At the second session of the Department of Education’s negotiated rulemaking March 31 to April 2, the department released a draft of a proposed expansion to the Pay As You Earn (PAYE) income-driven student loan repayment program. The revised Pay As You Earn, or REPAYE, would “target the plan to the neediest borrowers” with several departures from the current PAYE plan at the expense of graduate and professional borrowers. If approved, REPAYE is expected to be available in 2016.
Of particular concern to medical students, REPAYE includes the following new features:
If the combined outstanding balance of a borrower’s loans being repaid under the REPAYE plan is greater than $57,500 at the time the borrower initially enters the REPAYE plan, the repayment period is 25 years;
There is no cap on the monthly payment amount;
For unsubsidized loans, including Direct PLUS Loans made to graduate students, the Secretary charges 50 percent of the remaining accrued interest during periods of negative amortization; and
For married borrowers filing separately, the adjusted gross income of both the borrower and the spouse are used to determine whether the borrower has a partial financial hardship and to calculate the monthly payment amount.
Many of these changes are similar to proposals outlined in the president’s budget, and have not been approved by Congress [see Washington Highlights, Feb. 6]. The multitude of income-driven repayment plans are expected to be discussed in the upcoming reauthorization of the Higher Education Act.
The current negotiated rulemaking committee stems from a June 9, 2014, presidential memorandum, ordering the Department of Education to expand PAYE to more borrowers by the end of 2015. Unlike the current PAYE and Income Based Repayment (IBR) programs, REPAYE would be accessible to borrowers regardless of when they received their Direct Loans.