PAYE plan: Pay As You Earn
With a PAYE plan, you pay 10% of your discretionary income. The rest is forgiven after 20 years. All PAYE borrowers must select a new plan by June 30, 2028.
- Discretionary income carries a 10% charge
- Forgiveness comes after 20 years
- By June 30, 2028, pick a new plan
- July 1, 2028PAYE will end no later than
The PAYE program explained
Under PAYE, 10% of your discretionary income goes toward payment. That figure starts with your AGI, then takes off 150% of the poverty guideline that matches your family size. The 10-year Standard bill is the most you can pay. After 20 years, any balance left is forgiven.
Who qualifies for the Pay As You Earn student loan repayment plan
You're eligible if you're a new borrower starting Oct. 1, 2007 and your Direct Loan was disbursed starting Oct. 1, 2011. Already on PAYE? You can stay until the plan closes.
Deadline of June 30, 2028
No later than July 1, 2028, PAYE and ICR will end. You have to pick your new plan no later than June 30, 2028. Otherwise, your servicer will choose one on your behalf.
How PAYE, IBR and RAP compare
| Plan | Payment | Forgiveness | Open after 2028? |
|---|---|---|---|
| PAYE | Discretionary income carries a 10% charge | 20 years | No |
| IBR (2014 or later) | Discretionary income carries a 10% charge | 20 years | Yes, that's right, for older loans |
| RAP | 1% to 10% of AGI | 30 years | Yes, that's right |
Priya files her taxes on her own and earns $62,000. Her monthly PAYE payment is about $317. She'd pay that same $317 under IBR, provided her first loan came after June 30, 2014. Under RAP, it would be about $310.
Next steps to take now
You don't have to switch plans today if you have a PAYE student loan. Do plan ahead so you don't have to rush. For most newer borrowers, IBR uses the same math as PAYE. If you switch back, payments made under RAP won't count toward IBR, ICR or PAYE discharge.
Use your FSA ID to log in at studentaid.gov.
Open your income-driven repayment application, then pick IBR or RAP.
Give the Department of Education permission to pull your tax data. That way, your income is filled in.
Enter your family size and tell how you file your taxes.
Submit it. A letter with your new payment comes from your servicer.
Guides on related topics
Common questions
Will the PAYE plan still exist?
It won't last long. By July 1, 2028, at the latest, PAYE and ICR will be eliminated.
Is PAYE student loan forgiveness still 20 years?
Yes, that's right. After 20 years of payments, whatever balance remains is forgiven.
Is PAYE a good plan for repayment?
It ranked among the least expensive plans. Because PAYE is closing, IBR is the closest fit.
Is there a PAYE student loan calculator?
Use the IBR calculator and select a first loan dated July 1, 2014 or later. PAYE uses 10% of the income that exceeds 150% of the poverty line, and the cap stays the same, so you get the same number.
The sources are Federal Student Aid, IDR court actions and Federal Student Aid, income-driven repayment plans.