Revising REPAYE to Lower Student Loan Payments for the Most Borrowers

The Biden Administration announced on January 10th that it would be updating the income-driven repayment plan known as REPAYE as part of continuing student loan reforms. The announcement reverses their previous effort to create a new, more affordable IDR plan by, instead, changing the existing Revised Pay As You Earn plan. Although the full details have yet to be released, the Administration promises that the new rules “would substantially reduce the monthly and total cost of repaying Federal student loan debts for low- and middle-income borrowers, while simplifying the program and eliminating common pitfalls that have historically delayed borrowers’ progress toward forgiveness.”

Lower Monthly Payments, Quicker Forgiveness, Simplified IDR for all Borrowers

The new REPAYE plan includes a number of tweaks to existing policy, but also introduces new protocols to ease repayment for certain borrowers. Unlike the current plan, monthly payments would be capped at 5% of discretionary income, essentially cutting payments in half. Further, the ceiling for low-income borrowers will be raised to 225% of the federal poverty threshold, allowing those who fall below to make $0 payments. Under the new guidelines, borrowers wouldn’t see their principal balloon from interest if their monthly IDR payment doesn’t cover the amount garnered. Finally, those who borrowed just $12k or less would have their remaining balance forgiven in 10 years, rather than the possible 20 or 25 years, and “every additional $1,000 borrowed above that amount would add 1 year of monthly payments to the required time a borrower must pay before receiving forgiveness.”

Lingering Questions about REPAYE and Student Loan Borrower Needs

The updated REPAYE plan has a lot of exciting prospects for student loan borrowers, but questions remain about certain specifics. The current plan, for example, has no payment cap, meaning that your monthly payment will increase according to your income with no upper limit. Other plans, such as PAYE, are limited at the amount that you would pay on the standard 10-year plan—meaning you’ll never pay more than that. Another question is how married borrowers could be impacted: the current REPAYE uses a married couple’s income to calculate their monthly payments regardless of whether they file taxes together or separately. Again, it’s a unique feature of REPAYE: other plans don’t do that. 

This is exciting news, and we’re so happy to share it with you! Everyone is still scrambling to get their hands on more concrete answers to questions like those above and more, but when we have answers, you’ll find them here. In the meantime, if you are wondering about how these proposed changes to IDR could affect you or those you love (including the IDR Account Adjustment), we’re always just a phone call or email away!