1. What is PAYE Student Loan?

The Pay As You Earn (PAYE) repayment plan for student loans caps your monthly payment at 10% of your discretionary income and forgives any remaining balance after 20 years of payments.

2. How Does the Calculator Work?

The calculator uses the PAYE equation:

Where:

• \( P \) — Loan principal amount
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (months)
• \( income \) — Monthly discretionary income

Explanation: The payment is the lesser of either the standard 10-year repayment amount or 10% of your discretionary income.

3. Importance of PAYE Calculation

Details: Calculating your PAYE payment helps you understand your monthly obligations and plan your finances accordingly, especially if you have a lower income relative to your student loan debt.

4. Using the Calculator

Tips: Enter your total loan amount, annual interest rate (converted to decimal), repayment period in months, and your monthly discretionary income. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What counts as discretionary income?
A: For PAYE, discretionary income is the difference between your adjusted gross income and 150% of the poverty guideline for your family size and state.

Q2: How often do I recertify my income?
A: You must recertify your income and family size every year to remain on the PAYE plan.

Q3: Are there eligibility requirements for PAYE?
A: Yes, you must have a partial financial hardship and your loans must be Direct Loans or eligible FFEL Program loans.

Q4: What happens if my income increases?
A: Your payment will increase but never exceed the 10-year Standard Repayment Plan amount.

Q5: Is the forgiven amount taxable?
A: Under current law, any amount forgiven after 20 years of qualifying payments is taxable as income.