Pay As You Earn (PAYE): How It Works And What Happens When It Ends In 2028

How to Apply For PAYE

Apply online at StudentAid.gov using the income-driven repayment application; the Department says it takes most people about 10 minutes. You’ll choose PAYE specifically rather than letting the servicer pick the lowest payment, because in 2026 “lowest payment” can route you into RAP, and months on RAP don’t count toward PAYE or IBR forgiveness if you switch back.

The application pulls your income from the IRS with your consent, so you no longer need to upload a tax return in most cases. If your income has dropped since your last return, you can submit alternative documentation such as a recent pay stub, and if you have no income you state that on the form. Paper applications still exist through your servicer. If you have more than one federal servicer, each one needs the application. Beware of companies that charge to “enroll” you; the FTC shut down Ameritech Financial, the company a reader asked about in the comments below, in 2020, and our student loan scam checklist covers the warning signs.

Once You Are Approved

Your PAYE payment isn’t fixed. It’s recalculated every year when you recertify your income and family size, and you can recertify early any time your income drops or your family grows. Recertification happens through the same StudentAid.gov application, and most borrowers can now approve automatic annual recertification from IRS data so nothing lapses. Our capitalized interest explainer covers what happens to unpaid interest along the way.

If you miss the recertification deadline, you stay on PAYE, but your payment resets to the 10-year Standard amount based on what you owed when you entered the plan. You can get back to an income-based payment by submitting updated income, as long as you still qualify. Under the regulation, unpaid interest on PAYE capitalizes when your payment is no longer based on income or when you leave the plan, which is one more reason to recertify on time rather than drift.

The government also pays the unpaid interest on your subsidized loans for your first three consecutive years on PAYE if your payment doesn’t cover it. Periods of economic hardship deferment don’t count against the three years; other deferments and forbearances do. That subsidy is smaller than RAP’s full interest waiver, which is the one place RAP is clearly more generous.

PAYE Is Ending: What Happens On July 1, 2028

The One Big Beautiful Bill Act, signed July 4, 2025, ends the PAYE and ICR plans no later than July 1, 2028. Congress replaced them with the Repayment Assistance Plan, which launched July 1, 2026, and kept IBR as the only legacy income-driven plan for borrowers whose loans all predate July 2026. SAVE ended on July 1, 2026, so the plan the old version of this page told you to fall back on is already gone.

As of this writing, the Department of Education’s guidance says only that PAYE and ICR “will be eliminated no later than July 1, 2028” and that it is “working on a transition plan for borrowers who are enrolled in those plans.” No notices have gone out, no deadline has been set for individual borrowers, and no default plan has been announced.

What The End Of PAYE Will Look Like

Nobody at the Department has published the mechanics yet, so here is what we expect based on our conversations with a source at the loan servicers and on how the SAVE shutdown was run this summer. The servicers expect the PAYE wind-down to look very similar to SAVE’s.

Notices start in late 2027 or early 2028. Expect a series of reminder notices first, then deadline notices with a date by which you have to choose a plan. Borrowers will very likely be moved out in tranches rather than all at once, so your deadline may land weeks or months before July 1, 2028 depending on which group your servicer puts you in. For a sense of the cadence, SAVE borrowers got 90 days from their servicer’s notice to pick a plan, and the ICR page tracks the same clock for that plan’s borrowers.

The default for borrowers who don’t act is the open question. Servicers we’ve spoken to expect borrowers who miss their deadline to be placed on the Standard repayment plan, which is what happened to SAVE borrowers who didn’t choose. NASFAA’s chart of the new rules says PAYE borrowers land in RAP instead, with ICR borrowers moved to IBR because RAP can’t take parent PLUS consolidations. Either outcome is worse than choosing: the Standard plan can multiply your payment, and RAP starts a 30-year clock and, if you later want IBR, doesn’t count those months. Act on the first deadline notice, not the last.

What doesn’t change: your payment count. Payments you’ve made on PAYE count toward forgiveness on IBR and toward RAP’s 360-payment clock, and toward PSLF on any of them. The clock resets only in one direction: if you go to RAP and then come back to IBR or PAYE, the RAP months don’t count toward the older plans’ forgiveness unless your RAP payment was at least the 10-year Standard amount. Our RAP vs. IBR comparison explains that rule with examples.

PAYE Vs. IBR Vs. RAP: Where Should PAYE Borrowers Go?

Start with the year you first borrowed. That single fact decides whether IBR is a clone of PAYE or a worse plan, and the answer is spelled out in our RAP vs. IBR decision tree.

You first borrowed on or after July 1, 2014. Amended IBR gives you the same 10% of discretionary income and the same 20-year forgiveness as PAYE, and the law removed the old partial-financial-hardship requirement, so you qualify regardless of your debt-to-income ratio. Moving to IBR changes nothing about your monthly bill. Stay on PAYE until your servicer’s transition notice arrives, then choose IBR, unless RAP’s payment is meaningfully lower for your family size and you’re comfortable with the 30-year term.

Your first loan came between October 1, 2011 and June 30, 2014. IBR for you is 15% of discretionary income with forgiveness after 25 years. That’s a 50% higher payment and five more years than PAYE. Stay on PAYE as long as the plan exists, keep recertifying, and compare IBR against RAP in 2028 rather than switching early. For most borrowers in this group, RAP’s 1–10% of total AGI beats a 15% IBR payment at incomes under roughly $80,000, and the RAP calculator will show you where your crossover is.

You’re pursuing PSLF. All three plans qualify, and RAP months count toward PSLF even though they don’t count toward IBR forgiveness. Pick whichever plan produces the lowest payment for the years you have left, since a lower payment means more forgiven at 120. Our PSLF qualification breakdown covers the employer and payment tests.

You’re married. PAYE and IBR use your joint AGI if you file jointly and your income alone if you file separately, which is why married filing separately has been a common PAYE strategy. RAP uses combined AGI too when you file jointly, with one prorated payment across both spouses’ loans. The tax cost of filing separately grew under the 2025 tax law, so run both sides before you assume the loan savings win.