Your Best PSLF Repayment Options
By Weston Manley
February 2, 2020
For those going for Public Service Loan Forgiveness (PSLF), the two best repayment plans to select from are Pay as You Earn (PAYE) and Revised Pay as You Earn (REPAYE). We’ll discuss details and benefits of each and then provide scenario analysis as guidance as you determine which is most appropriate for you.
PAYE Basics:
• 10% of discretionary income
• May exclude your spouse’s income by filing taxes separately
•. Cap on payment equal to 10-year repayment when entered the repayment plan
REPAYE Basics:
• 10% of discretionary income
• No cap on payment
• 50% interest subsidy if calculated monthly payment is less than interest
Now that you know how each payment plan works, let’s talk about when it makes sense to utilize each.
A. If your spouse does not have federal debt then filing taxes separately to only include your income could be advantageous hence why using PAYE is likely the best route.
B. If your spouse does have federal debt and REPAY would allow you to earn an interest subsidy, then go that route.
If your calculated payment is too high for an interest subsidy, then PAYE could be better depending on the timing of when loans are paid off or forgiven as it would allow you to file taxes separately in the future reducing your payment.
If you are currently in Income Based Repayment (IBR), that brings in a whole other set of variables. Further, these are just guidelines as every individual has a unique set of circumstances. If you would like to go through a complimentary student loan analysis to see which route is best for you, please click the link below!
WM
Weston is a Certified Public Accountant, Certified Financial PlannerTM, and holds the Chartered Financial Analyst designation. In addition, Weston earned his master’s degree in accountancy from the University of Missouri – Columbia. Weston is active in the St. Louis community and board member of the Anti-Defamation League.
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