Repayment Strategy 11 min

IBR vs PAYE: Is There Any Difference in 2026?

Updated on October 26, 2026 Published October 14, 2026

If you first borrowed on or after July 1, 2014, IBR and PAYE cost exactly the same: both charge 10% of discretionary income, cap the payment at the 10-year Standard amount and forgive after 20 years. If you had a federal loan balance before July 1, 2014, PAYE is cheaper while it lasts, because your IBR terms are 15% and 25 years, but PAYE ends no later than July 1, 2028 and IBR stays. PAYE is open only to PAYE new borrowers with no new loan, including a consolidation loan, on or after July 1, 2026 (Federal Student Aid, Income-Driven Repayment Plans).

The Finology Software engine returns identical figures for the two plans on the newer-borrower terms, shown below for three households on October 14, 2026. Because RAP is where PAYE borrowers land if they do not choose a plan by July 1, 2028, each example shows RAP too.

IBR vs PAYE at a glance

	IBR	PAYE
Monthly payment	10% of discretionary income (first borrowed on or after July 1, 2014); 15% for earlier borrowers	10% of discretionary income
Discretionary income	AGI above 150% of the poverty guideline for your family size	Same
Payment cap	Never more than the 10-year Standard payment	Same
Forgiveness	20 years (10% terms) or 25 years (15% terms)	20 years
Who can enroll	Any Direct Loan borrower with eligible loans and no loan made on or after July 1, 2026; FFEL loans too	PAYE new borrowers (no balance when borrowing on or after October 1, 2007, and a Direct Loan disbursed on or after October 1, 2011) with no new loan on or after July 1, 2026
Entry test	None beyond loan eligibility	Your income-based payment must be lower than the 10-year Standard payment
FFEL loans	Eligible without consolidating	Must be consolidated into a Direct Loan
Unpaid interest	Accrues; covered on subsidized loans for 3 years; capitalizes if you leave IBR	Accrues; covered on subsidized loans for 3 years
Counts for PSLF	Yes	Yes
Plan ends	No end date	No later than July 1, 2028

Sources: Federal Student Aid, Income-Driven Repayment Plans; Federal Student Aid, IDR questions and answers; 34 CFR 685.209(c)(3).

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Three households, run through the engine

Computed October 14, 2026 with the free Finology Software calculator on finology.tech (the same engine advisors use). Direct Unsubsidized loans, no loan made on or after July 1, 2026, income held flat, no state entered, and a spouse with no federal student loans. Lifetime cost is every payment plus the estimated federal income tax on any balance forgiven outside PSLF. These are illustrations of how the formulas behave, not a projection of your loans. IBR is shown on the 10% terms.

1. Single, $70,000 income, $90,000 balance at 6.8%

Plan	Monthly payment (year 1)	Forgiven	Est. tax on forgiveness	Lifetime cost
IBR (10%)	$384	$120,280 at 20 years	$28,153	$120,273
PAYE	$384	$120,280 at 20 years	$28,153	$120,273
RAP	$350	$72,000 at 30 years	$16,566	$142,566
10-year Standard	$1,036	None, paid off in 10 years	$0	$124,287

PAYE ends no later than July 1, 2028, when borrowers move to RAP (or IBR if RAP isn’t available). PAYE totals here assume the plan continues for its full term; advisors can model the 2028 switch in Finology Software’s Plan Transition tool.

IBR and PAYE match to the dollar: $384 a month and $120,273 over the life of the loan. RAP’s payment is lower at $350, but its 30-year term brings the lifetime cost to $142,566.

2. Married filing jointly, one child, $140,000 household income, $200,000 balance at 7.0%

Borrower AGI $80,000, spouse AGI $60,000, one dependent.

Plan	Monthly payment (year 1)	Forgiven	Est. tax on forgiveness	Lifetime cost
IBR (10%)	$825	$281,960 at 20 years	$67,715	$265,755
PAYE	$825	$281,960 at 20 years	$67,715	$265,755
RAP	$1,117	$181,958 at 30 years	$42,242	$444,242
10-year Standard	$2,322	None, paid off in 10 years	$0	$278,660

Again identical on IBR and PAYE: $825 a month and $265,755 in total. On RAP the same household would pay $1,117 a month and $444,242 in total, which is why landing on RAP by default in 2028 is worth avoiding.

3. The same household, filing separately

Borrower AGI $80,000, one dependent, married filing separately, so the spouse’s income is left out.

Plan	Monthly payment (year 1)	Forgiven	Est. tax on forgiveness	Lifetime cost
IBR (10%)	$396	$384,920 at 20 years	$120,791	$215,871
PAYE	$396	$384,920 at 20 years	$120,791	$215,871
RAP	$417	$182,000 at 30 years	$48,157	$198,157
10-year Standard	$2,322	None, paid off in 10 years	$0	$278,660

Filing separately drops the IBR and PAYE payment to $396, still identical on both. The larger balance forgiven at year 20 brings an estimated $120,791 of tax, so here RAP’s lifetime cost, $198,157, comes in under IBR and PAYE’s $215,871. These figures leave out the extra income tax that filing separately usually costs each year; weigh both before choosing.

When the two plans actually differ

Same formula, same cap, same 20-year term: for a borrower who first borrowed on or after July 1, 2014, the choice between IBR and PAYE changes nothing about the money. The differences are about who qualifies and how long the plan lasts.

Borrowers with a balance before July 1, 2014. IBR charges you 15% of discretionary income and forgives after 25 years (Federal Student Aid, IDR questions and answers). If you also meet PAYE’s new-borrower test (for example, you first borrowed in 2012), PAYE’s 10% and 20 years are materially cheaper until PAYE ends. RAP vs PAYE vs IBR, all plans compared shows the cost of the 15% terms at four incomes.
Borrowers with a balance before October 1, 2007 who did not pay it off before borrowing again are not PAYE new borrowers. IBR is their income-driven plan alongside RAP.
FFEL borrowers. IBR takes FFEL loans as they are. PAYE needs a Direct Consolidation Loan, and a consolidation made on or after July 1, 2026 is a new loan that removes both PAYE and IBR.
The entry test. To enter PAYE, your income-based payment must be lower than the 10-year Standard payment (Federal Student Aid).

PAYE ends by July 1, 2028; IBR stays

Everyone repaying under PAYE must choose another plan before July 1, 2028. A borrower who does not choose is placed on RAP for loans RAP can take (34 CFR 685.209(c)(7)). PAYE payments made on or before June 30, 2028 count toward IBR forgiveness (34 CFR 685.209(k)(4)(i)(B)), so moving from PAYE to IBR keeps your count.

For a newer borrower, that makes IBR the plan PAYE turns into: same payment, same 20-year term, same count, no second move. For a borrower on the 15% IBR terms, PAYE saves money each month until 2028, and the move after that is to IBR at 15% and 25 years, or to RAP.

Interest on both plans

IBR and PAYE treat interest the same way. On subsidized loans, unpaid interest is covered for the first three years. After that, and on unsubsidized loans, interest your payment does not cover keeps accruing, and it capitalizes if you leave IBR or stop qualifying for an income-based payment (Federal Student Aid, IDR questions and answers). Starting in spring 2027, payments must be on time and in full to receive the interest subsidy on either plan (Federal Student Aid, One Big Beautiful Bill Act definitions). RAP waives each month’s unpaid interest instead, for as long as you pay on time.

PSLF on either plan

IBR and PAYE both qualify for PSLF, as do all income-driven plans (Federal Student Aid, Public Service Loan Forgiveness). Since the payment is the same for newer borrowers, PSLF does not change the choice; if you are on PAYE and pursuing PSLF, moving to IBR before the 2028 deadline keeps the same payment and your PSLF count. See Does RAP qualify for PSLF? to compare RAP for public service.

Which one fits you

First borrowed on or after July 1, 2014: either plan costs the same. IBR is the one that lasts, so choosing IBR now avoids a second switch in 2028.
Balance before July 1, 2014 and a PAYE new borrower: PAYE is cheaper each month until it ends; plan the 2028 move to IBR or RAP now.
Balance before October 1, 2007, or FFEL loans you do not want to consolidate: IBR.
Lower payment matters more than the 20-year term, or you are pursuing PSLF: compare RAP as well. See RAP vs IBR.

Run your own numbers

The calculator below produced every figure on this page and shows IBR, PAYE, RAP and Standard side by side. For IBR alone, use the IBR calculator; for the discretionary income both plans start from, the discretionary income calculator. For every plan explained together, see RAP vs PAYE vs IBR, all plans compared.

Frequently asked questions

Is PAYE cheaper than IBR?

Only if you had a federal loan balance before July 1, 2014. Otherwise both charge 10% of discretionary income, cap the payment at the 10-year Standard amount and forgive after 20 years, and the Finology Software engine returns the same payment and lifetime cost for both.

Am I a PAYE new borrower?

You are if you had no outstanding Direct or FFEL balance when you received a Direct or FFEL loan on or after October 1, 2007, and you received a Direct Loan disbursement on or after October 1, 2011. You also need no new loan, including a consolidation loan, on or after July 1, 2026 (Federal Student Aid).

Which IBR terms do I get?

10% of discretionary income and 20 years if you first borrowed on or after July 1, 2014; 15% and 25 years if you had a federal loan balance before that date.

What happens to my PAYE payments when PAYE ends?

They count. PAYE payments made on or before June 30, 2028 count toward IBR forgiveness (34 CFR 685.209(k)(4)(i)(B)), and progress under PAYE also counts toward RAP, on RAP’s 30-year clock.

What if I do nothing before July 1, 2028?

Borrowers still on PAYE are placed on RAP for loans RAP can take (34 CFR 685.209(c)(7)). In the engine example for a married family at $140,000, that meant $1,117 a month on RAP against $825 on IBR.

Can FFEL loans use IBR or PAYE?

IBR takes FFEL loans without consolidation. PAYE needs a Direct Consolidation Loan, and a consolidation made on or after July 1, 2026 is a new loan that removes both PAYE and IBR.

Do IBR and PAYE both count for PSLF?

Yes. All income-driven plans qualify for PSLF, and forgiveness after 120 qualifying payments is tax-free.