FIRST for Pre-health Advisors
Resources for staff who advise aspiring medical students
Pay As You Earn Repayment (PAYE)
For those who qualify, this plan may allow for the lowest possible monthly payment – offering an affordable repayment solution to graduates with student loan debt.
How Does It Work?
- PAYE “caps” loan payments at 10% of the household income that exceeds 150% of the federal poverty guideline based on your family size.
- The payment amount is adjusted annually based on changes to household income.
- Borrowers can remain in PAYE for up to 20 years. After 20 years, any remaining debt is forgiven, but is taxable.
|Example of a PGY-1 Resident in Pay As You Earn (PAYE)|
|Monthly Adjusted Gross Income (1)||$4,280|
|(minus) 150% of Poverty Line (2)||-$1,480|
|(multiplied by) (3)||x.10%|
|Monthly PAYE Payment||$280|
|(1) Based on AAMC estimate of 2014 post-M.D. year median stipend.|
|(2) Based on AAMC estimate of 2014 federal poverty guideline for a family size of one in the 48 contiguous states.|
|(3) Based on 2013 federal regulations.|
Who is an Eligible Borrower?
- Must be a new borrower as of 10/1/07. AND
- Must have received a Direct Loan Disbursement on or after 10/1/11.
- Must have 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.
Which Loans Qualify?
- Direct Stafford Loans
- Direct PLUS Loans (does not include Direct PLUS Loans made to parents)
- Direct Consolidation Loans
- Perkins and LDS Loans (only if part of a Direct Consolidation)
If you have loans that are not eligible for PAYE or if you are not an eligible borrower, Income-Based Repayment (IBR) could be another plan to consider. For more information on these plans and other repayment options, visit the Federal Student Aid website .
What is the Monthly Payment Amount?
Benefits of Pay As You Earn
- PAYE possibly offers the lowest monthly payment plan
- The maximum payment is never higher than the Standard 10-year repayment amount, which is calculated when entering Pay As You Earn.
- Postponement of interest capitalization occurs until a PFH no longer exists.
- The amount of capitalized interest is capped at 10% of the original debt.
- A partial interest subsidy is available for the first three years.
- PAYE is an eligible plan for Public Service Loan Forgiveness (PSLF)
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Medloans® Organizer and Calculator
Organize and track your loans, then view sample repayment scenarios with the Medloans® Organizer & Calculator, the only Web tool of its kind developed for medical students.