Features
Charting Student Loan Repayment
Updated October 9, 2018 to include the Aim Higher Act

To help make student loan repayment affordable, the US Department of Education offers several repayment plans that set monthly payments based on the borrower’s income. These plans require borrowers to pay a portion of their discretionary income (earnings above 150 percent of the federal poverty level) for a given number of years, after which the remainder of the loan is forgiven.

As Congress faces the task of reauthorizing the Higher Education Act, proposals to change these income-driven repayment plans abound. The House Republican’s PROSPER (or Promoting Real Opportunity, Success, and Prosperity through Education Reform) Act suggested one new version of income-driven repayment and House Democrats have suggested a different version in their Aim Higher bill.

The parameters of a repayment plan—the percentage of income paid, the period of repayment, and requirements for minimum payments—can substantially affect how much borrowers pay toward their loans. This tool shows how these parameters will affect the amount borrowers will pay (in present dollars) and how long it will take for borrowers to pay off the loan.

You can build your own policy by changing parameters, or use the buttons to model existing repayment plans or proposals. By adjusting the loan amount, you can see what would be repaid (and for how long) for borrowers at different starting income levels.

The chart on the leftThe first chart shows how much borrowers would repay based on their starting income. The chart to the rightThe second chart models how long borrowers would be in repayment, again based on their income. We’ve also calculated how much borrowers would repay under a standard 10-year plan to show how an income-driven plan compares with the standard repayment option.

The Revised Pay As You Earn (REPAYE) plan for undergraduates requires borrowers pay 10 percent of their discretionary income, with the remainder of the loan forgiven after 20 years. Because the loans continue to accrue interest, it is possible that some borrowers will pay more than they would have under a standard 10-year plan. Borrowers who make less than 150 percent of the federal poverty level pay nothing ($0) on their loans. Dependent undergraduate students can borrow a maximum of $31,000 in federal student loans.

REPAYE for graduate students is the same as REPAYE for undergraduates, except that the period before forgiveness is extended to 25 years. Graduate students can borrow up to the cost of attendance at their institution. Average debt for graduate students can range from $21,900 to $137,500, depending on program.

Under the Public Service Loan Forgiveness program (PSLF), borrowers on an income-driven repayment plan, such as REPAYE, who work in a nonprofit or public-sector job for 10 years are eligible for student loan forgiveness. This benefit is available to those with either undergraduate and graduate student loans.

The House’s PROSPER plan would require students to pay 15 percent of their discretionary income. Borrowers would have to make a minimum monthly payment of $25 dollars (which can be reduced to $5 due to severe economic hardship). And there is no loan forgiveness, but payments end when borrowers have paid what they would have under a standard 10-year plan, meaning that borrowers do not pay for additional accrued interest. The lack of a loan forgiveness period means that some borrowers might be paying off their loans for the entirety of their careers.

House Democrat’s Aim Higher plan would require students to pay 10 percent of their discretionary income. The plan would also redefine discretionary income as income earned above 250 percent of the federal poverty level, meaning that more borrowers would be eligible for $0 payments. However, for every $1,000 earned above $120,000, this 250 percent discretionary income threshold is reduced by 5 percent. Aim Higher would cap payments after 20 years or after the borrower has paid an amount equal to 150 percent of the principal loan amount.

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Build a new repayment plan
Click to model current or proposed repayment plans
REPAYE undergraduate
current law
REPAYE graduate
current law
REPAYE with PSLF
current law
PROSPER Act
proposal
Aim Higher
proposal
Define discretionary income
Exempt income up to
%
above federal poverty level
Reduce exemption percentage for high incomes
Define high income as those over
$k
Reduce exemption by
%
per $1,000 in income
Define monthly payment
Define payment as
%
of discretionary income
Set minimum monthly payment
$
Define when payments stop
Limit total amount paid to amount repaid under 10-year plan
Set forgiveness period
years
No forgiveness period
Limit total amount paid to percentage above principal amount
Limit total paid to
%
above principal amount
Total amount paid on a loan of
$30,000
By starting income
Years to repay a loan of
$30,000
By starting income
Source: Urban Institute analysis of income-driven repayment plans. Notes: REPAYE=Revised Pay as You Earn; PROSPER = Promoting Real Opportunity, Success, and Prosperity through Education Reform; PSLF = Public Service Loan Forgiveness. Starting income is starting adjusted gross income.