Beginning July 1, 2026, major changes will take effect for federal student loan repayment options. These changes apply to Direct Loans and PLUS Loans and will vary depending on a borrower’s loan type, whether they consolidate, and whether they take out new loans after July 1, 2026. Borrowers will fall into one of two tracks:
- New Borrowers – those who take out at least one new Direct Loan on or after July 1, 2026
- Legacy Borrowers – those with loans issued before July 1, 2026, who do not take out new loans or consolidate after that date.
New Borrowers
Borrowers who receive any new Direct Loan on or after July 1, 2026, will have two repayment options for all their loans, including older ones:
The Tiered Standard Plan is a new fixed repayment plan that has equal monthly payments calculated to fully repay the loans by the end of their repayment period. The repayment period will vary based on the total loan amount. Payments are based on the total loan amount, interest rate, and repayment period.
| Loan Amount | Repayment Period |
|---|---|
| < $25,000 | 10 years |
| $25,000 - $49,999 | 15 years |
| $50,000 - $99,999 | 20 years |
| >$100,000 | 25 years |
A benefit of the Tiered Standard Plan is that borrowers with higher loan balances will have more time to repay their loan, which will result in a lower monthly payment. Borrowers who do not request a different repayment plan will automatically be placed in the Tiered Standard Plan when entering repayment. They can switch to the RAP plan at any time to repay loans for their own education. Payments in the Tiered Plan do not qualify for Public Service Loan Forgiveness (PLSF).
The Repayment Assistance Plan (RAP) is a new income-driven repayment plan (IDR). Monthly payments are set at between 1% and 10% of total adjusted gross monthly income, minus $50 per dependent, and with a minimum monthly payment of $10, and no upper cap on the size of payments. The percentage of income the borrower is charged depends on their income bracket, with the highest 10% charge applying to borrowers with income over $100,000. Borrowers who are married and file taxes jointly will have their payments calculated based on their combined income, which can create a substantial marriage penalty that is only partially offset if their spouse also has federal student loans. Payments may be higher under the RAP than in older IDR plans. Payments can increase over time as incomes increase. A benefit of the RAP is the waiving of any monthly interest charges not covered by the monthly payment, so the principal decreases over time. After 30 years of qualifying payments, remaining balances are forgiven. Payments are eligible for Public Service Loan Forgiveness.
Legacy Borrowers
Legacy borrowers who do not take out any new loans or consolidate existing loans after July 1, 2026, will be able to keep most of the existing repayment options.
The Standard/Traditional Plan will remain available. This is the fixed payment plan that typically has a ten-year term. The monthly payment stays the same. Even though payments are high, with this plan, less interest is paid overtime.
The Income-Based Repayment (IBR) plan, which has been available since 2008, will remain available for legacy borrowers. Eligibility has been expanded by eliminating the “partial financial hardship” requirement. RAP is also available for legacy borrowers. The Graduated Plan, in which payments increase every two years to repay loans in full in 10 years, is still available. The Extended Plan, with either standard or graduated payments and an extended repayment period of up to 30 years, remains available.
Pay As You Earn (PAYE) and Income-Contingent Repayment (ICR) are not available but will be eliminated in July 2028. Borrowers who are in this plan and will pay off their loans by that time don’t need to make any changes. For borrowers who will still have a balance in July 2028, they need to consider switching to a different plan.
For borrowers who are enrolled in the SAVE plan, they need to immediately switch to a different plan. Those borrowers should have received a notification from the Department of Education. They will automatically be enrolled in the Standard plan if they do not choose another plan.
References:
National Consumer Law Center Digital Library, Major July Changes to Federal Student Loan Repayment.
