Your Student Loan Repayment Plan Just Changed — Here's What the New RAP and Tiered Standard Plans Mean for You

What Changed, and When

On July 1, 2026, the federal student loan repayment system changed more than at any point in over a decade, under the 2025 tax and spending law widely known as the One Big Beautiful Bill Act, or OBBBA (the Department of Education's own materials call it the Working Families Tax Cuts Act, but most coverage still uses OBBBA). Going forward, most borrowers have exactly two repayment plan options: the Tiered Standard Plan and a new income-driven plan called the Repayment Assistance Plan, or RAP.

If you have federal student loans, this isn't background news you can skip. It changes what you owe monthly, it puts millions of SAVE Plan borrowers on an active countdown clock right now, and it comes with a genuinely useful interest-rate discount that has its own deadline.

The Two New Repayment Plans

The Tiered Standard Plan replaces the old one-size-fits-all 10-year Standard Plan with fixed terms of 10, 15, 20, or 25 years, scaled to how much you owe. The Department of Education's own example: a $30,000 balance that would have carried a $341 monthly payment under the old 10-year Standard Plan drops to $262 a month over 15 years under Tiered Standard.

RAP is the more significant change. It's an income-driven repayment (IDR) plan, meaning your monthly payment is based on your income rather than a fixed schedule. Payments are calculated as a percentage of your adjusted gross income — roughly 1% to 10%, rising in graduated brackets as income increases — with a $10 minimum payment regardless of income, and a $50-per-month reduction for each dependent you claim.

Two mechanics make RAP meaningfully different from the income-driven plans it's replacing. First, any interest your payment doesn't cover is waived rather than added to your balance, as long as you pay on time and in full. Second, if your payment reduces your principal by less than $50, the government covers the difference, up to $50 a month. Together, those two features are designed so your balance shouldn't grow — a real fix for a well-documented problem: government data cited by the Department of Education found that roughly three out of four borrowers on the old income-driven plans owed more than they originally borrowed six years into repayment, because unpaid interest kept compounding onto the balance.

Forgiveness under RAP comes after 360 on-time monthly payments — 30 years, longer than the 20-to-25-year timelines under the plans it replaces.

One real limitation: Parent PLUS loans are never eligible for RAP, regardless of when they were disbursed. A separate deadline matters for a different reason: consolidating a Parent PLUS loan into a Direct Consolidation Loan before June 30, 2026 preserved access to Income-Contingent Repayment (ICR), and through that, Income-Based Repayment (IBR), for those borrowers; after that date, Parent PLUS borrowers are generally limited to the Tiered Standard Plan.

The older Pay As You Earn (PAYE) and ICR plans are closed to new enrollment and are set to be phased out entirely by July 1, 2028. IBR remains available, but only for loans disbursed before July 1, 2026.

If You Were on the SAVE Plan, You're on a Clock Right Now

The SAVE Plan — a Biden-era income-driven repayment option — was struck down in litigation, and the Department of Education is winding it down. Starting July 1, 2026, servicers began sending individualized 90-day exit notices to SAVE borrowers on a rolling basis. Your own 90-day window starts on the date your notice is sent to you, not on a single fixed date that applies to everyone.

Here's the part worth taking seriously: if you don't choose a new plan within your 90 days, you get auto-enrolled into either the Standard Plan or the Tiered Standard Plan — and whichever one your servicer applies isn't necessarily the plan that's best for your income and balance. If you're still on SAVE, don't wait for your notice to arrive before acting. You can contact your servicer now and choose RAP, Tiered Standard, or (if your loans were disbursed before July 1, 2026) IBR on your own timeline instead of a default's.

An Autopay Interest-Rate Discount Worth Grabbing Before September 30

Separately from the repayment-plan overhaul, the Department of Education is offering a temporary interest-rate discount for borrowers enrolled in automatic payments: a full 1 percentage point off your rate, up from the standard 0.25-point autopay discount, running from July 1, 2026 through June 30, 2028. If you're already enrolled in autopay, this applies automatically — no action needed. If you're not enrolled yet, you need to sign up by September 30, 2026 to get it. On a modest loan balance the dollar savings look small month to month — the Department's own example is a $30,000 loan at 6.4% dropping to 5.4%, saving roughly $17 a month — but it costs nothing to claim and compounds over two full years.

How to Actually Apply for a New Plan

Applying for a new plan takes about 10 minutes through your StudentAid.gov account. If you consent to sharing your tax information directly with the IRS as part of the application, you skip manually uploading income documentation, which speeds things up further.

Where This Fits Into Your Broader Financial Picture

If you're also investing or building retirement savings, RAP's design changes a calculation worth revisiting. Because RAP's interest waiver and principal-match features are built to keep your balance shrinking even at the minimum required payment, the old logic of "aggressively overpay your student loan versus invest the difference" gets weaker for RAP borrowers specifically. That's not a blanket recommendation to stop paying extra on your loans — your interest rate, your other debt, and your own risk tolerance still matter — but it's a comparison worth understanding for your own situation, now that minimum RAP payments carry less risk of your balance growing out from under you than the old income-driven plans did. A financial or tax professional can help run the actual numbers.

The Takeaway

If you have federal student loans, three things are true as of this week: your plan options changed on July 1 whether or not you did anything about it, SAVE Plan borrowers are on an active 90-day countdown that starts with their individual notice, and there's a real, low-effort interest-rate discount on the table through September 30. None of this requires an urgent decision made today, but all of it is worth ten minutes on StudentAid.gov before a default enrollment or a missed deadline makes the decision for you.

This article explains current student loan policy for general educational purposes. It is not personalized financial or tax advice — a qualified financial professional or your loan servicer can confirm how these changes apply to your specific loans and income.