We believe everyone should be able to make financial decisions with confidence. And while our site doesn’t feature every company or financial product available on the market, we’re proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward — and free.
So how do we make money? Our partners compensate us. This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services. Here is a list of our partners.
Pay As You Earn: How It Works and Whom It’s Best For
PAYE reopened for enrollment in late December 2024.
Many, or all, of the products featured on this page are from our advertising partners who compensate us when you take certain actions on our website or click to take an action on their website. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money.
Updated · 3 min read
How is this page expert verified?
NerdWallet's content is fact-checked for accuracy, timeliness and relevance. It undergoes a thorough review process involving writers and editors to ensure the information is as clear and complete as possible.
Eliza Haverstock is NerdWallet's higher education writer, where she covers all aspects of college affordability and student loans. Previously, she reported on billionaires and investing for Forbes in New York, and she also covered private markets for PitchBook in Seattle. Eliza got started at her college newspaper at the University of Virginia and interned for Bloomberg, where she spent a summer writing a feature story about plastic straws. She is based in Washington, D.C.
Cecilia Clark is an editor on the insurance team. She specializes in auto insurance and manages product reviews and roundups. Previously, she worked as a freelance writer and developed communications strategies for cybersecurity firms. Cecilia has also worked in post-secondary education, elevator operations management and sales and military nuclear command control, maintenance management and public affairs.
Ryan Lane is an editor on NerdWallet’s small-business team. He joined NerdWallet in 2019 as a student loans writer, serving as an authority on that topic after spending more than a decade at student loan guarantor American Student Assistance. In that role, Ryan co-authored the Student Loan Ranger blog in partnership with U.S. News & World Report, as well as wrote and edited content about education financing and financial literacy for multiple online properties, e-courses and more. Ryan also previously oversaw the production of life science journals as a managing editor for publisher Cell Press. Ryan is located in Rochester, New York.
Published in
Managing Editor
Editor's note, Jan. 3, 2025: PAYE reopened for new enrollment in late December 2024. Borrowers who switch from SAVE to PAYE will resume earning credit toward Public Service Loan Forgiveness or income-driven repayment forgiveness.
The government previously ended PAYE enrollment on July 1, 2024. However, lawsuits temporarily blocked the SAVE repayment plan over the summer, leaving 8 million borrowers with an interest-free payment pause. SAVE borrowers are not earning forgiveness credit for months spent in the pause.
Expect application processing delays.
Pay As You Earn (PAYE) is an income-driven repayment (IDR) plan that caps federal student loan payments at 10% of your discretionary income and forgives your remaining balance after 20 years of repayment.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
5.0
NerdWallet rating
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
4.5
NerdWallet rating
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
5.0
NerdWallet rating
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
5.0
NerdWallet rating
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
4.0
NerdWallet rating
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
5.0
NerdWallet rating
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
4.5
NerdWallet rating
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
4.0
NerdWallet rating
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
4.5
NerdWallet rating
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
4.0
NerdWallet rating
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
4.5
NerdWallet rating
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
5.0
NerdWallet rating
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
4.5
NerdWallet rating
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
5.0
NerdWallet rating
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
5.0
NerdWallet rating
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
4.5
NerdWallet rating
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
5.0
NerdWallet rating
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
4.5
NerdWallet rating
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
All income-driven plans share some similarities: Each caps payments to between 10% and 20% of your discretionary income and forgives your remaining loan balance after 20 or 25 years of payments. Use Federal Student Aid’s Loan Simulator to see how much you might pay under different plans.
Unlike most other IDR plans, PAYE limits capitalized interest to 10% of your balance. Capitalized interest — or interest added to your loan’s balance — increases the amount you owe, as interest then accrues on a larger balance.
PAYE is also unique because you need a partial financial hardship to qualify. This is generally true if your total federal student loan debt is higher than your annual discretionary income.
In most cases, the least confusing way to select an income-driven plan is to let your servicer place you on the plan you qualify for that will have the lowest monthly payment. Specifically choosing PAYE may be right for you in the following instances:
You can qualify for PAYE
Pay As You Earn has the strictest requirements of any income-driven plan. To qualify, you must demonstrate a partial financial hardship — which essentially means you can't afford the standard repayment amount — and meet two distinct borrowing guidelines:
You must have received a direct loan on or after Oct. 1, 2007, and had no outstanding federal loans at that time.
You must have received a direct loan disbursement on or after Oct. 1, 2011.
If you meet PAYE's financial qualifications, but didn't borrow your loans at the right time, consider Income-Based Repayment. PAYE's features are very similar to the new version of IBR, which is available to those who borrowed loans after July 1, 2014.
PAYE payments are capped at 10% of your discretionary income, but even if your earnings grow in the future, payments will never be higher than what they would be under the standard 10-year repayment plan. Most other IDR plans don’t have this payment ceiling, which can give some high-earners very large student loan bills.
You’re married — or think you’ll get married
If you’re married, your payments under PAYE depend on your tax filing status:
File taxes separately. Payments will be based solely on your income.
File taxes jointly. Payments will be based on your and your spouse’s income.
Income-driven repayment plans can last up to 25 years. Even if you’re not married now, you may be in the next quarter-century. If you’re using PAYE at that point, you could keep your payments low by filing taxes separately.
Talk to a tax professional to understand the pros and cons of different tax filing statuses. You shouldn’t choose or change your status based solely on student loan payments.
Pay As You Earn forgives any remaining balance on your loans after 20 years of payment — no matter what type of federal loans you have.
Other income-driven plans either always take 25 years until forgiveness or add five extra years to your repayment term if you took out loans for graduate or professional studies.
If you don’t have graduate school debt — and won’t qualify for Public Service Loan Forgiveness — weigh the benefits of SAVE vs. PAYE. SAVE subsidizes more interest on your loans, potentially leaving you with a smaller balance to forgive. That’s actually a good thing since non-PSLF forgiven amounts are taxable.
» MORE:Who should get on ‘SAVE’, the new student loan IDR plan?
Visit studentaid.gov. Log in with your Federal Student Aid ID, or create an FSA ID if you don’t have one.
Select income-driven repayment plan request. Preview the form so you know what documents to have ready, like your tax return or alternate proof of any taxable income you’ve earned within the past 90 days.
Choose your plan. If you qualify for more than one income-driven repayment plan, you can be automatically placed in the plan with the lowest payment or specifically choose PAYE if it makes the most sense for you.
Complete and submit the application. Enter the required details about your income and family. Remember to include your spouse’s information, if applicable, as it will affect your payments under PAYE.
Your servicer can put your loans in forbearance while processing your application. You aren’t required to make payments during forbearance, but interest will accrue on your loan. This increases the amount you owe.
Recertify your information to stay on PAYE
To stay on PAYE, you must resubmit the income-driven repayment application every year, unless you gave consent during the application process for your tax information to be accessed. If so, your recertification will automatically renew. You will receive notice before a new payment amount goes into effect. If your income changes, your payments will change, too.
If you miss the recertification deadline — or you begin earning too much to qualify for PAYE — your payments will switch to the amount you'd pay under the standard plan. Any interest will also be capitalized, or added to your principal balance, at that point.
If income-driven repayment isn't right for you, the federal government offers extended repayment and graduated repayment plans, which lower your payments but aren’t based on your income. You may pay more interest under these plans, though, and neither offers loan forgiveness.
You also may be able to pay less by refinancing your student loans. Refinancing federal student loans can be risky, as you’ll lose access to income-driven repayment and other federal loan programs and protections. But if you’re comfortable giving up those options and have strong credit as well as a steady income, refinancing may save you money.
