The National Foundation for Credit Counseling (NFCC), located at www.studentloanhelp.org, has an information sharing program about how to identify less expensive ways to tackle student debt.

“Just because a new program is announced, it doesn’t mean that it is going to be a perfect fit for every borrower,” said Bruce McClary, spokesman for the NFCC. “It takes a clear understanding of the benefits available through each option and how those are applicable to a person’s unique circumstances.”

NFCC points out that the downside to this repayment option is that for some borrowers, the monthly payment may not cover both interest and principal payments, which means the balance due could keep growing. That makes it harder to obtain other personal credit—from credit cards to mortgages—because the borrower’s credit capacity is exhausted. Another risk is that the lower monthly payment under REPAYE will lead the borrower to pay substantially more over the life of the loan when compared to a Standard Repayment plan.

Borrowers could also get whacked by REPAYE after a large salary increases. Under PAYE and IBR, monthly loan payments are capped at the rate charged in the ten-year standard repayment plan. With REPAYE, payment will always be 10% of your monthly discretionary income, even if it amounts to more than the original payment under the ten-year plan as income rises. If you’re married, a spouse’s pay raise could have the same result.

According to the NFCC, the loan forgiveness aspect of REPAYE can also trigger a one-time spike in taxes due. When a balance is forgiven, the amount may be taxed as ordinary income. The Obama administration is trying to fix the tax issue with a proposal to make forgiven student loan balances tax free—a proposal that would need congressional approval.

With the rollout of REPAYE, there are now eight income driven programs to chose from. “The problem is there are too many repayment plans," said Kantrowitz, "with too many details, making the process of choosing a repayment plan too complicated.”

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