Following the advice here https://www.whitecoatinvestor.com/forums/topic/idea-to-enter-repaye-early/. I consolidated my loans immediately upon graduating medical school and have been receiving the monthly subsidy from the government without any issue. I decided to take the risk of losing the subsidy for a month and paid off all of my interest ($2239.63) on Dec 27th for the tax deduction. A couple of things to note as seen in the attachment. #1 I did receive the government subsidy 4 days after I made the payment. This didn't surprise me because I think my billing cycle ends in the middle of the month and the subsidy doesn't post until the last day of the month so I believe the payment was made after that billing cycle had already concluded. #2 After having paid off all of my interest the subsidy that applied four days later on the 31st of December actually applied $234.76 towards my principle, I received the full subsidy despite having zero interest. #3 Most surprisingly, I received the January 31st full subsidy despite having paid off all my interest during that same billing cycle.
I think this is good evidence that you can make as many payments as you want against your loan interest or principle and still receive the full subsidy for the entirety of the year as calculated annually when you submit your information at the beginning of each Repaye year. My effective interest rate is ~2.8% so not worth paying back loans for 2.8% alone but may be worth if for the tax deduction up to $2,500 each year. Don't know how exactly to calculate that benefit but it would also lower my AGI which would then in turn decrease my Repaye payment and increase the amount of subsidy that I receive for the following year.
I think this is good evidence that you can make as many payments as you want against your loan interest or principle and still receive the full subsidy for the entirety of the year as calculated annually when you submit your information at the beginning of each Repaye year. My effective interest rate is ~2.8% so not worth paying back loans for 2.8% alone but may be worth if for the tax deduction up to $2,500 each year. Don't know how exactly to calculate that benefit but it would also lower my AGI which would then in turn decrease my Repaye payment and increase the amount of subsidy that I receive for the following year.
The REPAYE interest subsidy is based on your required payment, not your actual payment. This holds true until you begin to pay down the principal. Interest is calculated on the principal balance. And, as the principal balance decreases, interest accrual decreases.
I'll also add why not delay any non-required payments, if you're not paying down principal, until you're ready to exit REPAYE. Put that money in an interest bearing account to generate some interest, albeit minimal. Because interest does not capitalize while in REPAYE, no rush to pay (and assuming you're saving the money).