Pay As You Earn Repayment
How Does It Work?
- Pay As You Earn "caps" loan payments at 10% of the household income that exceeds 150% of the Federal poverty guideline based on your family size.
- Payment amount adjusted annually based on changes to the household income.
- Can remain in Pay As You Earn for up to 20 years. After 20 years, any remaining debt is forgiven, but taxable.
|Example of a PGY-1 Resident in Pay As You Earn (1)|
|Monthly Adjusted Gross Income (2)||$4,138|
|(minus) 150% of Poverty Line (3)||-$1,396|
|Monthly Pay As You Earn Payment||$274|
|(1) Based on the 2012 first post-M.D. year median stipend of $49,651.|
|(2) Based on the 2012 federal poverty guideline for a family size of one (as determined by the US Department of Health and Human Services in the 48 contiguous states — $11,170).|
|(3) Based on 2012 federal regulations|
Who is Eligible?
New borrowers who both:
- Owed NO other Direct or FFELP Loans
- Received a new loan disbursement from Direct Loans on or after October 1, 2011
Borrowers also need to display a Partial Financial Hardship (PFH). Most medical residents exhibit this hardship.
Borrowers must submit income and family size information to their loan servicer(s) annually. Servicer(s) are the point of contact for all eligibility matters.
If you don’t qualify for Pay As You Earn, Income-Based Repayment (IBR) offers similar benefits and may be a good alternative.
Which Loans Qualify?
- Direct Stafford Loans
- Direct PLUS Loans (not Parent)
- Direct Consolidation Loans
- Perkins and LDS Loans (only if part of a Direct Consolidation)
FFELP Loans will be considered but not covered under the Pay As You Earn plan. IBR can be sought for FFELP Loans. For more information visit the Federal Student Aid Web site .
What is the Payment Amount?
Benefits of Pay As You Earn
- possibly the lowest monthly payment plan
- maximum payment never higher than the Standard 10-year repayment amount - calculated upon entering Pay As You Earn
- postponement of interest capitalization (until a PFH no longer exists)
- amount of capitalized interest capped at 10% of the original debt
- partial interest subsidy (for the first three years)
- eligible towards Public Service Loan Forgiveness (PSLF)
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