Repayment Plan

Pay As You Earn Repayment Plan

If your student loan debt is high relative to your income, you may qualify for the Pay As You Earn Repayment Plan.

Most Direct Loans—except for Direct PLUS Loans for parents and Direct Consolidation Loans that repaid PLUS loans for parents—are eligible for Pay As You Earn.

The Pay As You Earn Repayment Plan helps keep your monthly student loan payments affordable, and usually has the lowest monthly payment amount of the repayment plans that are based on your income. If you need to make lower monthly payments, this plan may be for you.




Monthly Payments

Under this plan, your monthly payments are:

  • Based on your income and family size;
  • Adjusted each year, based on changes to your annual income and family size;
  • Usually lower than they are under other plans;
  • Never more than the 10-year Standard Repayment amount; and
  • Made over a period of 20 years.

Advantages of Pay As You Earn

  • Pay based on what you earn: Your monthly payment amount will be 10 percent of your discretionary income, will never be more than the amount you would be required to pay under the 10-year Standard Repayment Plan, and may be less than under other repayment plans.
  • nterest payment benefit: If you’re monthly Pay As You Earn payment amount does not cover the interest that accumulates on your loans each month, the government will pay your unpaid accrued interest on your Direct Subsidized Loans for up to three consecutive years from the date you began repaying your loan under Pay As You Earn.
  • Limitation on the capitalization of interest: While you have a partial financial hardship, interest that accrues but is not covered by your loan payments will not be capitalized, even if interest accrues during a deferment or forbearance. The total amount of interest that capitalizes while you are repaying your loans under the Pay As You Earn plan is limited to 10% of your original principal balance when you begin paying under Pay As You Earn.
  • 20-year forgiveness: If you repay under Pay As You Earn and meet certain other requirements, any remaining balance will be forgiven after 20 years of qualifying repayment.
  • Made over a period of 20 years.