A Pay As You Earn Calculator (commonly referred to as a PAYE Calculator) is a tool that federal student loan borrowers use to organize their finances.
Pay As You Earn (PAYE) is a type of income-driven repayment plan where the debtor’s minimum monthly payments are a small fraction of their discretionary income.
Furthermore, if you have loan debt after twenty years of making regular payments, the remaining balance will be forgiven.
That pans out to 240 months’ worth of total payments.
Read on to learn about the 3 best PAYE calculators you can use to figure out your PAYE plan.
How the PAYE Calculator Works
The PAYE calculator provides you with a breakdown of your student loan repayment schedule under a PAYE plan.
Additionally, a PAYE student calculator also lets you know the amount you can get knocked off your loan amount from student loan forgiveness.
To use a PAYE calculator, you’ll need to have the following information:
- The total amount borrowed from the lender
- The balance on your student loan
- Your loan’s interest rate
- The type of loan (Federal or Private)
Enter the information listed above in the corresponding fields.
Some people use the PAYE calculator even if they do not have an existing student loan. They do this to get a sense of what a payment plan would look like under a PAYE student loan plan.
That way, they can organize their finances ahead of time.
In such cases, you can use estimated figures to populate the fields and the results provided can give you an idea.
That said, it’s best to use realistic estimates – in other words, numbers that are as close to the real thing as possible.
In doing so, the results you get will be as accurate as possible.
3 Best PAYE Calculators You Can Use Today
FutureFuel.io’s Reassess tool empowers student loan borrowers to make smarter decisions regarding their alternative repayment options.
It customizes calculations to a borrower’s unique circumstance, based on their marital status, income and state of residence.
Reassess demystifies the eligibility requirements for all government-sponsored repayment plans, including PAYE.
In a matter of minutes, discover if you are eligible for PAYE and see how much you could save with personalized insights! Unlike other calculators, you can switch your repayment plan directly through Reassess easily, without having to spend hours on the phone with your loan servicer. The average borrower saves between $260 – $326 per month using FutureFuel.io’s Reassess tool.
Student Loan Hero’s Student Loan Pay As You Earn Calculator helps you calculate how the PAYE plan can help you lower your monthly payments.
It also shows you how it can lead to forgiveness of your student loans.
You just have to enter your adjusted gross income, family size, state of residence, and annual income growth percentage. You’ll also have to enter your federal student loan balance, average weighted interest rate, and your current monthly payments.
The results will show you how PAYE can effectively reduce your monthly payments, total balance, repayment term, and help you get forgiveness.
MagnifyMoney’s Student Loan Pay As You Earn (PAYE) Calculator provides details on how much the income-driven repayment plan PAYE can help you save.
After you enter your personal and loan info, it’ll calculate the first and last month’s payments, total balance paid, total forgiveness, and the repayment terms with PAYE.
It’ll also show you how much you’ll save compared to your original payment plan. You can use the comparison to decide whether PAYE is the right plan for you.
When Should You Use a PAYE Plan
PAYE plans mandate that the debtor puts just 10% of their discretionary income towards their monthly loan payments.
To get that figure, the lender uses your adjusted gross income and subtracts it from 150% of the poverty guidelines.
The U.S Department of Health & Human Services is the one that determines the aid thresholds of people who are financially challenged.
Different from the Public Service Loan Forgiveness, any amount forgiven under PAYE is taxable.
This plan is a favorite among borrowers who have a high debt to income ratio. This is because this plan doesn’t put tremendous strain on a borrower’s pocket since the monthly payments under a PAYE plan are not fixed.
However, before you decide on getting a PAYE plan, you need to remember that not everyone is eligible for this plan.
Among all income-driven repayment plans, PAYE has the most stringent requirements.
To start with, PAYE plans only accept the following types of direct loans:
- Direct Plus Student Loans
- Direct Consolidation Loans (Parent Plus Loans Do Not Count)
- Direct Subsidized
- Direct Unsubsidized Loans
If your loans are any of the above, to be deemed eligible, you need to be in one of the following situations:
- You were granted a federal loan on or preceding October 1st, 2007, without having any federal loan debt prior to the commencement of that loan.
- You submitted a claim for partial financial hardship.
- You received a loan disbursement on or proceeding October 1st, 2011.
- You consolidated your student loans on or after October 1st, 2011.
If you are eligible and see desirable results on the PAYE calculator, you can opt for a PAYE plan.
Start Using a PAYE Calculator
In short, a PAYE calculator is a useful tool for PAYE plan borrowers. It helps to organize your student loan repayments ahead of time.
Furthermore, it lets you monitor your contributions during the repayment period.
Additionally, if you are considering switching from a REPAYE plan to a PAYE plan, a PAYE calculator will tell you which plan would work better for you.
If you combine its use with a personalized financial health platform like FutureFuel.io, you could double your efforts and clear your debt faster.