Free Consultation
The office is open as per the NYS Covid-19 guidelines. We are now doing both in-person and telephone consultations. Please call the office at 718-855-6840 to schedule a time to speak with one of our experienced bankruptcy attorneys.

Government Proposing A New Student Loan Repayment Option: REPAYE

It seems like yesterday when there were only a handful of options for dealing with federal student loans: consolidation, deferment, and forbearance. Then, in a matter of a few years, the government created a slew of acronymic hardship repayment programs: ICR, PSLF, IBR, and PAYE. Keeping these plans straight is difficult since they share so many features. What’s more, the Department of Education is proposing a new plan: Revised Pay-As-You-Earn, aka REPAYE.

So how does REPAYE differ from (as you can guess) PAYE? There are a several ways.

(1)  Widespread eligibility: As of now, borrowers are eligible for PAYE only if they had no direct loans (or older guaranteed loans) prior to October 1, 2007. REPAYE extends its eligibility to all borrowers with direct loans.

(2)  Continuous eligibility: Income-sensitive repayment plans currently require borrowers to show that they have a “partial financial hardship,” meaning their payments must exceed what would normally be required under a 10-year repayment plan for eligibility and for their payments to count toward eventual loan forgiveness. REPAYE does away with the partial financial hardship requirement, so borrowers can’t be kicked off when their incomes rise.

(3)  Extending loan forgiveness for graduate students: PAYE forgives unpaid loan balances after 20 years of timely payments under a partial financial hardship. REPAYE will add 5 years for borrowers who take out any loan for a graduate program. The idea is to make sure graduate students, who tend to borrow more money, pay longer into the program before receiving loan forgiveness.

(4)  Combining spousal income: Currently, PAYE and other plans only count borrowers’ individual incomes. It doesn’t matter if they live with a high-earning spouse. REPAYE will include spouse’s incomes, even for borrowers filing jointly.

(5)  Addressing borrowers who don’t provide documentation on time: Earlier this year, hundreds of thousands of borrowers were thrown off income-sensitive repayment plans for not filing their income documentation on time with the Department of Education. Under REPAYE, borrowers who do not file their documentation on time will be placed on an alternative repayment plan that costs either the amount necessary to repay the loan in 10 years or the end of the REPAYE period (20 or 25 years), whichever occurs sooner. Borrowers will need to provide income documentation for the missing time, so they will pay more if their incomes increased.

(6)  Reduce accrued interest: Borrowers whose payments do not cover the interest charges will not pay as much as under REPAYE. The government will forgive unpaid interest for borrowers with subsidized loans for the first three years. Borrowers with unsubsidized loans (or subsidized loans after the three-year repayment period) will be charged only half the unpaid interest.

(7)  Reduce capitalized interest: Currently borrowers who leave PAYE or no longer have a partial financial hardship have all their unpaid interest capitalize onto their loans. Under REPAYE, the amount of interest that would be capitalized would be limited to 10 percent of the loan’s principal balance.

REPAYE might benefit some debtors more than others, particularly unmarried college graduates as opposed to married graduate debtors. The Department of Education hasn’t adopted it yet, but it probably will. You can find the proposed version here. If you have financial problems stemming from debts that can’t be placed in a federal income-sensitive repayment plan, then you should talk to an experienced New York bankruptcy lawyer.

For answers to more questions about student loans bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney near me Bruce Weiner for a free initial consultation.

Rosenberg, Musso & Weiner, L.L.P
26 Court St # 2211
Brooklyn, NY 11242, USA
718-855-6840
http://nybankruptcy.net/

Recent Posts

Beware Grace Periods, Debtors

Too often, debtors see grace periods offered by lenders as free benefits. “Grace” makes it sound so innocent. However, debtors who routinely rely on grace periods when making payments will find themselves facing financial difficulties that might lead to bankruptcy. The reason is that although creditors offer grace periods to debtors, they also use them

Read More »

Bankruptcy May Not Rescue You From Vicious Personal Disputes

Bankruptcy is a technical process that assumes everyone working within it is mostly rational. To the extent that it expects parties to deviate from irrational behavior, the Bankruptcy Code and its accompanying rules include incentives to keep parties in line. Creditors are usually large and impersonal, and they rarely care if their debtors file bankruptcy.

Read More »

Non-Lawyers’ Explanations of Bankruptcy May Be Wrong

Do you have financial problems? Do you tend to ask your friends for advice? Is one of your friends an experienced New York bankruptcy lawyer who will explain the process for you? Are your friends otherwise knowledgeable people? The answer to these questions may be, “Yes but you don’t know it.” Although many bankruptcy lawyers

Read More »

6 Steps to Take Before Filing Bankruptcy

Leaving your case to an experienced New York bankruptcy lawyer is not the only step on the to-do list before filing bankruptcy. There are many things debtors should do (and not do) before they file, and the more organized and mindful debtors are, the easier the process will be and the more effective the result.

Read More »

Social Security Number Not Necessary for Bankruptcy

A question that’s commonly asked about New York bankruptcy is whether a debtor needs a Social Security number to file. Debtors ask because they sometimes run across the bankruptcy form title, “Your Statement About Your Social Security Numbers” (B 121), which asks debtors to list their current and prior Social Security numbers. The new bankruptcy

Read More »

How Can a Debtor (or Creditor) Get a New Trustee?

The trustee in a New York bankruptcy case is usually not the debtor’s ally. His or her purpose is mainly to administer the bankruptcy estate or ensure the debtor’s repayment plan goes according to plan. Trustees pursue preference payments, fraudulent conveyances, and other malfeasance committed by debtors. They frequently initiate adversary proceedings against debtors. In

Read More »
Scroll to Top