Discretionary-income formula
PAYE generally uses 10% of discretionary income, divided by 12.
Legacy IDR Plan | Mandatory Transition by July 1, 2028
Pay As You Earn (PAYE): 2026 Eligibility, Payment & 2028 End Date
PAYE can still be valuable for the right legacy borrower, but the decision now has two parts: does PAYE fit today, and what replaces it by 2028?
Federal loans only · Legacy borrower rules apply · Annual recertification · Borrower keeps FSA credentials
PAYE FRAMEWORK2026
PAYMENT FORMULA10%of discretionary income
150% POVERTY SHIELDSTANDARD CAP20-YEAR HORIZON
PLAN ENDSNO LATER THAN JULY 1, 2028
10% Discretionary Income150% Poverty Allowance20 YRS General Horizon2028 Mandatory Transition
THE LEGACY PLAN WITH AN EXPIRATION DATE
Pay As You Earn (PAYE) remains available to a narrow group of legacy federal student loan borrowers in 2026, but it is now a transition plan with an expiration date. For eligible Direct Loan borrowers, PAYE generally sets the monthly payment at 10% of discretionary income, protects the payment with a 10-year Standard cap, and uses a 20-year general forgiveness horizon. The catch is eligibility: loan dates and borrower history matter, and every PAYE borrower must move to another repayment plan no later than July 1, 2028.
01 / PAYE AT A GLANCE
What Is the PAYE Repayment Plan?
PAYE is a legacy income-driven plan for a specific group of older Direct Loan borrowers. It can lower the required payment based on income while capping that payment at the applicable 10-year Standard amount.Poverty-guideline shield
Discretionary income generally starts above 150% of the applicable poverty guideline.
Maximum scheduled payment
The PAYE payment does not exceed the applicable 10-year Standard amount used for the cap.
General repayment horizon
Remaining eligible balance may be discharged after the equivalent of 20 years of qualifying repayment.
02 / ELIGIBILITY FIRST
Who Can Use PAYE in 2026?
PAYE is one of the most history-sensitive federal repayment plans. The borrower and the loans both have to fit the legacy rules.The borrower history matters
- PAYE new-borrower status generally begins on or after October 1, 2007.
- A qualifying Direct Loan disbursement generally must occur on or after October 1, 2011.
- The eligible loans must fit the pre-July 1, 2026 framework.
- The borrower must initially meet the partial-financial-hardship test.
Not every older federal loan can use PAYE
- Parent PLUS loans are not PAYE-eligible.
- Loans with parent-borrower history do not become PAYE-eligible merely because they were consolidated.
- FFEL and Perkins debt generally must be handled through an eligible Direct Consolidation path when applicable.
- Newer borrowing can change which IDR plans are available.
03 / THE 2028 DEADLINE
PAYE Ends No Later Than July 1, 2028
PAYE is not a permanent 20-year plan anymore. Current borrowers need a transition strategy before the federal sunset date.PAYE RETIRESJULY 1
2028No later than this date
2028No later than this date
Federal Student Aid currently marks PAYE as a plan that ends. If your expected repayment or forgiveness timeline runs past July 1, 2028, the real decision is not simply whether PAYE is attractive today. You also need to understand what plan you are likely to use next and what that switch could do to your payment, repayment horizon, and forgiveness strategy.
01
Check which replacement plans your loans can use.IBR, RAP, and fixed-payment options do not have identical eligibility rules.
02
Model the payment after PAYE.A favorable PAYE payment today can still lead to a materially different required payment after the transition.
03
Protect qualifying-payment records.If PSLF or IDR discharge matters, preserve the account history and confirm how the transition affects future qualifying months.
04 / PAYMENT FORMULA
How Is the PAYE Payment Calculated?
The basic structure is 10% of discretionary income, divided by 12, subject to the PAYE Standard-payment cap.CORE FORMULA(AGI − 150% of Poverty Guideline) × 10% ÷ 12
The poverty guideline depends on family size and state. Married borrowers can also have different income treatment depending on federal tax filing status. The official Federal Student Aid calculator should be used for the actual estimate.
Use the official Repayment Calculator ↗ENTRY TESTPartial financial hardshipThe calculated PAYE amount must initially be below the applicable 10-year Standard payment.
CEILINGStandard payment capPAYE does not rise above the applicable 10-year Standard amount used for the cap.
ANNUAL UPDATEIncome and family informationPAYE remains an income-driven plan and requires the applicable annual recertification process.
05 / THE DECISION
Six Factors That Determine Whether PAYE Still Makes Sense
The lowest current payment is only one part of the decision. PAYE’s eligibility restrictions and 2028 end date change the long-term analysis.Borrower History
PAYE has unusually specific history rules. You generally must be a new borrower on or after October 1, 2007 and have received a qualifying Direct Loan disbursement on or after October 1, 2011.
Loan Dates
PAYE is a legacy plan for eligible Direct Loans tied to the pre-July 1, 2026 framework. Newer borrowing can change the repayment plans available to the account.
Partial Financial Hardship
To enter PAYE, the income-based amount must be lower than the applicable 10-year Standard payment. That is why income and debt both matter at entry.
Marriage & Filing
Joint filers generally use joint income. Separate filers generally use the borrower’s individual income, subject to the current federal calculation rules.
Future Income
PAYE’s Standard-payment cap can matter when income rises, but the plan itself is temporary and must be replaced no later than July 1, 2028.
Forgiveness Strategy
PAYE has a 20-year general horizon and can also be used for qualifying PSLF payments when the other PSLF requirements are satisfied.
06 / WHAT COMES NEXT
What Should Replace PAYE?
There is no universal replacement. The right post-PAYE plan depends on the loans that remain eligible, the borrower’s income path, and the forgiveness goal.Income-Based Repayment
For many eligible older borrowers, IBR is the most natural legacy comparison because it also uses discretionary income and a Standard-payment cap but does not share PAYE’s 2028 sunset.
- 10% or 15% formula
- 20- or 25-year general horizon
- Eligible FFEL loans can participate directly
Repayment Assistance Plan
RAP can be available to eligible Direct Loans and uses a different AGI-band formula, $10 minimum, dependent reduction, and balance-management features.
- 1%–10% AGI schedule
- $10 monthly floor
- 30-year general horizon
Standard or Tiered Standard
A fixed-payment path can be stronger when rapid payoff and total-interest reduction matter more than income-based affordability or forgiveness.
- Predictable scheduled payment
- No annual income formula
- Different eligibility by loan date
07 / FIT CHECK
When PAYE Deserves a Look — and When It Does Not
PAYE may deserve a serious look when…
- Your eligible Direct Loans and borrower history satisfy the PAYE date requirements.
- The 10%-of-discretionary-income calculation is below the applicable 10-year Standard payment.
- The Standard-payment cap provides useful protection if your income later rises.
- A 20-year general repayment horizon fits your long-term strategy better than a longer alternative.
- You are pursuing PSLF and PAYE produces a strong qualifying-payment path for the remaining transition period.
- You already understand that PAYE ends no later than July 1, 2028 and have a replacement-plan strategy.
Reconsider or compare more closely when…
- You do not satisfy the October 2007 / October 2011 borrower-history requirements.
- You have Parent PLUS debt or Parent PLUS history and are assuming consolidation creates PAYE eligibility.
- Your newer loan or consolidation history changes which income-driven plans are available.
- IBR or RAP produces a stronger payment, repayment horizon, or long-term balance trajectory.
- You are choosing PAYE only because it looks cheaper today without planning for the mandatory 2028 transition.
- Your tax-filing or household situation is about to change and the estimate you are using may not remain representative.
08 / DECISION PROCESS
How to Evaluate PAYE Before You Commit
Use verified loan data, the official calculator, and a replacement-plan forecast rather than choosing from the payment shown today.Verify the Loan Portfolio
Check loan type, disbursement dates, consolidation history, current plan, and servicer in StudentAid.gov. PAYE eligibility cannot be inferred from income alone.
Verify the PAYE Borrower Dates
Confirm the October 1, 2007 new-borrower requirement and the October 1, 2011 Direct Loan disbursement requirement.
Run the Official Payment Estimate
Use the Federal Student Aid Repayment Calculator with current income, family size, marital and filing information, and actual loan records when possible.
Compare the Standard Cap
Confirm that the PAYE amount qualifies under the partial-financial-hardship requirement and understand how the Standard cap could matter if income rises later.
Compare the Exit Plan Now
Because PAYE ends no later than July 1, 2028, compare IBR, RAP, and other eligible paths before the deadline forces a switch.
Layer in PSLF or Long-Term Forgiveness
If forgiveness is part of the strategy, compare not only the monthly payment but the payment trajectory, qualifying-payment progress, and likelihood of staying eligible.
Submit and Keep the Record
Use the official federal channel, retain confirmations, watch the servicer’s processing, and keep annual income-recertification records until the transition is complete.
09 / FREQUENTLY ASKED QUESTIONS
PAYE Repayment Plan FAQs
What is the Pay As You Earn (PAYE) Repayment Plan?
PAYE is a federal income-driven repayment plan for a narrow group of eligible legacy Direct Loan borrowers. It generally uses 10% of discretionary income, has a 10-year Standard payment cap, and a 20-year general repayment horizon.
Who qualifies for PAYE in 2026?
PAYE generally requires eligible Direct Loans in the pre-July 1, 2026 framework, PAYE new-borrower status on or after October 1, 2007, and a qualifying Direct Loan disbursement on or after October 1, 2011. The borrower must also initially have a partial financial hardship.
How is the PAYE payment calculated?
PAYE generally uses 10% of discretionary income divided by 12. For PAYE, discretionary income is generally adjusted gross income above 150% of the applicable poverty guideline for family size and state. The payment is capped at the applicable 10-year Standard amount.
What is a partial financial hardship under PAYE?
To initially qualify, the monthly PAYE calculation based on income and family size must be lower than the amount the borrower would pay under the applicable 10-year Standard Repayment Plan.
Does PAYE have a maximum payment?
Yes. Federal Student Aid states that the PAYE monthly payment will never be more than the applicable Standard Repayment Plan amount used for the cap.
Can a PAYE payment be $0?
PAYE does not have RAP’s $10 monthly minimum. Depending on income, family size, and the official calculation, an income-driven estimate can be very low and may be $0. Use the current Federal Student Aid Repayment Calculator for the actual estimate.
How long is PAYE?
PAYE has a 20-year general qualifying-repayment horizon, but the PAYE plan itself ends no later than July 1, 2028. Borrowers whose long-term repayment extends beyond that date will need to move to another eligible plan.
When does PAYE end?
Federal Student Aid says PAYE will be retired no later than July 1, 2028. Current PAYE borrowers should compare replacement plans before that deadline rather than waiting for the transition notice.
What happens when PAYE ends in 2028?
Borrowers must select or be moved to another eligible repayment plan. The strongest replacement depends on loan type and dates, income, household information, forgiveness goals, and which plans remain available to the account.
Can Parent PLUS loans use PAYE?
No. Parent PLUS loans are not eligible for PAYE, and current Federal Student Aid guidance says loans made for parents are not PAYE-eligible even if consolidated.
How does marriage affect PAYE?
Federal Student Aid generally uses joint income for married borrowers filing jointly and individual income for married borrowers filing separately. Tax filing decisions can affect more than student loans, so FedRepay does not provide tax-return advice.
Does PAYE qualify for PSLF?
PAYE can be used for qualifying PSLF payments on eligible Direct Loans when the borrower also satisfies the employment, payment, form, and other PSLF requirements.
Is PAYE better than IBR?
Not universally. PAYE uses a 10% formula and a 20-year horizon, while IBR can use 10% or 15% and a 20- or 25-year horizon. PAYE has tighter borrower-history rules and a 2028 sunset; IBR remains a longer-term legacy option for eligible older loans.
Is PAYE better than RAP?
That depends on eligibility and the borrower’s actual numbers. RAP uses a different AGI-based formula, a $10 minimum, a 30-year general horizon, and different balance-management features. PAYE has a 20-year horizon and Standard cap but ends by July 1, 2028.
How do I apply for PAYE?
Use the official Federal Student Aid repayment process and current IDR request through StudentAid.gov. FedRepay can help analyze options and review borrower-completed information within the purchased scope, while the borrower keeps the FSA credentials and submits through the official channel.
Primary federal sources reviewed August 26, 2026
Federal Student Aid IDR FAQs, the current IDR Plan Request, the Federal Student Aid marriage guidance, and the current Repayment Calculator. Official federal rules and account-specific information control.
YOUR PAYE DECISION SHOULD INCLUDE 2028
Compare the plan you have today with the plan you may need next.
Start with the free federal calculator. If the PAYE-to-IBR, PAYE-to-RAP, PSLF, or changing-income tradeoffs remain unclear, FedRepay can build the comparison around your actual federal loan history.