Federal student loan repayment plans after July 1, 2026

What changed

The 2025 budget law (the One Big Beautiful Bill Act) simplified federal student loan repayment. Starting July 1, 2026, borrowers can use the Repayment Assistance Plan (RAP) and a tiered standard repayment plan. The Department of Education is phasing out several older income-driven plans.

Federal student loan rules changed on July 1, 2026. Which repayment plans and limits apply to you depends on when your loans were first disbursed. Confirm your options on studentaid.gov or with your loan servicer.

Repayment Assistance Plan (RAP)

• Monthly payments are between 1% and 10% of income, depending on how much you earn.
• Payments are reduced by $50 per month for each dependent.
• If you make your on-time monthly payment, any remaining unpaid monthly interest is waived.
• If your on-time payment reduces the principal by less than $50, the federal government contributes up to $50 a month toward the principal.
• Available for Direct Loan borrowers (including Direct Consolidation loans that do not include a Parent PLUS loan).

Standard repayment

The standard plan spreads payments over a fixed term so the loan is paid off on schedule. Under the new rules the standard plan’s term depends on how much you owe (a “tiered” standard plan). Check studentaid.gov for the tiers and for the plan your servicer assigns.

Choosing a plan

• Compare the monthly payment and total cost of each plan available to you using the loan calculators.
• If you work in public service, ask whether payments on your plan count toward Public Service Loan Forgiveness.
• Recertify income on time if your plan requires it.

How to pick a plan

1. Log in to studentaid.gov and list every federal loan with its balance, rate and disbursement date.
2. See which plans your loan types allow.
3. Compare the monthly payment and total cost of each with the student loan calculator.
4. If you work in public service, check that the plan counts toward PSLF.
5. Set up autopay and calendar your income recertification date if your plan requires it.

What RAP means in practice

Under RAP, your payment is tied to income, unpaid monthly interest is waived when you make the on-time payment, and the government can add up to $50 a month toward principal if your payment reduces principal by less than $50. Those features prevent your balance from growing while you make your required payments.

Standard vs income-based thinking

A fixed-term standard plan pays the loan off on schedule and usually costs the least in total interest. An income-based plan lowers the monthly payment when income is low but can take longer. Balance cash-flow needs against total cost, and prepay when you can if there is no penalty.

Questions to ask your servicer

1. Which repayment plans am I eligible for based on when my loans were first disbursed?
2. What would my monthly payment be under each plan?
3. Do my payments count toward Public Service Loan Forgiveness?
4. When and how do I recertify my income?
5. How is unpaid interest handled on my plan?

If you are struggling to pay

Contact your servicer before you miss a payment. Ask about income-based options and other relief available for your loan type. If your loans are in default, ask about rehabilitation or other ways to return to good standing. Be careful with companies that charge upfront fees to “fix” student loans; help from your servicer and from studentaid.gov is free.

How repayment fits into your budget

A student loan payment is a fixed obligation, so include it in your budget alongside housing and utilities. If you receive a raise, consider whether to keep your payment the same and put extra toward principal, or to use the money for other goals such as an emergency fund.

🧮 Worked example: a 10-year standard payment on $30,000

At the 6.52% undergraduate rate, a $30,000 balance repaid over 10 years (120 payments) costs about $340.95 a month and roughly $10,914 in total interest. Stretching to 20 years lowers the payment to about $224.03 but raises interest to about $23,766. Illustration; your servicer’s figures control.

⚠️ Common mistakes to avoid

• Choosing a plan based only on the lowest monthly payment.
• Missing the annual income recertification and losing plan benefits.
• Assuming old plan names still apply to loans disbursed after the changes.
• Ignoring PSLF requirements while on an ineligible plan.
• Refinancing federal loans into private loans before comparing plans.
• Ignoring servicer letters and emails.

🛠️ Try it yourself

📚 Sources

• U.S. Department of Education: Negotiated rulemaking to implement the One Big Beautiful Bill Act’s loan provisions
• studentaid.gov: One Big Beautiful Bill Act updates
• studentaid.gov: Repayment plans

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