Borrowed Federal Loans Between October 2007 and July 2014? Here's Where PAYE Actually Stands
PAYE hasn't disappeared — but its runway is now measured in months, not years. Here's the real timeline, what changed with Old IBR, and why the old 'partial financial hardship' rule no longer applies to you.
More than any other group, borrowers who took out federal loans between October 1, 2007 and July 1, 2014 were reshaped by the 2025 overhaul. If you fell into this window and used an income-driven plan, there's a good chance you landed on Pay As You Earn (PAYE) — and PAYE's clock is now running down for real.
What's Actually Happening to PAYE
PAYE isn't gone yet, but here's the confirmed schedule: new enrollment in PAYE closes July 1, 2027, and the plan terminates entirely on July 1, 2028. If you're already enrolled, you can stay on it right now — but you'll need a plan for what comes next well before that 2028 deadline.
Your Options Once PAYE Closes
Because your oldest federal loan predates July 1, 2014, you fall into the Old IBR bucket rather than the newer 2014 IBR terms — that eligibility line is based on your earliest disbursement date, not your graduation date. Here's how the plans compare:
| PAYE (open until 7/1/2028) | Old IBR | RAP (live since 7/1/2026) | |
|---|---|---|---|
| Monthly payment | 10% of discretionary income | 15% of discretionary income | 1–10% of total AGI, by income band |
| High-earner cap | Capped at the 10-year Standard amount | Capped at the 10-year Standard amount | No cap |
| Forgiveness timeline | 20 years | 25 years | 30 years (360 payments) |
| Interest handling | Unpaid interest can capitalize on certain triggers | Unpaid interest can capitalize on certain triggers | Unpaid interest waived monthly — balance can't grow from underpayment |
Should You Move to Old IBR Now, or Wait?
- Leaving PAYE does not trigger interest capitalization — that's true whether you move to Old IBR or RAP, so there's no capitalization penalty for switching early.
- Old IBR and PAYE use the same underlying discretionary-income formula shape, just at different percentages (15% vs. 10%) and different forgiveness horizons (25 vs. 20 years) — so the comparison mostly comes down to which timeline and payment level fits your budget.
- Old IBR is written into statute and isn't going anywhere; PAYE's 2028 sunset is now locked in. If you want certainty rather than a countdown, moving now removes the deadline pressure.
- If you'd rather wait, you can — PAYE remains open to current enrollees for now. Just don't let 2028 sneak up on you; processing backlogs at loan servicers during past transitions have left borrowers waiting months.
A Rule That Quietly Changed: "Partial Financial Hardship" No Longer Applies
IBR used to require demonstrating a "partial financial hardship" to qualify or to avoid certain capitalization events. The 2025 law eliminated that requirement outright, effective July 4, 2025 (the Department of Education finished updating its own systems on December 22, 2025). If you were ever told you didn't qualify for IBR because your income was too high relative to your balance, that's no longer the case — it's worth reapplying. Capitalization on IBR today is triggered only by leaving the plan, missing recertification, your payment rising to the Standard amount, or consolidating.