Which Student Loan Plan to Pick July 1

What's Changing July 1

The One Big Beautiful Bill Act eliminated all existing income-driven repayment plans — SAVE, PAYE, and ICR — effective July 1, 2026. Two new options replace them.¹

The federal government's goal was simplification: instead of five or six plans with overlapping eligibility rules, borrowers now have two. But the choice matters. The plan you pick affects how much you pay each month, how long you pay, and how much interest you'll pay over the life of your loan.

The Tiered Standard Plan

The Tiered Standard Plan replaces the old one-size-fits-all 10-year Standard Repayment Plan. Your repayment term now depends on your total loan balance.²

Total 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

Payments under Tiered Standard are fixed — the same amount every month — calculated to pay off your entire balance plus interest within your tier's term. If your income drops, your payment doesn't adjust. If your income rises, you can pay extra and finish early without penalty.

The Repayment Assistance Plan (RAP)

RAP is the new income-driven option. Unlike every income-driven plan that came before it — IBR, PAYE, SAVE — RAP bases payments on your full adjusted gross income (AGI), not your discretionary income. That means the poverty-line subtraction older plans used is gone.³

Payments run on a sliding scale:

Annual AGI	Monthly Payment
Under $10,000	$10 flat minimum
$30,000	3% = $75/month
$45,000	4% = $150/month
$60,000	5% = $250/month
$80,000	7% = ~$467/month
Over $100,000	10% of AGI

Each qualifying dependent reduces your payment by $50/month. If your payment doesn't cover your accruing interest, the government forgives the difference — your balance cannot grow while you make required payments. Any remaining balance is forgiven after 30 years.

RAP does not apply to Parent PLUS loans. If you're repaying Parent PLUS debt — or a consolidation loan that included Parent PLUS — Tiered Standard is your primary option after July 1. Contact your servicer if you have a mix of loan types.

How to Pick the Right Plan

Pick Tiered Standard if you:

• Have a small balance (under $25,000) and want the same 10-year payoff as before
• Earn close to what you expect your career income to be — no big income growth expected
• Want a fixed, predictable monthly payment that won't change
• Don't expect to need forgiveness at the 20- or 30-year mark
• Are repaying Parent PLUS loans (RAP is unavailable for these)

Pick RAP if you:

• Are early in your career and currently earn significantly less than you expect to earn in five years
• Have a large balance relative to your current income
• Have dependents — the $50/month per child deduction can meaningfully lower payments
• Are working toward Public Service Loan Forgiveness (RAP payments count as qualifying)
• Have high-balance professional loans — the 30-year timeline with income-based payments may be more manageable than fixed payments on $100,000+

A recent grad with $35,000 in debt and a $40,000 starting salary would pay roughly $133/month under RAP. Under Tiered Standard, they'd be in the 15-year tier with a fixed payment — higher initially but paid off in half the time. If their income will grow quickly, RAP now plus Tiered Standard in two or three years is a reasonable strategy. Switching plans is allowed.

What SAVE Borrowers Need to Do Now

If you're among the 7.5 million borrowers who were enrolled in SAVE, your servicer will issue a 90-day notice on or around July 1 asking you to choose a plan.³ If you don't respond within 90 days, you'll be automatically placed on the Tiered Standard Plan.

That automatic placement could mean a significantly higher payment than what you were paying under SAVE — especially if you had a $0 payment because your income fell below the poverty threshold. Don't wait for the notice to arrive.

Borrowers on PAYE or ICR have until July 1, 2028, before those plans are fully eliminated. IBR — for eligible borrowers with loans first disbursed before July 1, 2014 — is not being eliminated.

Review our full RAP plan explainer and SAVE transition guide for more detail.

Next Steps

1. Find your exact balance: Log in to StudentAid.gov to see your total outstanding federal loan balance. That number determines your Tiered Standard tier.
2. Estimate your RAP payment: Take your annual AGI, apply the corresponding bracket percentage (see table above), divide by 12, and subtract $50 per dependent.
3. Compare: Which is lower — your RAP estimate or a 10-to-25-year fixed payment on your balance?
4. Contact your servicer before September 30: If you're on SAVE, the 90-day choice window opens July 1. Choose proactively rather than getting auto-enrolled.
5. Check the broader picture: For context on how much debt is reasonable relative to your expected income, see how much student debt is too much and average student loan payments by degree level.

For a full breakdown of all federal student loan repayment options and how the old plans compared to these new ones, see our main repayment guide.

Footnotes

1. U.S. Department of Education. (2026). Fact Sheet: The Trump Administration Is Simplifying Student Loan Repayment. ed.gov. https://www.ed.gov/about/news/press-release/fact-sheet-trump-administration-simplifying-student-loan-repayment ↩

2. National Association of Student Financial Aid Administrators. (2026). Student Loan Repayment Plan Options As of July 1, 2026. nasfaa.org. https://www.nasfaa.org/uploads/documents/OB3_Repayment_Plan_Chart.pdf ↩

3. NPR. (2026, June 10). Guide: Student loan options change July 1. What you need to know. https://www.npr.org/2026/06/10/nx-s1-5835633/student-loans-guide-education-changes-repayment-plan ↩ ↩²