Pay As You Earn | What to Know

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If you’re looking for a way to lower your federal student loan payments, the Pay As You Earn (PAYE) plan is one to consider. However, the criteria to qualify are stricter than those for some of the other repayment plans.

PAYE is best for borrowers who:

• Took out their first federal student loan after Oct. 1, 2007
• Have Federal Direct Loans or Direct Consolidation Loans originated after Oct. 1, 2011
• Demonstrate partial financial hardship

• What are the requirements for PAYE?
• How do you apply for PAYE?
• Pros of PAYE
• Cons of PAYE

What are the requirements for PAYE?

The PAYE repayment plan is one of four income-driven repayment plans available to federal student loan borrowers.

Here are the basic criteria you’ll need to meet to qualify for PAYE

• You have federal student loans. PAYE is only available to federal student loan borrowers. Private student loans aren’t eligible for PAYE
• You took out your federal loan on or after October 1, 2011. Your loan’s disbursement date is the date that counts for this purpose
• You had no federal student loan balance as of October 1, 2007. The Department of Education uses this date as a cutoff to define “new” borrowers for PAYE eligibility
• You have a lot of debt relative to your income. The annual amount you would have to pay under the 10- or 30-year Standard Repayment Plan (which does not take your income into account) must be higher than what you would pay under PAYE (which does take your income into account). Federal Student Aid calls this a “partial financial hardship.”

In many ways, PAYE is similar to REPAYE, or Revised Pay As You Earn, which is another option you may want to consider. REPAYE also gives you a monthly payment of about 10% of your discretionary income. However, it doesn’t cap your monthly payment amount, so you could end up paying more than you would have under the standard 10-year repayment plan.

Learn More: REPAYE: How it Works and Who it’s For

What if you don’t qualify for PAYE?

If you have excellent credit, you might also be able to save money by refinancing your student loans, but if you do that you’ll lose the opportunity to join PAYE or other federal student loan repayment plans in the future

Deferment and forbearance can be a good option for shorter-term financial hardship, as interest still accrues and you will have to get back to your regular payments after a certain period of time

If you’re considering refinancing, visit Credible to compare private student loan rates from various lenders in minutes

The student loan consolidation companies in the table below are Credible’s approved partner lenders. Because they compete for your business through Credible, you can request rates from all of them by filling out a single form. Then, you can compare your available options side-by-side. Requesting rates is free, doesn’t affect your credit score, and your personal information is not shared with our partner lenders unless you see an option you like

Lender	Variable rates from (APR)	Fixed rates from (APR)
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	4.79%+	4.4%+
Fixed APR: 4.4%+ Variable APR: 4.79%+ Min. credit score: 720 Loan amount: $10,000 to $400,000 Loan terms (years): 5, 7, 10, 15, 20 Repayment options: Military deferment, forbearance Fees: Late fee Discounts: Autopay Eligibility: Must have a credit score of at least 720, a minimum income of $60,000, and must be a resident of Texas Customer service: Email, phone Soft credit check: 720 Cosigner release: No Loan servicer: Firstmark Services Max. Undergraduate Loan Balance: $100,000 - $149,000 Max. Graduate Loan Balance: $200,000 - $400,000 Offers Parent PLUS Refinancing: Does not disclose
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	6.26%+1	5.39%+1
Fixed APR: 5.39%+1 Variable APR: 6.26%+1 Min. credit score: Does not disclose Loan amount: $10,000 to $750,000 Loan terms (years): 5, 7, 10, 15, 20 Repayment options: Immediate repayment, academic deferment, military deferment, forbearance, loans discharged upon death or disability Fees: Late fee Discounts: Autopay, loyalty Eligibility: Must be a U.S. citizen or permanent resident and have at least $10,000 in student loans Customer service: Email, phone, chat Soft credit check: Yes Cosigner release: After 24 to 36 months Loan servicer: Firstmark Services Max. Undergraduate Loan Balance: $100,000 to $149,000 Max. Graduate Loan Balance: Less than $150,000 Offers Parent PLUS Refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	5.99%+2	5.99%+2
Fixed APR: 5.99%+2 Variable APR: 5.99%+2 Min. credit score: Does not disclose Loan amount: $5,000 to $300,000 Loan terms (years): 5, 7, 10, 12, 15 Repayment options: Military deferment, forbearance, loans discharged upon death or disability Fees: Late fee Discounts: Autopay Eligibility: All states except for ME Customer service: Email, phone, chat Soft credit check: Yes Cosigner release: After 24 to 36 months Loan servicer: College Ave Servicing LLC Max. Undergraduate Loan Balance: $100,000 to $149,000 Max. Graduate Loan Balance: Less than $300,000 Offers Parent PLUS Refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	7.41%+5	7.41%+5
Fixed APR: 7.41%+5 Variable APR: 7.39%+5 Min. credit score: 700 Loan amount: $7,500 to $200,000 Loan terms (years): 5, 10, 15, 20 Repayment options: Immediate repayment, academic deferment, forbearance, loans discharged upon death or disability Fees: None Discounts: Autopay Eligibility: Must be a U.S. citizen or permanent resident and submit two personal references Customer service: Email, phone Soft credit check: Yes Cosigner release: After 36 months Loan servicer: Granite State Management & Resources (GSM&R) Max. Undergraduate Loan Balance: $150,000 to $249,000 Max. Graduate Loan Balance: $150,000 to $199,000 Offers Parent PLUS Refinancing : Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	4.78%+3	5.08%+3
Fixed APR: 5.08%+3 Variable APR: 4.78%+3 Min. credit score: 680 Loan amount: $10,000 to $250,000 Loan terms (years): 5, 7, 10, 12, 15, 20 Repayment options: Forbearance Fees: None Discounts: None Eligibility: Must be a U.S. citizen or permanent resident, have at least $15,000 in student loan debt, and have a bachelor’s degree or higher from an approved school Customer service: Email, phone Soft credit check: Yes Cosigner release: No Loan servicer: Mohela Max. Undergraduate Loan Balance: $250,000 Max. Graduate Loan Balance: $250,000 Offers Parent PLUS Refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	6.61%+4	5.61%+4
Fixed APR: 5.61%+4 Variable APR: 6.61%+4 Min. credit score: 670 Loan amount: $5,000 to $250,000 Loan terms (years): 5, 10, 15, 20 Repayment options: Academic deferment, military deferment, forbearance Fees: Late fee, returned payment fee Discounts: Autopay Eligibility: Must be U.S. citizen or permanent resident Customer service: Email, phone, chat Soft credit check: Yes Cosigner release: Yes Max undergraduate loan balance: $250,000 Max graduate loan balance: $250,000 Offers Parent PLUS refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	4.76%+	4.49%+
Fixed APR: 4.49%+ Variable APR: 4.76%+ Min. credit score: 700 Loan amount: $5,000 to $300,000 Loan terms (years): 5, 7, 10, 15 Max. undergraduate Loan Balance: $125,000 Time to Fund: 10 to 30 days Repayment options: Immediate repayment, forbearance Fees: Late fee Discounts: Autopay Eligibility: Must be a U.S. citizen or permanent resident and have already graduated with at least an associate degree from an eligible institution Customer service: Email, phone Soft credit check: Yes Cosigner release: After 12 months Loan servicer: LendKey Technologies Inc. Max. graduate Loan Balance: $175,000 Credible Review: LendKey Student Loans review Offers Parent PLUS Refinancing: No
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	N/A	5.5%+
Fixed APR: 5.5%+ Variable APR: N/A Min. credit score: 670 Loan amount: $10,000 up to the total amount Loan terms (years): 7, 10, 15 Repayment options: Military deferment, loans discharged upon death or disability Fees: None Discounts: None Eligibility: Must be a U.S. citizen or permanent resident and have at least $10,000 in student loans Customer service: Email, phone Soft credit check: Yes Cosigner release: No Loan servicer: AES Max. Undergraduate Loan Balance: No maximum Max. Gradaute Loan Balance: No maximum Offers Parent PLUS Refinancing: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	5.34%+ - 10.29%+	7.06%+ - 13.72%+
Fixed APR: 5.34%+ - 10.29%+ Variable APR: 7.06%+ - 13.72%+ Min. credit score: 680 Loan amount: $5,000 to $500,000 (depending on degree) Loan terms (years): 5, 7, 10, 15, 20, 25 Time to fund: 3 business days Repayment options: Immediate, payment extension, reduced payment plan, rate reduction, term modification, extended grace period, interest only, rate and term modification, hardship forbearance, natural disaster forbearance, military forbearance, academic deferment Fees: Late fee, NSF fee Discounts: Autopay Eligibility: Must be a U.S. citizen or have permanent residency status with a valid U.S. Social Security number Customer service: Email, phone Soft credit check: Yes Cosigner release: After 24 months Loan servicer: Firstmark Services Max. undergraduate loan balance: $125,000 Max. graduate loan balance: $500,000 Offers Parent PLUS loans: Yes Min. income: $36,000
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology. View details	N/A	5.29%+
Fixed APR: 5.29%+ Variable APR: N/A Min. credit score: 680 Loan amount: $7,500 to $250,000 Loan terms (years): 5, 10, 15 Repayment options: Academic deferment, military deferment, forbearance, loans discharged upon death or disability Fees: None Discounts: Autopay Eligibility: Available in all 50 states; must also have at least $7,500 in student loans and a minimum income of $40,000 Customer service: Email, phone Soft credit check: Does not disclose Cosigner release: No Loan servicer: Rhode Island Student Loan Authority Max. Undergraduate Loan Balance: $150,000 - $249,000 Max. Graduate Loan Balance: $200,000 - $249,000 Offers Parent PLUS Refinancing: Yes
Compare personalized rates from multiple lenders without affecting your credit score. 100% free! Compare Now Trustpilot
All APRs reflect autopay and loyalty discounts where available | 1Citizens Disclosures | 2College Ave Disclosures | 5EDvestinU Disclosures | 3 ELFI Disclosures | 4INvestEd Disclosures | 7ISL Education Lending Disclosures

See Also: Can’t Pay Your Student Loans? What You Need to Know

How do you apply for PAYE?

Some companies will help you apply for PAYE for a fee, but you don’t need to use their services. You can apply for PAYE yourself for free. You can also get free help from your student loan servicer. You can research who your servicer is by logging in at StudentAid.gov/login. If you have more than one servicer, you’ll need to apply for PAYE with each servicer. The Department of Education recommends that you apply online.

If you don’t want to apply online, you can print out a paper application and mail it to your loan holder. The official form says “Income-Driven Repayment (IDR) Plan Request” at the top

However you apply, you’ll need to provide the following information:

• Name, address, Social Security number, and phone number
• Which IDR plan you’re applying to
• Your family size and number of dependents
• Your marital status
• If you’re married and have access to your spouse’s income, information about your spouse, their income, and their student loans
• Income information, including whether you’ve recently lost income due to job loss or another reason
• At least one document proving each source of income and dated within 90 days of your application

Pros of PAYE

Applying for PAYE might be a good choice if these benefits appeal to you:

• Limit your monthly payment to 10% of your discretionary income, not to exceed what you would have paid under the 10-year Standard Repayment Plan.

Discretionary income is the income you have left after subtracting 150% of the poverty guideline amount, which is based on your family size and state of residence. “Income” is your adjusted gross income from your most recent federal tax return

• For subsidized loans, get interest forgiveness for the first three years on the difference between your monthly payment and the interest that accrues
• Become eligible for federal student loan forgiveness after 20 years
• Switch to another income-driven repayment plan anytime, as long as you’re eligible for that plan
• Keep the federal student loan benefits that you would lose by refinancing your student loans with a private lender
• You’re married but don’t want your spouse’s income considered, which is an option if you file separately or don’t have access to your spouse’s income

Cons of PAYE

PAYE is not the best choice for everyone. A different repayment plan might be better for you if any of the following apply:

• You have parent loans. These aren’t eligible for PAYE
• You don’t want to carry student loan debt for two decades
• You can afford the monthly payments under the Standard Repayment Plan or Graduated Repayment Plan and they will cost you less in the long run given your total debt and starting income
• Your spouse’s income prevents you from qualifying or results in a substantially higher payment
• You don’t meet the plan’s definition of “new borrower” or “partial financial hardship.”
• You’re not great at following up and meeting deadlines. Failure to annually recertify your eligibility for PAYE will result in capitalized interest that will increase your loan balance
• You need an income-driven repayment plan for loans that are not Federal Direct Loans
• Your income is likely to increase substantially. If that happens, you could stop qualifying for PAYE. The low payments you make under many income-driven repayment plans mean that the total interest you owe can grow over time. If you leave PAYE, you could end up with a lot of capitalized interest added to your loan balance

Erik Rosenberg has contributed to the reporting of this article.

About the author

Amy Fontinelle

Amy Fontinelle has been a personal finance writer since 2006. Her work has been published by Forbes Advisor, Capital One, MassMutual, Prudential, Reader’s Digest, The Motley Fool, Investopedia, International Business Times, Business Insider, Bankrate, and other outlets.

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