All Student Loan Borrowers Affected by Payment Plan Changes

Beginning July 1, 2026, a number of significant changes will affect the federal student loan system, including payment plans for all borrowers. Some changes have already taken effect, others will soon, and yet others won’t take effect until 2028, but every single payment plan will be impacted. Borrowers with new loans taken out after July 1, 2026 will have significantly fewer repayment options, even if they have older loans that predate the changes. Borrowers with older loans will retain access to some of the existing payment plans but others will be phased out in a couple of years. In short, every borrower—including those currently in repayment—will be impacted by these changes to payment plans, and they would do well to consider their repayment options under this new normal.

Income-Driven Repayment (IDR) Plans

Borrowers who are enrolled in an Income-Driven Repayment (IDR) plan—or who hope to be soon—should be aware of the changes coming to all plans, including some that have happened already.

• The SAVE plan has been eliminated, and borrowers currently enrolled in it will need to find a new plan as soon as possible. Beginning July 1, borrowers enrolled in SAVE will be notified that they have 90 days to select a new plan; those who do not will be automatically placed on the new Tiered Standard Plan. See below to learn more about this plan, especially potentially harmful consequences for those pursuing Public Service Loan Forgiveness (PSLF). 
• The PAYE plan is theoretically available until 2028 to borrowers who have Direct Loans taken out before July 1, 2026 as long as they can show a Partial Financial Hardship when they enroll. Payments are 10% of borrowers’ discretionary income and are capped at what they would be under the old 10-year standard plan. New regulations, however, state that the plan will be unavailable for those who previously qualified for it, so it’s unclear if borrowers will be able to switch to the plan after July 1st.
• The ICR plan remains available to borrowers who have Direct Loans taken out before July 1, 2026, but is the least popular plan, requiring borrowers to pay 20% of their discretionary income.  It has also been the only plan available to borrowers with Parent PLUS Loans who consolidated into a Direct Consolidation Loan. When it is eliminated in 2028, they will be moved to IBR, which is now available to them.
• The IBR plan has already been tweaked and is available to all borrowers with Direct Loans taken out before July 1, 2026. Payments are calculated at 10 or 15% of borrowers’ discretionary income (based on when the loans were dispersed), but are capped just like with PAYE. After PAYE is eliminated in 2028, this will be the only IDR plan with a payment cap.
• The RAP plan will become available starting on July 1, 2026 and will be the only IDR plan available for those with new loans taken out after that date. It calculates borrowers’ payments strictly off of adjusted gross income (AGI) from the last year’s taxes, regardless of family size. It also extends the repayment window to 30 years and does not have a payment cap.

The New Tiered Standard Repayment Plan

Starting July 1, 2026, a new Tiered Standard Plan will replace the existing fixed payment plans, leaving new borrowers with just this and RAP as their options for repayment. The old fixed payment plans gave borrowers three choices with fixed or graduated payments that extended between 10 and 25 years of repayment. The Tiered Standard Plan, however, removes those options and creates a repayment schedule based on the initial total balance of your loan(s). If you take more loans out later, the repayment window is recalculated. Your payment is calculated based upon your repayment window and balance, requiring a minimum payment of $50 per month. 

Unlike the previous fixed payment plans, the Tiered Standard Plan is not a qualifying plan for PSLF. Borrowers with new loans taken out after July 1, 2026 (even if they have older loans that precede that date) who are pursuing PSLF will only be able to use RAP.

If you have questions about changes to the student loan repayment plans, especially if you are still enrolled in SAVE, give us a call. We can help you understand the changes as they apply to your particular situation, evaluate your options, and make an informed decision that will save you the most money on your loans.

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