Eligibility Requirements: Direct Loan borrowers who were new borrowers on or after October 1st, 2007, and who received a loan disbursement on or after October 1st, 2011 are eligible for this plan if they meet the income requirement of partial financial hardship. All types of Direct Loans can be repaid using this plan except for PLUS Loans given to parents and consolidation loans repaying Plus Loans made to Parents.
Payment Amount: Your monthly payment will generally be 10% of your discretionary income. However, it will never be more than you would pay on the standard 10-year repayment plan (based on what you owed when you entered the PAYE plan).
Loan Forgiveness: Any amount that you still owe after 20 years of qualifying payments will be forgiven.
Interest Benefit: Any of the interest on your subsidized loans that your monthly payment does not cover is paid by the government for the first three years. If you voluntarily leave the plan, or if you no longer qualify to make payments based on your income (when your income determines that your monthly payment is greater than or equal to what you would pay on the standard plan), any interest not paid by you or the government can be capitalized. However, the amount of interest that can be capitalized due to your increased income is limited to 10% of the original loan balance when you entered the PAYE plan.
