Hello,
IPN communication between PayPal and s2Member is what enables automatic downgrading of members. For this to work, the IPN integration needs to be set up properly. Also, the s2Member accounts must contain the PayPal Subscriber ID so that s2Member knows which account should be downgraded. The Subscriber ID is stored automatically when they signup through your site using an s2Member-generated form/button. Please double-check that your s2Member accounts show the corresponding Subscriber ID that matches their recurring profile on PayPal.
Please make sure your IPN Integration is correct: Dashboard -› s2Member® -› PayPal® Options -› PayPal® IPN Integration. Also, if you haven’t enabled logging, I suggest doing so: Dashboard -› s2Member® -› PayPal® Options -› Account Details -› Logging. The log files in wp-content/s2member-logs/ will help in diagnosing any issues with IPN communication.