Pay As You Earn Repayment (PAYE)
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)||$4,640|
|(minus) 150% of Poverty Line (2)||-$1,530|
|(multiplied by) (3)||x.10%|
|Monthly PAYE Payment (4)||$310|
(1) Based on AAMC estimate for the 2018 first post-MD-year median stipend.
(2) Based on AAMC estimate of 2018 federal poverty guideline for a family size of one in the 48 contiguous states.
(3) Based on 2015 federal regulations.
(4) Rounded to the nearest tenth.
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 . 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 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, or could be additional repayment plans to consider. For more information about these plans, and more repayment options, visit the website and the resources on the website.
What is the Monthly Payment Amount?
Use the AAMC’sto help determine your monthly payment amount.
Benefits of Pay As You Earn
- PAYE possibly offers one of the lowest monthly payment plans.
- 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 .
Financial Information, Resources, Services, and Tools (FIRST)
MedLoans® Organizer and Calculator (MLOC)
655 K Street, NW, Suite 100
Washington, DC 20001-2399