Borrowers who wish to switch to the PAYE Income-Driven Repayment (IDR) have a July 1, 2026 deadline, after which they’ll have difficulty accessing the plan. Starting July 1st, new rules for student loan repayment will take effect as part of the 2025 congressional spending bill and the most recent round of negotiated rulemaking. In addition to the SAVE plan being eliminated completely, some IDR plans will have new rules that will make them more difficult—or impossible—to utilize. Those who wish to make use of the PAYE plan before it’s phased out in 2028 should switch before July 1 to avoid any issues.
All IDR plans are being slightly revamped, but some more than others. IBR—which will be the only existing IDR plan that will remain indefinitely, but only for those with loans taken out before July 1, 2026—has been significantly tweaked, including removing the partial financial hardship. PAYE and ICR currently remain available to borrowers already in repayment, but will be phased out in 2028. SAVE is completely off the table. Beginning July 1, borrowers will also have access to the Repayment Assistance Plan (RAP), which is completely new. For borrowers with new loans originating after July 1, 2026, only the RAP and the fixed-payment plan will be available, and only the RAP plan will qualify them for PSLF.
With the SAVE plan gone and those borrowers needing to switch to new plans imminently, PAYE remains the most affordable plan for many borrowers. PAYE requires borrowers to pay just 10% of their discretionary income towards their student loans as long as they show a partial financial hardship. It also has a payment cap, which prevents borrowers’ monthly payments from ballooning beyond what they’d pay under the standard 10-year fixed-payment plan. The new RAP plan, which may also lower payments for some borrowers, does not have a cap. PAYE also offers IDR forgiveness after 20 years of repayment, as opposed to RAP’s 30 years.
Borrowers who wish to switch to PAYE, such as those who are currently on SAVE, need to switch as soon as possible. New Rules announced by the Department of Education prevent borrowers who qualified for or were previously enrolled in PAYE from (re-)enrolling in the plan. Studentaid.gov currently contradicts the rule, saying that “If you have eligible loans taken out before July 1, 2026… There will be no restriction on enrolling in the IBR, ICR, or PAYE Plans on or after July 1, 2026, unless you receive a disbursement on a new loan on or after July 1, 2026.” The rule is supposed to take effect on July 1st, however, and ED has given inconsistent guidance before, as in the case of the IDR Tracker.
We recommend that borrowers who may benefit from switching to PAYE look into switching plans as soon as possible, especially if they’re currently enrolled in SAVE. Give us a call and we’ll compare all of your options and help you make an informed choice before this deadline arrives.
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