PAYE Is Going Away: What Borrowers Need to Know About the Coming Student Loan Repayment Transition

If you're on the Pay As You Earn (PAYE) repayment plan, you've probably heard that changes are coming. Here's the short version: PAYE is scheduled to end no later than July 1, 2028. If you're currently enrolled in PAYE, you will need to transition to a different repayment plan before that date, and the plan you land on depends heavily on when you originally borrowed — not when you graduated.

This distinction trips up a lot of borrowers, so let's walk through it carefully.

Old IBR vs. New IBR: It Comes Down to a Single Date

Income-Based Repayment (IBR) actually comes in two versions, and which one you get depends on whether you're considered a "new borrower" under federal rules. The cutoff is July 1, 2014. If you had no outstanding federal student loan balance before that date — meaning your first loans were disbursed on or after July 1, 2014 — you qualify as a new borrower and you get New IBR. If you had loans outstanding before that date, you're on Old IBR.

• Old IBR: payments are generally 15% of discretionary income, with forgiveness after 25 years of qualifying payments.
• New IBR: payments are generally 10% of discretionary income, with forgiveness after 20 years of qualifying payments.

That's a meaningful difference — both in what you pay each month and in how long you're in repayment before any remaining balance is forgiven.

Two Illustrative Examples

Consider a borrower who took out their first federal student loan in 2012, while still an undergraduate. Because that first loan was disbursed before July 1, 2014, this borrower has an outstanding balance from before the cutoff and lands on Old IBR — 15% of discretionary income, 25-year forgiveness timeline — regardless of when they eventually graduated or how many loans they took out afterward.

Now consider a second borrower whose first loan was disbursed in 2015. Because that borrower had no federal loan balance before July 1, 2014, they qualify as a new borrower and land on New IBR — 10% of discretionary income, 20-year forgiveness timeline.

Two borrowers, potentially similar loan balances, potentially similar careers and income — but very different repayment terms, because of a single disbursement date years earlier.

PAYE, Old IBR, and New IBR Side by Side

Why Is PAYE Ending?

A 2025 legislative overhaul of federal student loan repayment restructured the repayment plan landscape. As part of that overhaul, PAYE is being phased out, with a hard end date of no later than July 1, 2028. Income-Contingent Repayment (ICR) is being phased out on the same timeline. In their place, a new plan called the Repayment Assistance Plan (RAP) is scheduled to launch in 2026.

SAVE and REPAYE are a separate story — both have been affected by ongoing litigation, and their long-term availability is less certain than PAYE's clearly scheduled sunset. If you're on SAVE or REPAYE, keep an eye on developments there separately.

What Is RAP?

The Repayment Assistance Plan calculates payments using a formula based on adjusted gross income, rather than the discretionary-income formula used by PAYE and IBR. RAP also includes provisions that can reduce unpaid interest and, in some cases, unpaid principal over time, which is a different mechanism than the forgiveness-after-N-years structure of IBR.

Because RAP's formula and terms are structured differently from IBR's, the two plans won't produce the same monthly payment or the same long-run outcome for every borrower. There isn't a single right answer here — it depends on income, balance, and how each formula plays out over the life of the loan.

So What Should the 2012 Borrower Do?

Going back to our first example — the borrower whose first loan was disbursed in 2012 — that person is currently on Old IBR terms if they're in IBR, or on PAYE if they enrolled there. Once PAYE ends, they'll need to evaluate Old IBR against RAP against any other available option, based on their actual numbers: current income, family size, loan balance, and interest rate. This isn't a decision to make on autopilot. It's worth running the actual comparison rather than assuming either plan is automatically better.

Don't Confuse "When You Graduated" With "When You Borrowed"

This is the single most common point of confusion. The New Borrower determination is based on when you first had an outstanding federal student loan balance — not your graduation date, not when you consolidated, and not when you entered repayment. A borrower who took out a loan for their first year of undergrad in 2012 but didn't graduate until 2016 is still judged by that 2012 disbursement date. They are not a "new borrower," even though most of their loans and their entire professional life came after July 1, 2014.

If you're not sure which side of the line you fall on, check the disbursement dates on your oldest outstanding federal loan — not your enrollment or graduation dates.

Why You Shouldn't Wait Until 2028

It's tempting to treat 2028 as a far-off deadline and set this aside. But a few things make that risky. First, RAP is scheduled to launch in 2026, which means the actual comparison you'll want to run — your current plan versus RAP versus whatever IBR terms apply to you — is available well before the PAYE cutoff. Second, plan transitions, income recertification, and paperwork processing at loan servicers can take time, and processing backlogs during past transitions have left borrowers in limbo for months. Third, waiting means you're making a bigger decision under time pressure instead of on your own schedule, with less room to course-correct if something doesn't process the way you expected.

Running the numbers now costs you nothing and gives you options. Waiting until the deadline gives you fewer options and less time to fix problems.

The Bigger Financial Planning Question

Choosing a repayment plan isn't just about which formula produces the lowest monthly payment today. It fits into a larger financial picture, including:

• How your income is likely to change over the next several years, especially if you're early in a specialty career with a rising income trajectory.
• Whether you're pursuing Public Service Loan Forgiveness and how a plan change could affect qualifying payment counts.
• How much unpaid interest could accrue under each plan, and whether that interest is subsidized, capitalized, or reduced under the plan's terms.
• Your broader savings goals — retirement contributions, a home purchase, an emergency fund — that compete with your loan payment for the same monthly cash flow.
• Your tolerance for uncertainty, given that RAP is new and some of its long-run behavior won't be fully clear until it's been in use for a while.

Bottom Line

PAYE is going away no later than July 1, 2028, and if you're enrolled in it, you'll need to move to something else. But the first question to ask isn't simply "which plan should I switch to." It's "when did I first borrow, and does that make me an Old IBR borrower or a New IBR borrower?" That single date determines your baseline terms and shapes every comparison you'll run against RAP or any other option. Get that answer first — then run the numbers.