What to Know as Student Loan Repayments Restart in February 2022

There’s a confusing assortment of plans available, and there may even be a new one coming, though probably not for a while. For now, the alphabet soup includes PAYE, REPAYE, I.C.R., and I.B.R. (which comes in two flavors, with the latest version updated to have slightly better terms for newer borrowers).

Monthly payments are often calculated as 10 or 15 percent of discretionary income, but one plan is 20 percent. Discretionary income is usually defined as the amount earned above 150 percent of the poverty level, which is adjusted for household size. “PAYE usually has the lowest payment, followed by either I.B.R. or REPAYE, depending on the specific circumstances of the borrower,” said Mark Kantrowitz, a student aid expert.

There’s a dizzying variety of rules. Consider spousal income.

“REPAYE has a marriage penalty, while I.B.R. and PAYE will use just the borrower’s income if they file a separate return, joint income if they file a joint return,” he said. REPAYE, he said, uses joint income regardless of tax filing status.

Got all that?

These plans aren’t a cure-all. Even though some borrowers may be eligible for a $0 payment, the plans aren’t always affordable for everyone. The formulas aren’t adjusted for local cost of living, private student loans or medical bills, among other things. And people who are eligible for small (or $0) payments will see their balances grow, sometimes dramatically. That can take a mental toll, even if the debt is forgiven years later.

But they remain a more manageable solution for many borrowers.

“Enrolling in I.D.R. now is a great next step, particularly if you lost your job during Covid, or your spouse lost their job and you are experiencing a drop in income,” said Mike Pierce, executive director of the Student Borrower Protection Center.

That’s a lot to consider. How do I choose the best plan?

Analyzing the plans is an agonizing exercise, which is why you should visit the loan simulator tool at StudentAid.gov. It will guide you through the options and help you decide which plan best fits your goals — finding the lowest-payment plan, for example, versus paying loans off as soon as possible.

It is, fortunately, easy to use: When you sign in, it should automatically use your loans in its calculations. (You can manually add other federal loans if any are missing.) You can also compare plans side by side — how much they’ll cost over time, both monthly and in total, and if any debt would be forgiven.