Pay As You Earn Repayment (PAYE)

January 9, 2023

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For those who qualify, this income-driven repayment plan allows for one of the lowest monthly payments – offering an affordable repayment solution to graduates with student loan debt. 

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Please note: new regulations will go into effect on July 1, 2023, and at that time, some of the information below will change. This fact sheet will be updated again in July 2023.

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 and household size.
  • The repayment term for PAYE is up to 20 years. If a balance remains after 20 years, the remaining balance is forgiven; however, the amount forgiven is taxable.
Who is an Eligible Borrower?
  1. Must be a new borrower as of 10/1/07 AND must have received a Direct Loan Disbursement on or after 10/1/11.
  2. 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. Contact your loan servicer if you have any questions regarding eligibility for this payment plan.   

Which Loans Qualify?
  • Direct Subsidized/Unsubsidized 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) or Revised Pay As You Earn (REPAYE) could be repayment plans to consider. For more information about these plans, and additional repayment plans, visit the Federal Student Aid website and review FIRST's Resources

What is the Monthly Payment Amount?

Use the AAMC’s MedLoans® Organizer and Calculator to help determine your monthly payment amount.

Benefits of Pay As You Earn
  • Currently, PAYE (and REPAYE) offer the lowest monthly payment since payment is based on 10% of your discretionary income.
  • With PAYE, the maximum required payment is never higher than the Standard 10-year repayment amount, which is calculated when entering Pay As You Earn.
  • Currently, postponement of interest capitalization occurs until a PFH no longer exists.
  • While in this plan, capitalization cannot exceed 10% of the loan balance when entering PAYE.
  • A partial interest subsidy is available for the first three years (for subsidized loans).
  • PAYE is an eligible repayment plan for Public Service Loan Forgiveness (PSLF)
Example of a PGY-1 Resident Pay As You Earn (PAYE)
Monthly Adjusted Gross Income (1) $5,070
(minus) 150% of Poverty Line (2) - $1,700
Discretionary Income (3) = $3,370
(Multiplied by) (4) × .10%
Monthly PAYE Payment (5) = $340

(1) Based on AAMC estimate for the 2023 first post- MD-year median stipend ($60,800).
(2) Based on the 2022 federal poverty guideline for a family size of one in the 48 contiguous states.
(3) Discretionary income is the difference between income and 150% of the poverty guideline for the borrower's state of residence. (This example is based on family size of one).
(4) Based on 2015 federal regulations.
(5) Rounded to the nearest $10.

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