Pay As You Earn (PAYE)
Closing - sunsets July 1, 2028 · Income-driven · counts toward PSLF
Pay As You Earn (PAYE). Was 10% of discretionary income (AGI minus 150% of the poverty guideline), capped at the 10-year Standard amount. Was 20 years. Whether borrowers can finish PAYE before the 2028 sunset depends on transition rules - verify at studentaid.gov. General information, not advice.
Source: Federal Student Aid - OBBBA updates. Data as of June 2026.
General information, not financial or legal advice. Federal student loan rules are changing in 2025-2026 under the One Big Beautiful Bill Act - figures here are estimates from public sources and the final program rules are still being implemented. Always verify with your loan servicer and studentaid.gov. See our disclaimer.
How PAYE works
Formula. Was 10% of discretionary income (AGI minus 150% of the poverty guideline), capped at the 10-year Standard amount.
Interest. Standard IDR interest accrual; limited interest subsidy on subsidized loans early on.
Forgiveness. Was 20 years. Whether borrowers can finish PAYE before the 2028 sunset depends on transition rules - verify at studentaid.gov.
Availability. Closed to new enrollees as of July 1, 2026 and sunsetting entirely by July 1, 2028. Existing borrowers must move to IBR or RAP by the deadline.
Worked example
This plan's payment depends on income and family size - use the calculators to estimate yours.
Estimate only. Try the calculators with your own numbers.
Pros and cons
| Pros | Cons |
|---|---|
| 10% of discretionary income with a payment cap (while still available) | Closed to new enrollees; sunsets by July 1, 2028 |
| Must transition to IBR or RAP before the deadline |
Eligibility
Closing. Existing PAYE borrowers should compare IBR and RAP and switch by July 1, 2028.
Frequently asked questions
Does PAYE count toward PSLF?
Yes. Payments under Pay As You Earn (PAYE) count toward Public Service Loan Forgiveness (120 qualifying payments while working full-time for a qualifying public-service employer).
When is loan forgiveness under PAYE?
Was 20 years. Whether borrowers can finish PAYE before the 2028 sunset depends on transition rules - verify at studentaid.gov.
Who can use PAYE in 2026?
Closing. Existing PAYE borrowers should compare IBR and RAP and switch by July 1, 2028.
Compare with other plans
- Repayment Assistance Plan (RAP) · New - available July 1, 2026
- New tiered Standard plan · New - default for loans on/after July 1, 2026
- Income-Based Repayment (IBR) · Remains available (existing borrowers)
- Standard 10-year plan · Continues for existing borrowers
- Graduated repayment plan · Continues for existing borrowers
- Extended repayment plan · Continues for existing borrowers (balance over $30,000)
- SAVE plan (Saving on a Valuable Education) · Closing - vacated by the courts; ending
- Income-Contingent Repayment (ICR) · Closing - sunsets July 1, 2028
Sources & accuracy
Plan rules from Federal Student Aid - OBBBA updates and the U.S. Dept of Education. Data as of June 2026. The 2025-2026 rules are still being implemented - this is general information, not financial or legal advice. Verify with your loan servicer and studentaid.gov. See our methodology and disclaimer.
Last updated: 2026-06-22