PAYE vs REPAYE: Which One is Best for You

Jocelyn Segoviano
Jocelyn Segoviano

Jocelyn Segoviano is a freelance writer specializing in personal finance topics. With a passion for helping individuals navigate their financial journeys, she has been providing insightful advice and practical tips to readers for over years.

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Daniel Kahn
Daniel Kahn
Daniel is the co-founder and COO at Sparrow. Daniel is responsible for the day-to-day operations of a company, working closely with other members of the executive team to develop and implement strategies to support the growth and success of the company.
Daniel was a 2023 Forbes 30 Under 30 lister in the Education category.  Daniel was born and raised in Raleigh, North Carolina and graduated from Duke University in 2020.
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Camden Ford
Camden Ford

Camden leads Sparrow’s business operations – everything from product management to business analytics. After graduating Cum Laude from Duke University where he studied Civil Engineering, Camden worked as a Consultant for A.T. Kearney where he worked in their Strategic Operations practice. With a strong background in analytics, Camden strives to deliver data-driven conclusions and insights.

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November 10, 2023

Both PAYE and REPAYE are great, affordable repayment options for federal student loans. If you’re here, then you’ve probably heard of both. The problem is you’re not exactly sure what the difference between the plans is or which one to choose. In the epic battle of PAYE vs REPAYE, we’re here to help. Let’s get into it. 

Pay as You Earn (PAYE) 

Pay as You Earn is an income-driven repayment (IDR) plan that came into effect in 2012. It can be a bit hard to qualify for but offers great benefits. 

How your monthly payment is set: Your monthly payment will be 10% of your discretionary income. Married couples filing taxes separately won’t have their spouse’s income calculated into the payment. The monthly payment cannot be more than what you would get on the 10-year standard repayment plan

What you need to qualify: To qualify for the PAYE plan, you need a federal Direct Loan taken out on or after October 1, 2011. Parent PLUS Loans are ineligible. You’ll also need to demonstrate partial financial hardship. 

Repayment period: Your repayment period will be 20 years. 

Revised Pay as You Earn (REPAYE) 

Revised Pay as You Earn is an IDR plan that came into effect in 2017. The REPAYE plan is a lot easier to qualify for but may not have the same benefits. 

How your monthly payment is set: Your monthly payment is 10% of your discretionary income. If you’re married, they’ll also take into account your spouse’s income. This monthly payment can exceed what you would pay on a standard 10-year repayment plan. 

What you need to qualify: As long as you have qualifying loans, you can get the REPAYE plan. A qualifying loan for REPAYE includes most federal Direct Loans. Parent PLUS Loans are ineligible.

Repayment period: If you have undergraduate loans, your repayment period is 20 years. If you have loans for grad school, your repayment period is 25 years. 

Choosing Between PAYE vs REPAYE

Now that you have a better understanding of the plans, we can move on to the burning question in your mind: PAYE or REPAYE? 

Before we get into that, though, let’s make sure that an income-driven repayment plan is the best plan for you. Here are some questions to ask yourself to see if an IDR is right for you: 

  1. Do you have federal student loans? 
  2. Is the standard 10-year plan too expensive for you? 
  3. Are you planning to pursue loan forgiveness? 

If you answered yes to at least the first two, then an IDR plan can be a great option for you. With that out of the way, we can finally help you decide which of the two plans you should get. Keep in mind that both are good plans but the one that’s going to be good for you depends on your situation and what you want in a repayment plan. 

PAYE is a great option for those with at least partial financial hardship. That requirement, though, can make it hard to qualify. In addition to partial financial hardship, you also must meet the following: 

  1. Have received a federal loan on or after October 1, 2007, and had no outstanding loans at that time 
  2. Have received a loan disbursement on or after October 1, 2011, or consolidated on or after that date 

The REPAYE plan would be your best repayment option if you don’t qualify for PAYE.

If you do qualify for PAYE and still need help deciding, here is a chart going over the key differences between the plans: 


Monthly Payment and Calculation 
10% of your discretionary income Spouse’s income not counted10% of your discretionary income Spouse’s income counted 

Eligible Loans 
Most Federal Direct Loans taken out on or after October 1, 2011Most Federal Direct Loans 
Easy to Qualify? NoYes 
Repayment Period20 years 20 years for undergraduate loans 25 years for graduate loans

Interest subsidized 100% first 3 years Up to 10% of principal can be capitalized Interest subsidized 100% first 3 years and 50% rest of period 0% interest capitalized as long as you stay with the plan

Both plans offer different things. So, deciding which option is right for you is ultimately up to what you want in a repayment plan. 

The Federal Student Aid’s Loan Simulator is another great tool for you to use. The simulator will give you an idea of what your payments would be under each plan. The simulation will also include information such as interest costs and the potential for loan forgiveness. Be sure to include all of the following information for accurate results: 

  1. You and your spouse’s (if applicable) student loan type, balance, and interest rate 
  2. Your tax filing status, family size, and state of residence 
  3. You and your spouse’s (if applicable) adjusted gross income

Frequently Asked Questions About PAYE vs REPAYE

  1. Is PAYE or REPAYE better for Public Service Loan Forgiveness (PSLF)? Under these plans, the government will forgive any remaining balance after your repayment period is over. However, you may finish paying before you can get loan forgiveness. Talk to your loan servicer for more information about what you should do. 
  2. Can you switch between PAYE and REPAYE? You can switch between federal repayment plans whenever you need to. Be sure to talk to your loan servicer before making the switch.
  3. Can you make extra payments on REPAYE? You can make extra payments on your plan, which will pay off your debt faster. Paying it off faster means there may be less money for loan forgiveness. So, it’s really up to you. Is loan forgiveness a priority? Or do you want to just pay it off as fast as you can? 
  4. What happens when you leave a REPAYE plan? If you leave the REPAYE plan for whatever reason, the interest will capitalize. This means you’ll owe any unpaid interest you have on the loan. 

Final Thoughts from the Nest 

Both the PAYE and REPAYE plans are great options for your federal loans. Choosing the best one for you depends on your financial situation and what you want in a repayment plan. If for whatever reason these don’t work out, there are plenty of other federal repayment plans you can switch to. 

If you have federal student loans and are looking for a different option to pay off your debt faster, refinancing is a great way to do that. Sparrow has many refinancing options from different lenders. To get started, fill out the Sparrow application. It’ll then match you with what you best qualify for from any of our 15+ lenders.

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