Pay As You Earn Repayment Plan (PAYE): 2026 Guide

The Pay As You Earn (PAYE) Plan is an income-driven repayment plan for federal student loans. The plan caps monthly payments at 10% of discretionary income. 

As of early 2026, 1.48 million borrowers were enrolled in PAYE. However, the plan is being phased out, and borrowers must switch to another plan by July 1, 2028. Here's what you need to know about how PAYE works, who still qualifies, and what your alternatives are.

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What is the PAYE repayment plan?

The PAYE Plan is one of several income-driven federal student loan repayment plans. 

Under PAYE, monthly payments equal 10% of your discretionary income, but will never exceed the amount you'd pay under the standard 10-year repayment plan. Payments are recalculated every year based on your updated income and family size. You must certify that information annually, even if nothing has changed. 

Borrowers on the PAYE Plan will have their outstanding loan balance forgiven after 20 years of qualifying payments. PAYE is also an eligible plan for borrowers seeking loan forgiveness through Public Service Loan Forgiveness (PSLF).

Is the PAYE Plan still available in 2026?

The PAYE Plan is still available in 2026, but only to a limited group of borrowers. Like several income-driven repayment plans, it’s in the process of being phased out in stages. 

• Starting July 1, 2026, PAYE will no longer be an option for new borrowers who haven’t previously taken out federal student loans. 
• Existing federal loan borrowers can continue to enroll in PAYE until July 1, 2027.
• The plan will disappear for everyone on July 1, 2028.

“Existing borrowers may continue in the PAYE Plan until July 1, 2028, when it will be phased out,” says Mark Kantrowitz, a nationally recognized expert on student loans. “When the PAYE Plan is phased out, borrowers will need to switch to another repayment plan.”

Pros and cons of the PAYE Plan

Details on the pros

• Lower monthly payments: Payments are more affordable than they would be under the standard repayment plan because they're capped at 10% of your discretionary income.
• Loan forgiveness: Your remaining balance is forgiven after 20 years of qualifying payments.
• Eligible for PSLF: PAYE qualifies for Public Service Loan Forgiveness, which allows you to eliminate your remaining debt balance after 10 years of eligible payments.

Details on the cons

• Annual recertification required: Recertifying your income and family size each year can be time-consuming and may lead to payment increases.
• Longer repayment timeline: Extending your repayment terms to 20 years results in higher interest payments over time.
• Uncertainty due to phase-out: Since PAYE is being discontinued by 2028, borrowers will need to switch to another repayment plan.

Who can qualify for the PAYE Plan?

Eligibility for the PAYE Plan is limited, and not all federal student loan borrowers will qualify. 

To be eligible, you must be considered a “new borrower” as of Oct. 1, 2007, and must have received a qualifying loan on or after Oct. 1, 2011. 

You must also demonstrate a partial financial hardship, meaning your calculated PAYE payment is lower than the amount you’d pay under the standard 10-year repayment plan. 

As of July 1, 2026, PAYE will no longer be available to new borrowers who haven’t previously taken out federal student loans, and starting July 1, 2027, no borrowers will be able to newly enroll in this plan. 

How are PAYE monthly payments calculated?

Monthly payments under the PAYE Plan are based on your income and family size. 

Your payment is capped at 10% of your discretionary income, which is generally defined as the difference between your adjusted gross income (AGI) and 150% of the federal poverty guideline for your household size and state. 

Using this formula, your payments can change over time. If your income increases, your monthly payments increase, but if it decreases or your family grows, they decline. However, even if your income increases significantly, your monthly payment will never exceed the amount you would have paid under the standard 10-year repayment plan.

What happens after 20 years on PAYE?

After 20 years of qualifying PAYE payments, any remaining loan balance is forgiven. To qualify, you must make on-time monthly payments and recertify your income and family size each year.

How to apply for the PAYE repayment plan

You can apply for the PAYE Plan through the federal student loan system online by logging into your account at StudentAid.gov. You’ll start by completing the Income-Driven Repayment (IDR) application and then select PAYE.

You must provide your income information, which can usually be imported directly from the IRS using the data retrieval tool. If your income has changed recently, you may need to submit alternative documentation, like pay stubs. 

Once your application is approved, your loan servicer will notify you of your new monthly payment.

PAYE Plan vs. other income-driven plans

The PAYE Plan is one of several income-driven repayment (IDR) options you can choose from. There are important differences between them. 

PAYE caps payments at 10% of your discretionary income and also offers forgiveness after 20 years, while Income-Based Repayment (IBR) caps your payments at either 10% or 15% of your discretionary income, depending on when you borrowed. Forgiveness typically takes 20 or 25 years. 

“One of the biggest differences with newer IDR plans is that short-term relief is prioritized over long-term cost,” said Leslie Tayne, a financial attorney at Tayne Law Group. “Lower monthly payments can feel like a win, but it actually stretches repayment out for longer, which will increase the total amount the borrower pays at the end of the loan.”

It's also important to note that PAYE and several other existing income-driven plans are being replaced by a new Repayment Assistance Plan (RAP).

“The new RAP plan has a lower monthly payment than the IBR and PAYE Plans for low- and moderate-income borrowers, but a longer repayment term,” explains Kantrowitz. “For higher-income borrowers, the new RAP plan has a higher monthly payment.”

He adds that RAP includes features designed to reduce balance growth, including waiving unpaid interest, a $10 minimum payment, and potential government contributions to ensure the loan balance decreases over time.

PAYE Plan vs. refinancing

The PAYE Plan and student loan refinancing serve very different purposes, so the right choice depends on your goals. 

The PAYE Plan can lower your payments, provide a path to forgiveness, and give you access to federal protections like deferment and forbearance.

Refinancing replaces your existing federal loans with a new private loan, ideally at a lower interest rate. This can help you save money on interest and pay off your debt faster, especially if you have strong credit and a stable income. But once you refinance federal loans, you lose access to key borrower protections.

If your priority is lower monthly payments and flexibility, PAYE may be the better option. If your goal is to reduce interest costs and become debt-free sooner, refinancing could make more sense.