For graduates, finding the right repayment plan can be like searching for a contact lens in the ocean—while being circled by Jaws. It's fruitless and scary.

The U.S. government offers a bewildering array of student loan repayment plans, with perks frequently offset by not-so-great trade-offs. Repayment plans based on the borrower's income share many characteristics but have significant differences as well, including how payment amounts are calculated and how long forgiveness takes. Alumni can easily feel lost, and the pressure to get it right can be daunting.

The new income-based plan Revised Pay As You Earn (REPAYE), which took effect in December 2015, adds more complexity to an already difficult decision. The big news, however, is that it can help alumni with older loans to lower their monthly payments. Let's look at its pros and cons.

A program with your interest in mind

Between 2004 and 2014, average U.S. student debt at graduation rose more than twice the rate of inflation. Seven in 10 graduates of the Class of 2014 had student loan debt that averaged $28,950 per borrower.

Federal income-driven repayment plans can help new graduates in the early years of their career. Under these plans, monthly payments are established as a percentage of income so when grads don't earn much, their payments are low.

How low? Until the introduction of REPAYE, payment amounts depended on when students borrowed their first federal loans. Some graduates with loans before Oct. 1, 2007, had payments set at 15 percent of discretionary income. But REPAYE sets payments at 10 percent of discretionary income.

Another REPAYE perk is that it caps interest, helping borrowers with low incomes keep pace with interest accrual. Borrowers might be making a monthly payment that doesn't fully cover accruing interest, which is known as a negative amortization. In these circumstances, REPAYE would charge only 50 percent of the interest not covered by a borrower's payment, partially mitigating rising debt balances.

Forgive, Faster

Another plus of REPAYE is that debt might be forgiven sooner. Under some income-driven plans, borrowers can repay loans for 25 years before the balance is forgiven. REPAYE provides for loan forgiveness after 20 years for undergraduate study. But if you have debt from graduate school or professional study, it balloons back to 25 years. The balance is also considered taxable income during the year it's forgiven.

Here's some good news for your do-gooder alumni—those in government and nonprofit careers may earn Public Service Loan Forgiveness of remaining balances in 10 years (after making 120 qualifying payments). Payments made under REPAYE, as under other income-driven plans, are eligible for Public Service Loan Forgiveness. Best of all? The portion forgiven is not taxable.

Cap with a Capital ‘C'

While the new REPAYE program includes some strong features, other aspects may be less appealing to graduates. If alumni are married or earning high incomes, they need to know how their payments will be calculated under REPAYE.

Other income-driven plans cap the maximum monthly payments, but REPAYE has no cap on the monthly amount. As a borrower earns more, he or she pays more—and alumni with large incomes can have large monthly payments. This might be unappealing to some borrowers, who would prefer payments to be limited to a maximum amount.

Till debt do us part

Married couples especially need to consider how REPAYE would affect their payment structure. Under other income-driven repayment options, the loan servicer only considers a spouse's income when determining the borrower's payment if the couple files their taxes jointly. If they file separately, payments will be determined based on the borrower's individual income.

Under REPAYE, married borrowers must pay based on combined income; their total payment amount takes into account both spouses' debt and both spouses' income. A proportion of the total payment is assigned to each spouse based on their share of the couple's student loan debt. So unless both spouses have significant debt burdens, REPAYE may not be the best option.

Scare Away the Sharks

Want to help your alumni? The U.S. Department of Education provides tools for managing federal student loans, including access to account information and a repayment estimator at studentloans.gov and studentaid.ed.gov. Although all federal student loan programs offer entrance and exit counseling, many borrowers can benefit from additional guidance. Consider offering resources or hosting a webinar for alumni who may have questions about their repayment options. By assisting them in best managing their debt, you can help build alumni affinity to your institution. And as graduates pay back their loans, they may even give to their alma mater.

Is the newest federal income-driven loan repayment plan, Revised Pay As You Earn (REPAYE), right for your alumni?

Pros

• Lower payments than under other income-based repayment plans
• Unpaid interest capped at 50 percent
• Loan forgiveness could be earned sooner for undergraduate debt

Cons

• No option to have payments calculated based on borrower's income separate from spouse's earnings
• No cap on maximum monthly payments