PAYE Plan 2026: Should You Stay or Switch Before the 2028 Sunset?

By Student Relief Solutions Editorial — Reviewed by Marcus Whitfield

If you're currently on the Pay As You Earn (PAYE) plan, you have a decision to make before July 1, 2028: stay on PAYE for its remaining benefits, or switch to Income-Based Repayment (IBR) now. The right answer depends on your balance, income trajectory, and PSLF eligibility — and there is no single answer that fits every borrower.

The short version

PAYE is being phased out. Per the Department of Education's 2023 Final Rule (88 Fed. Reg. 43820, July 10, 2023), PAYE closes to new enrollees and existing borrowers will be transitioned out by July 1, 2028. The question every current PAYE borrower faces is whether to stay on PAYE until it closes (preserving your lower 10% discretionary income payment cap and 20-year forgiveness timeline) or switch to IBR now (where new-borrower IBR also caps at 10% but has a 20-year forgiveness term for new borrowers, and 25 years for older borrowers). This guide walks through the decision matrix so you can assess which path fits your situation.

What PAYE actually is and who's on it

PAYE (Pay As You Earn) is an income-driven repayment plan created in 2012 and expanded in 2014. It caps monthly payments at 10% of discretionary income (defined as income above 150% of the federal poverty line for your family size) and offers loan forgiveness after 20 years of qualifying payments. Per studentaid.gov's PAYE page, eligibility required that borrowers have no federal loan balance before October 1, 2007 and that they received a Direct Loan disbursement on or after October 1, 2011. PAYE has historically been available only to newer borrowers, which is why its enrollee population skews toward more recent graduates.

PAYE borrowers generally benefit from:

• 10% discretionary income payment cap (same as new-borrower IBR)
• 20-year forgiveness timeline (same as new-borrower IBR for new borrowers)
• Payment cap: PAYE payments are capped so you never pay more than the standard 10-year payment amount, even if your income rises significantly

What happens when PAYE sunsets in 2028

Per ED's 2023 Final Rule, PAYE closed to new enrollees as of July 1, 2024. Current PAYE borrowers can remain on the plan until July 1, 2028. After that date, PAYE borrowers will be transitioned to another IDR plan — most likely IBR — by their servicer. ED has indicated that borrowers will not lose their IDR forgiveness progress in the transition, but the specifics of how payment counts transfer across plans matters for your timeline.

The new Repayment Assistance Plan (RAP), which launches July 1, 2026, is primarily designed for borrowers entering repayment after that date and is not expected to be a replacement pathway for current PAYE borrowers seeking to switch plans. Check studentaid.gov for current RAP eligibility guidance as it becomes available.

IBR in 2026: which version applies to you

IBR has two versions, and which one you'd land on matters significantly:

• New-borrower IBR (for borrowers who had no federal loan balance before July 1, 2014): 10% of discretionary income, 20-year forgiveness. This is substantively similar to PAYE on the key metrics.
• Old-borrower IBR (for borrowers who did have a federal loan balance before July 1, 2014): 15% of discretionary income, 25-year forgiveness. Materially less favorable than PAYE or new-borrower IBR.

Per studentaid.gov's IBR page, if you're currently on PAYE, you almost certainly qualify for new-borrower IBR, since PAYE required no pre-2007 balance and a post-2011 disbursement — making you a "new borrower" under IBR's definition too. Confirm your loan disbursement dates with your servicer before switching.

The decision matrix: stay on PAYE or switch to IBR now

Here are the scenarios where each choice tends to make more sense:

Stay on PAYE if:

• You are pursuing PSLF and you have a substantial payment count already. PAYE counts toward PSLF, and you want to minimize disruption to your qualifying payment count. Switching plans mid-stream is generally fine for PSLF (switching between qualifying IDR plans doesn't reset your count), but it's a change worth documenting carefully. If you're 6+ years in on PSLF, staying on PAYE keeps your current track intact.
• Your income may spike temporarily. PAYE's payment cap (never exceeding the standard 10-year amount) provides more protection if your income rises sharply. IBR also has a cap for new borrowers, but the mechanics differ. If you anticipate high-income years, verify the cap details on each plan.
• You're within a few years of 20-year forgiveness. If you've been on PAYE for 15+ years and your forgiveness date is before 2028, there's no reason to switch — ride PAYE to forgiveness.
• You don't want to introduce any administrative risk right now. Plan switches require a servicer application, processing time, and a paper trail. If your situation is stable and you don't need the switch for financial reasons, staying put minimizes the surface area for servicer errors.

Switch to IBR now if:

• You want to get settled on the long-term plan sooner. If new-borrower IBR is substantively identical to your PAYE terms (10% / 20 years), switching now means one less forced transition in 2028, and you do it on your schedule rather than a servicer-driven one in a high-volume window.
• You're not pursuing PSLF and you're at least a decade from forgiveness. In this case, both plans are likely equivalent, and switching to IBR now consolidates your timeline and removes PAYE's sunset risk from your planning.
• Your loans disbursed between certain dates make your IBR eligibility certain. If you've verified with your servicer that you qualify for new-borrower IBR at 10% / 20 years, and that's the same as your current PAYE terms, switching now versus waiting until 2028 has roughly equivalent outcomes.

Do not switch to IBR if:

• You would land on old-borrower IBR at 15% / 25 years. If your loan history means you'd qualify only for the less favorable old-borrower IBR, staying on PAYE until 2028 and letting ED's automatic transition handle it may give you more information about the transition terms. Check with your servicer to confirm which IBR version you'd qualify for before initiating any switch.

The math: PAYE vs new-borrower IBR side by side

For most current PAYE borrowers who qualify for new-borrower IBR, the payment calculation is nearly identical — both use 10% of discretionary income above 150% of the federal poverty line. For a single borrower earning $55,000 per year with a family size of 1, the 2026 federal poverty line is approximately $15,060 (per HHS guidelines for 2026); 150% of that is $22,590. Discretionary income = $55,000 - $22,590 = $32,410. 10% of $32,410 / 12 = approximately $270/month. This payment would be the same on PAYE or new-borrower IBR. The substantive differences are structural: PAYE's payment cap mechanics and the sunset timeline. For most borrowers in this scenario, the financial outcome is similar either way.

What about SAVE?

SAVE (Saving on a Valuable Education) was eliminated following federal court rulings in 2024. SAVE is not a live repayment option as of 2026. Any discussion of switching to SAVE is historical context only; borrowers who were on SAVE prior to its elimination were placed in administrative forbearance. If you are currently in SAVE forbearance, you should contact your servicer and evaluate switching to IBR. Do not treat SAVE as a current option.

How to switch from PAYE to IBR

1. Log in to studentaid.gov with your FSA ID
2. Navigate to "Manage Loans" → "Repayment Plans" → "Apply for Income-Driven Repayment"
3. Select IBR and confirm you meet the eligibility criteria (no pre-2007 balance, Direct Loans)
4. Submit the application; your servicer will process it and confirm your new payment amount
5. Your payment count toward IDR forgiveness should transfer to IBR; confirm this with your servicer in writing

Processing typically takes 2-4 weeks. You can continue making payments on your current plan during processing.

Common mistakes PAYE borrowers make

Switching to IBR without confirming which version applies: Before submitting the IBR application, ask your servicer or check studentaid.gov to confirm whether you'd be on new-borrower IBR (10% / 20 years) or old-borrower IBR (15% / 25 years). This is the most consequential variable in the switch decision.

Assuming the 2028 transition will be seamless: Servicer-driven mass plan transitions have a documented history of errors (see the PSLF one-time adjustment as a reference). If you know you'll eventually need to be on IBR, doing it yourself on a quiet day is lower risk than waiting for a forced mass transition in 2028.

Forgetting to recertify income annually: Regardless of which IDR plan you're on, you must recertify your income and family size each year. Missing the recertification deadline can result in your payment jumping to the standard 10-year amount. Set a recurring calendar reminder for your recertification date.

Related programs

If you're on PAYE and pursuing PSLF, the PAYE sunset may interact with your 10-year forgiveness timeline. See our PSLF eligibility guide for payment plan compatibility details. For a full comparison of all current IDR options, see our IDR plans 2026 guide, which covers IBR, ICR, RAP (launching July 2026), and the post-SAVE landscape.

This article was generated by AI under editorial supervision. All program rules and figures are sourced from primary government documents (studentaid.gov, CFPB, ED.gov). This is information, not financial advice — talk to a fiduciary or your servicer about your specific situation.