loan Program borrowers may qualify through consolidation.

• Borrowers may qualify for loan forgiveness after 20 years of repayment for undergraduate loans, or after 25 years of repayment for loans received for graduate study. But any forgiven loan debt is taxable income under current tax laws.

• There is no income requirement to qualify. Note, however, that borrowers in REPAYE who do not face partial financial hardship may have higher total loan costs because of capitalized interest.

• REPAYE cuts in half the remaining interest fees not covered by a borrower’s income-driven monthly payment amount.

• Unlike with other income-driven plans, REPAYE calculates discretionary income for married borrowers according to joint adjusted gross income regardless of whether each spouse files separately.

The Oct. 30, 2015, Federal Register has more details about REPAYE rules and regulations.

Spread the word
An analysis of loans guaranteed by USA Funds® showed that recent graduates frequently do not specify a repayment option for their loans — meaning their loans automatically are placed in the standard repayment plan. Make sure your borrowers know their options and carefully select the plan that works best for them.

Here are a few suggestions for getting borrowers up to speed on REPAYE and other repayment plans:

• Ensure that your entrance and exit loan counseling materials are updated with REPAYE details, and that materials for any supplemental counseling you provide have the latest information.

• Review your financial literacy training efforts. Are you including details about repayment options in those materials? Do they include an overview of REPAYE?

• What borrower outreach are you conducting after students leave school? Grace period is a great time to get borrowers off on the right foot with information about their repayment options. Your borrowers who are having repayment problems also can benefit from a reminder of income-driven options that might help them get back on track.

If you need assistance with default prevention planning, visit www.borrowerconnect.org.