Federal student loan repayment just got more complicated. With the recent signing of H.R.1, major changes are coming to how you'll repay your student loans. These changes don't just affect future borrowers – they could impact your current loans too.
If you have federal student loans or plan to borrow for college, you need to understand these changes. This isn't like previous changes where existing borrowers could ride out repayment in their current plan, these changes may require current borrowers in repayment to make some changes.
What's Changing on July 1, 2026
Starting July 1, 2026, the federal student loan system will look completely different. Anyone who borrows a new federal student loan on or after this date will only have two repayment options:
- The new Standard Repayment Plan
- The Repayment Assistance Plan (RAP)
This means all the current repayment plans you might know about – like Income-Based Repayment (IBR), Pay as You Earn (PAYE), and Income-Contingent Repayment (ICR) – will no longer be available for new borrowers.
The New Standard Repayment Plan
The new Standard Repayment Plan works differently than the current 10-year standard plan. Instead of a fixed 10-year term, your repayment period will range from 10 to 25 years based on how much you owe.
This change means you'll have more time to pay off your loans, which could lower your monthly payments. However, a longer repayment period also means you'll pay more interest over time.
Understanding the Repayment Assistance Plan
The Repayment Assistance Plan is an income-driven option that calculates your monthly payment based on your income. Here are the basics of the calculation.
How to Calculate Your RAP Payment
Your payment depends on your Adjusted Gross Income (AGI). The plan uses a sliding scale where higher earners pay a larger percentage of their AGI.
The AGI brackets are as follows:
- AGI less than $10,000: $120 total per year
- AGI between $10,000 - $20,000: 1% of AGI
- AGI between $20,000 - $30,000: 2% of AGI
- AGI between $30,000 - $40,000: 3% of AGI
- AGI between $40,000 - $50,000: 4% of AGI
- AGI between $50,000 - $60,000: 5% of AGI
- AGI between $60,000 - $70,000: 6% of AGI
- AGI between $70,000 - $80,000: 7% of AGI
- AGI between $80,000 - $90,000: 8% of AGI
- AGI between $90,000 - $100,000: 9% of AGI
- AGI over $100,000: 10% of AGI
To calculate your monthly payment:
- Determine your AGI bracket.
- Apply the bracket percentage on your total AGI.
- Take the final figure and divide by 12 to determine your monthly payment.
- Subtract $50 for each qualifying dependent (based on the tax return of the borrower).
If you complete the steps above and your payment is less than $10, your payment will be rounded up to $10. The minimum payment amount on the RAP, is $10 per month.
If your monthly payment doesn't cover your accruing interest, and you make your payment on-time, the unpaid interest will be forgiven. RAP also includes a matching principal payment feature designed to ensure your balance decreases consistently. If your monthly payment doesn’t reduce your principal by at least $50, your principal balance will be reduced by $50.
For example, you have a payment of $150. Your accruing interest each month is $200. The $50 in interest will not be added to your balance, and your principal balance will also be reduced by $50.
If you're married, your spouse's income will only count toward your payment calculation if you file a joint tax return. If you file separately, only your income matters for determining your RAP payment.
What Happens to Current Repayment Plans
Most current repayment plans will continue for borrowers who already have loans before July 1, 2026. This includes:
- 10-year Standard Plan
- Graduated Repayment Plan
- Extended Repayment Plan
- New Income-Based Repayment (IBR)
- Old Income-Based Repayment (IBR)
- Income-Contingent Repayment (ICR)
- Pay As You Earn (PAYE)
However, there's an important deadline: borrowers using ICR or PAYE must choose a new repayment plan by July 1, 2028. You can switch to another current plan, or move to RAP when it becomes available.
Current Borrowers in Repayment
Current borrowers in repayment, expect for those in SAVE, can continue to repay in their current chosen repayment plan.
But there are three things to consider.
Borrowers in ICR or PAYE
If you are in ICR or PAYE, you can continue to repay in that plan, but you will need to switch to another plan, either another existing plan, or RAP by July 1, 2028.
Borrowers Who Consolidate
If you consolidate your federal student loans with a Direct Consolidation Loan on or after July 1, 2026, you will only be able to choose the new Standard Repayment Plan or RAP.
Borrowers Who Borrow a New Loan on or After July 1, 2026
If you borrow a new federal student loan on or after July 1, 2026, you will be required to repay all your federal student loans on the new Standard or the RAP. There is no way to keep existing loans in the current plans if you borrow a new federal student loan on or after July 1, 2026.
Borrower Enrolled in the SAVE Plan
For borrowers enrolled in the SAVE Plan, borrowers can remain in the SAVE Plan forbearance. However, the U.S. Department of Education has indicated that the zero percent interest benefit for the SAVE Plan forbearance is ending on Aug. 1, 2025. While borrowers can remain in the forbearance, interest will begin to accrue in August, borrowers can also opt to enter any other current repayment plan that exists.
While the requirement to have a partial financial hardship to enroll in IBR has been eliminated by the bill, and it is effective as the date of enactment, we are not seeing this update on StudentAid.gov or on the IDR applications. It is expected that this will take several weeks to months for this update to be made.
How to Prepare for These Changes
Start planning now, even if the changes seem far away. Here's what you can do:
Track Your Current Loans: Make a list of all your federal student loans, their balances, and current repayment plans. This will help you understand which loans might be affected.
Calculate Potential RAP Payments: Use the RAP formula to estimate what your payments might be under the new system. Compare this to your current payments to see if RAP could help or hurt your budget.
Consider Your Future Borrowing: If you plan to borrow more for school after July 1, 2026, factor the new repayment options into your borrowing decisions.
Stay Informed: Student loan rules change frequently. Read all correspondence from all official sources, like your loan servicer and the Department of Education.