Federal student loan rules changed on July 1, 2026, ending the SAVE repayment plan and replacing a tangle of income-driven options with two new plans for the roughly 43 million Americans carrying federal student debt. The Department of Education is directing about 7.5 million SAVE borrowers to choose a new plan within 90 days or be moved into a standard plan with higher payments.
Key Takeaways
- The SAVE plan ended July 1, and servicers are notifying about 7.5 million enrolled borrowers to pick a new plan within 90 days.
- Two options replace the old menu for new borrowers: the income-driven Repayment Assistance Plan and a Tiered Standard Plan.
- The Repayment Assistance Plan sets payments at 1% to 10% of adjusted gross income, with a $10 minimum and a $50 reduction per dependent.
- Forgiveness under the new income-driven plan comes after 30 years, longer than the 20 to 25 years under older plans.
- Borrowers on auto pay can get a 1% interest-rate reduction available through June 30, 2028.
What Changed on July 1
The changes stem from the reconciliation law formally titled the Working Families Tax Cuts Act, and they took effect July 1, 2026. For anyone borrowing a federal student loan on or after that date, the older set of income-driven repayment plans is gone. New borrowers now choose between two options: the Repayment Assistance Plan, an income-driven plan known as RAP, and a Tiered Standard Plan with fixed payments over 10, 15, 20, or 25 years depending on the balance.
The most immediate change affects the roughly 7.5 million borrowers enrolled in the Saving on a Valuable Education plan, known as SAVE. The Department of Education began directing those borrowers to exit SAVE and enroll in a legal repayment plan. Federal loan servicers are expected to begin issuing 90-day notices on July 1. Borrowers who do not select a new plan within that window will be placed into a standard repayment option, which generally carries higher monthly payments than the income-driven plans many SAVE enrollees relied on. SAVE borrowers have been in forbearance since 2024, and many enrolled specifically because their incomes qualified them for a $0 monthly payment.
How the Repayment Assistance Plan Works
The Repayment Assistance Plan is the new income-driven option, and for borrowers taking out loans on or after July 1, it is the only income-driven plan available. Monthly payments run on a sliding scale from 1% to 10% of a borrower’s adjusted gross income, with a minimum payment of $10 for those earning $10,000 or less per year. The plan subtracts $50 from the monthly payment for each dependent.
The Repayment Assistance Plan carries two features earlier plans lacked. It waives unpaid interest in any month when a borrower’s payment does not cover the interest that accrued, so balances do not grow during repayment. It also includes a matching principal benefit: if a payment fails to reduce principal by at least $50, the government contributes enough to ensure the balance drops by that amount.
The tradeoff is time. Forgiveness under the Repayment Assistance Plan arrives after 30 years, or 360 qualifying payments, compared with the 20 to 25 years under the older income-driven plans. According to the Congressional Research Service, that longer horizon means more total payments for many borrowers. Public Service Loan Forgiveness still requires 120 qualifying payments, and the Repayment Assistance Plan qualifies for it, while the Tiered Standard Plan does not.
What Existing Borrowers Should Know
Borrowers who took out all their loans before July 1 and do not borrow again keep access to several existing plans, including the current Standard, Graduated, and Extended plans, and can also opt into the Repayment Assistance Plan. The Income-Based Repayment plan remains available long term, but the Pay As You Earn and Income-Contingent Repayment plans are scheduled to end July 1, 2028.
One caution carries weight: taking out any new loan or consolidating existing loans on or after July 1 pulls all of a borrower’s debt into the new system, limiting them to the Repayment Assistance Plan or the Tiered Standard Plan. Once a borrower enrolls in the Repayment Assistance Plan, switching to another plan later is not permitted, making the initial choice consequential.
The Department of Education is also offering a 1% interest-rate reduction for borrowers enrolled in auto pay, available through June 30, 2028, for those who enroll by September 30, 2026. Separately, the overhaul tightens borrowing itself, eliminating Grad PLUS loans for new borrowers and capping annual graduate borrowing at $20,500 and professional borrowing at $50,000.
Financial aid experts have cautioned that pushing millions of borrowers into repayment and into plans that cost more than SAVE could worsen a rise in student loan defaults, particularly among lower-income borrowers who had qualified for $0 payments. Borrowers can compare their options using the Federal Student Aid loan simulator at StudentAid.gov.
For the 43 million Americans holding federal student debt, July 1 replaced a confusing menu of repayment choices with a simpler two-track system, but for many borrowers the simpler math means larger monthly checks and a longer road to forgiveness.
Frequently Asked Questions
What happened to the SAVE plan? The SAVE plan ended on July 1, 2026, following a legal settlement. About 7.5 million enrolled borrowers are being directed to choose a new repayment plan, with servicers issuing 90-day notices.
What are the two new repayment plans? New borrowers choose between the Repayment Assistance Plan, an income-driven option, and a Tiered Standard Plan with fixed payments over 10 to 25 years based on balance.
How much will I pay under the Repayment Assistance Plan? Payments range from 1% to 10% of adjusted gross income, with a $10 minimum for the lowest earners and a $50 reduction per dependent.
When does forgiveness happen under the new plan? Any remaining balance under the Repayment Assistance Plan is forgiven after 30 years, or 360 qualifying payments.
What if I do nothing after getting a notice? Borrowers who do not select a new plan within the 90-day window will be placed into a standard repayment plan, which generally has higher monthly payments.
Can I still get a lower interest rate? Yes. Borrowers enrolled in auto pay qualify for a 1% interest-rate reduction, available through June 30, 2028, for those who enroll by September 30, 2026.
