Federal student loan repayment changed more between 2025 and 2026 than in the previous decade combined — a new law rewrote which plans exist, a federal court struck down the plan millions of borrowers were using, and the rules are still being contested in court as this is written. This guide explains the system as it stands in September 2026, but this is the single most litigation-sensitive topic we cover — verify your own status at studentaid.gov before making a decision, especially anything involving a court case or a rule you read about that hasn’t taken effect yet.
This is general education, not personalized advice. Loan servicers and the Department of Education can tell you exactly where your specific loans stand.
What changed, and why this topic moves so fast
On July 4, 2025, a federal law (the Working Families Tax Cuts Act) rewrote federal student loan repayment from the ground up, replacing a patchwork of income-driven plans with two new ones. Then, on March 10, 2026, a federal court vacated the SAVE Plan — the income-driven plan roughly 7.5 million borrowers were using — following years of legal challenges. Those borrowers are now being moved onto other plans through notices that started going out July 1, 2026, giving each borrower 90 days to choose.
The mechanics of the new plans described below come directly from the statute, so they’re on firmer ground than any news headline about them. What’s still genuinely unsettled is around the edges — employer-eligibility rules for one forgiveness program were finalized, then struck down by a court a day before taking effect. That’s the nature of this topic right now: treat the payment formulas as reliable, and treat anything about court cases, eligibility disputes, or “this program might end” as something to double-check the day you act on it.
The plans available today, by loan date
Which plans you can choose depends heavily on when your loan was first disbursed — before July 1, 2026, or after. This single date splits the entire system in two.
If your Direct Loans were all first disbursed before July 1, 2026, you generally keep access to:
- The three older fixed plans — Standard (10 years), Graduated, and Extended.
- Older income-driven plans, though two of them are being phased out: PAYE and Income-Contingent Repayment (ICR) stopped accepting new enrollments on July 1, 2026, and both fully sunset by July 1, 2028. IBR is the one legacy income-driven plan that survives long-term.
- If you were in SAVE, you’re in the 90-day transition window described above and need to actively choose a new plan — being auto-enrolled into a non-income-driven default is possible if you don’t.
If any of your Direct Loans were first disbursed on or after July 1, 2026, your only two options are the plans created by the new law: the Tiered Standard Plan and the Repayment Assistance Plan (RAP). The older menu of income-driven plans simply isn’t available to you.
The Tiered Standard Plan: fixed payments, term set by your balance
The Tiered Standard Plan is a fixed monthly payment, like the old Standard Plan — but instead of a flat 10-year term for everyone, your term is set by how much you owe. It doesn’t look at your income at all.
| Your loan balance | Repayment term |
|---|---|
| Under $25,000 | 10 years |
| $25,000 – $49,999 | 15 years |
| $50,000 – $99,999 | 20 years |
| $100,000 or more | 25 years |
A larger balance gets a longer term specifically so the fixed payment stays affordable — the same idea behind a longer auto loan term, applied to student debt. (The payment figures below use an illustrative 6.4% rate to show the mechanics; your actual rate depends on your loan type and disbursement year — verify it before comparing plans.)
- $15,000 balance, 10-year term: about $169/month
- $30,000 balance, 15-year term: about $260/month (versus roughly $339/month if it had stayed on the old flat 10-year plan — the tiered term exists precisely to lower that payment)
- $75,000 balance, 20-year term: about $554/month
- $120,000 balance, 25-year term: about $802/month
There’s no forgiveness on this plan — you pay the loan down to zero over the term, full stop. And payments on the Tiered Standard Plan do not count toward Public Service Loan Forgiveness (PSLF), so if you’re working toward PSLF, this is not your plan.
The Repayment Assistance Plan (RAP): the new income-driven option
RAP is the only income-driven plan available on loans disbursed after July 1, 2026, and it works differently from the income-driven plans you may have heard of before (IBR, PAYE, SAVE). Instead of a formula based on “discretionary income” above the poverty line, RAP charges a straightforward percentage of your Adjusted Gross Income (AGI) — 1% to 10%, rising by one percentage point for every $10,000 of AGI, capped at 10% once you’re above $100,000. Each dependent you claim on your tax return lowers your payment by $50/month, and the minimum payment is $10/month no matter how low your income is.
Worked examples (verified against the Department’s own published formula):
- AGI $55,000, no dependents: 5% bracket → about $229/month
- AGI $75,000, two dependents: 7% bracket, minus $100 → about $337/month
- AGI $101,000, no dependents: capped at 10% → about $842/month
- AGI $101,000, two dependents: capped at 10%, minus $100 → about $742/month
RAP has two protections the older plans didn’t have. First, any interest your payment doesn’t cover is waived, not added to your balance — so unlike some older plans, your loan can’t balloon simply because your payment was small. Second, if your payment doesn’t reduce your principal by at least $50 in a given month, the government makes up the difference — meaning your balance is guaranteed to fall every month you make your required payment, even at the $10 minimum.
Any remaining balance on RAP is forgiven after 30 years (360 qualifying payments) — or after 10 years if you qualify for Public Service Loan Forgiveness, since RAP payments do count toward PSLF.
Public Service Loan Forgiveness (PSLF): still here, still worth understanding
PSLF forgives your remaining federal loan balance after 120 qualifying monthly payments (10 years) while working full-time for a qualifying employer — government agencies at any level, or a qualifying nonprofit. This program is separate from which repayment plan you’re on, though your plan determines whether your payments count toward the 120.
Government employers — federal, state, local, and tribal — remain qualifying employers regardless of the recent legal back-and-forth over eligibility rules. A new rule narrowing which nonprofit employers qualify was finalized in late 2025 but was struck down by two federal courts on June 30, 2026, the day before it would have taken effect. In August 2026 the Department of Education appealed those rulings, but the rule stays vacated nationwide while the appeals proceed — so the prior eligibility standard, under which government agencies and qualifying 501(c)(3) nonprofits qualify, is what applies as of this writing. This is exactly the kind of detail that can change again; verify current employer eligibility at studentaid.gov/pslf before counting on it.
If you’re pursuing PSLF, one thing matters more than any plan comparison: make sure you’re on a qualifying repayment plan. RAP and IBR both count. The Tiered Standard Plan does not.
Other things worth knowing
Parent PLUS loans have a narrower path. They’re not eligible for RAP at all. The only income-driven option for Parent PLUS loans is Income-Contingent Repayment (ICR) — and only after consolidating first — but ICR itself is scheduled to sunset by July 1, 2028. If you hold Parent PLUS loans, this is worth discussing directly with your servicer.
Refinancing federal loans with a private lender is a one-way door. A private refinance can lower your rate if you have strong credit and stable income, but it permanently forfeits every federal protection — income-driven plans, PSLF, deferment, and forbearance. Only consider it if you’re confident you’ll never need any of those.
The federal student loan interest deduction is separate from all of this. You can deduct up to $2,500 of student loan interest paid each year without itemizing, regardless of which repayment plan you’re on.
Wondering whether to pay more than RAP requires, or invest that money instead? See Invest or Pay Off Debt First? How to Decide — with RAP’s rate typically well under the 6-8% break-even point, many borrowers are better off investing while paying the minimum.
How to choose
- Check when your loans were first disbursed. This single fact determines your entire menu of options.
- If you’re pursuing PSLF, confirm your plan counts. RAP and IBR do; the Tiered Standard Plan does not.
- If income-driven payments matter to you, run your numbers under RAP (or IBR, if your loans predate July 2026) using the official calculator at studentaid.gov, not a third-party estimate.
- If you were in SAVE, don’t let the 90-day window lapse without acting — the automatic default may not be the plan that best fits your situation.
- Before finalizing anything, check studentaid.gov/announcements-events for the current status — this article reflects the rules as of September 2026, and this is the one area of personal finance where “as of today” genuinely matters.
The bottom line
The federal student loan system was rebuilt in 2025–2026: the SAVE Plan is gone, two new plans (RAP and the Tiered Standard Plan) now govern any loan disbursed after July 1, 2026, and older borrowers are watching two legacy income-driven plans wind down by 2028. The payment formulas themselves come from statute and are stable — RAP’s income percentages and the Tiered Standard’s balance tiers aren’t going to shift with the next news cycle. What can still move is eligibility and forgiveness policy, which remain under active litigation. Know which loans you have, know which plans they qualify for, and check studentaid.gov before you commit to anything.
General information only, not personalized financial advice. This article reflects federal student loan rules as of September 2026. This topic is subject to ongoing litigation and regulatory change — verify current details at studentaid.gov before making any repayment decision. Dollar examples above use illustrative rates to show the calculation method; confirm your own rate and balance before comparing plans.
Sources (verified on official domains):
- U.S. Department of Education — Fact Sheet: Simplifying Student Loan Repayment (RAP and Tiered Standard Plan mechanics): https://www.ed.gov/about/news/press-release/fact-sheet-trump-administration-simplifying-student-loan-repayment
- U.S. Department of Education — Next Steps for Borrowers Enrolled in the SAVE Plan (90-day transition): https://www.ed.gov/about/news/press-release/us-department-of-education-announces-next-steps-borrowers-enrolled-unlawful-save-plan
- Federal Student Aid / StudentAid.gov — current plan status and court actions: https://studentaid.gov/announcements-events/save-court-actions
- Federal Student Aid — Public Service Loan Forgiveness: https://studentaid.gov/pslf
- Congress.gov — CRS summary of the Repayment Assistance Plan (P.L. 119-21): https://www.congress.gov/crs-product/IF13075
- Federal Student Aid (via loan servicer) — PSLF program regulation status update: https://mohela.studentaid.gov/DL/resourceCenter/PSLFInformation.aspx
