Revised Pay As You Earn (REPAYE) Repayment Plan (now SAVE)

Editor’s note: The REPAYE plan has been renamed and rebranded as the Savings on a Valuable Education (SAVE) plan. Check out our resource on the SAVE plan.

If you have federal student loans, you may have taken advantage of the Revised Pay As You Earn (REPAYE) program to help with repayment—now known as the Saving on a Valuable Education (SAVE) Repayment Plan.

The plan caps monthly payments at 10% of your discretionary income as determined by state poverty guidelines and other factors. For many, this option can represent relief from what can often be an overwhelming monthly debt obligation. But with so many student loan repayment options, how do you know whether SAVE is the right one for you?

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What is REPAYE (now SAVE)?
Who should consider REPAYE or SAVE?
Pros and cons of REPAYE and SAVE
Other options

What is REPAYE (now SAVE)?

Prior to 2015, select federal student loan borrowers relied on the Pay As You Earn (PAYE) program to lower their monthly payments. This program helped some borrowers, but the benefits were limited to those who took out their first loan after October 1, 2007 and met specific financial hardship requirements.

Due to rising student debt and the limited nature of the PAYE program, former President Barack Obama requested the U.S. Department of Education create a plan to extend the benefits of PAYE to include more borrowers, namely those with older federal student loan debt or those who didn’t meet the financial requirements of other plans. The result was a revised Pay As You Earn program.

In 2023, REPAYE was replaced by the SAVE Repayment Plan. Under SAVE, eligible borrowers can get lower monthly payments and an interest benefit that can keep loan balances from growing. The SAVE plan also simplifies IDR enrollment for married couples and allows for the possibility of loan forgiveness after 20 to 25 years of on-time repayment.

PAYE vs. REPAYE

Monthly payments through REPAYE

If you enroll in the REPAYE program, you can expect monthly payments capped at 10% of your discretionary income. Your discretionary income, at least as it relates to the REPAYE program, is based on the difference between your annual income and 150% of the poverty guideline for your household size.

Since your annual income and family size can change over time, you must re-certify your enrollment each year with up-to-date information (including your income). As such, your monthly payments will vary over time, increasing as you make more money or decreasing should you take a pay cut or have more children.

Loan forgiveness with REPAYE or SAVE

Another primary benefit of the SAVE program is student loan forgiveness. Under this plan, borrowers repaying loans for their undergraduate degree are eligible for loan forgiveness after making qualifying payments for 20 years. Borrowers who make payments on a loan used for graduate or professional studies will be eligible for forgiveness after making 25 years of qualifying payments.

Any loan amount forgiven at the end of the repayment period is considered taxable income, so you may be required to pay income taxes on the remaining amount.

Am I eligible for REPAYE or SAVE?

Some income-driven payment options, such as the Income-Based Repayment Plan (IBR) and PAYE, require borrowers to meet certain income requirements. SAVE is not income-contingent and is available to anyone with eligible federal student loans.

The following Direct Loans are eligible for SAVE:

Direct Stafford Loans (Subsidized & Unsubsidized)
Grad PLUS Loans
Direct Consolidation Loans that did not include Parent PLUS loans

The following loans are eligible only if they are consolidated into a Direct Consolidation Loan:

FFEL Subsidized Federal Stafford Loans
FFEL Unsubsidized Federal Stafford Loans
FFEL (Federal Family Education Loan program) PLUS Loans for graduate or professional students
FFEL Consolidation Loans that did not include PLUS Loans
Federal Perkins Loans

Many borrowers will qualify for SAVE, but loans in default are not eligible for this program. However, you have options to rehabilitate your loans, many of which will open the door to income-driven repayment plans.

If your loans are in default and you’re considering an income-driven repayment plan, you can contact your student loan servicer for guidance.

Who should consider REPAYE/SAVE?

The right income-driven repayment plan can help you manage your monthly bills, avoid sending your loans into default, and keep your credit score from plummeting.

If you’re reviewing your options, here are a few reasons you might consider SAVE:

You qualify for Public Service Loan Forgiveness (PSLF). If you work for a government agency or nonprofit, you may be eligible for PSLF, but one of the qualifications is entering into an income-driven repayment plan.
You don’t qualify for IBR or PAYE but are still struggling to make your monthly payments.
You enrolled in an IBR program prior to the launch of SAVE. (Before you switch plans, always check to see whether your payment history will count toward the new plan.)
Your loans are in default and you are considering federal student loan consolidation as a method to remove them from their current status. If choosing this route, you must agree to repay your new Direct Consolidation Loan with an income-driven repayment plan, which includes SAVE.

Pros and cons of REPAYE/SAVE

The SAVE program, like other federal student loan repayment plans, has benefits and downsides.

Pros

Monthly payments are capped at 10%, making this a more affordable option for borrowers, especially those who don’t qualify for IBR or PAYE.
Borrowers are eligible for loan forgiveness after making regular payments for 20 or 25 years.
SAVE offers several interest subsidies, which can prevent a sizable tax obligation at the end of the repayment period.

When enrolled in this repayment plan, the government will pay: all remaining interest on Subsidized Loans for the first three years; after that point, it will pay 50% of the remaining interest. It will also pay 50% of the remaining interest on Unsubsidized Loans for the duration of the repayment term.
Simplifies IDR enrollment for married couples

Cons

The IRS considers loans forgiven at the end of the repayment period taxable income, which can lead to a significant tax burden at the end of your loan term.
Borrowers who could otherwise commit to a shorter repayment term may pay far more interest over the course of the 20- to 25-year term.

Other options

Here are options to evaluate before determining whether SAVE makes the most sense for you.

Tip

The Federal Student Aid website offers a Loan Simulator you can use to help determine the best repayment plan based on your goals.

Standard repayment plan

If you’re looking for the fastest way to pay off your loan or want to limit the interest you pay over the life of your loan, this is likely the best option. Under the standard repayment plan, you’ll pay off your loan within 10 years. However, because this is the shortest route, it often results in the highest monthly payments.

Other income-driven repayment plans

In addition to the REPAYE program, the government offers Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Income-Contingent Repayment (ICR). Though the qualifications vary by program, they all result in loan forgiveness at the end of the repayment period.

IBR and PAYE are designed to help borrowers who can show financial hardship. These repayment plans generally include 20- or 25-year terms and cap monthly payments at 10%. However, borrowers in the IBR program who took loans out prior to July 2014 must pay 15%.

ICR results in a payment that amounts to 20% of your discretionary income or the amount you would pay under a 12-year fixed payment plan, adjusted according to your AGI. This payment plan extends repayment to 25 years. ICR is one of the only income-driven repayment plans available to borrowers with Parent PLUS loans.

Refinance with a private lender

For many borrowers, refinancing through a private lender can be an attractive option. In some cases, particularly for borrowers with excellent credit, refinancing federal loans to the private sector can result in lower interest rates and significant savings over the life of the loan.

However, it’s important to weigh the pros and cons before doing so. Once you refinance your loans with a private lender, you’ll lose access to income-driven repayment plans and any potential loan forgiveness. Many private lenders offer flexible repayment plans, but most don’t offer income-driven plans to borrowers facing financial hardships. Some allow you to pause payments in the event of a job loss.