Federal Student Loan Borrowers Gain 2 New Repayment Plans Starting July 1
Updated
Updated · CNBC · May 29
Federal Student Loan Borrowers Gain 2 New Repayment Plans Starting July 1
7 articles · Updated · CNBC · May 29
July 1 brings two new federal student loan options: the income-driven Repayment Assistance Plan and a Tiered Standard Plan that stretches fixed payments from 10 to 25 years based on debt size.
RAP sets monthly bills at 1% to 10% of adjusted gross income, requires at least $10 a month, forgives remaining balances after 30 years, and gives a $50 monthly reduction per qualifying dependent.
The Tiered Standard Plan keeps a 10-year term for balances under $25,000, but extends repayment to 15 years for $25,000-$49,999, 20 years for $50,000-$99,999, and 25 years above $100,000.
Current borrowers can still use IBR, while PAYE and ICR remain temporarily available until July 1, 2028 without new forgiveness; payments made before switching can still count toward RAP or IBR relief.
Borrowers taking out new federal loans after July 1 will generally be limited to RAP or the Tiered Standard Plan, pushing lower-income, higher-debt borrowers toward RAP and smaller-balance borrowers toward faster standard repayment.
With the popular SAVE plan terminated, is the new RAP option a better deal for borrowers?
New loan limits and fewer repayment plans are here. Is a college degree now out of reach?
The 2026 Federal Student Loan Overhaul: What Borrowers Need to Know About New Repayment Plans, Loan Caps, and the One Big Beautiful Bill Act
Overview
The One Big Beautiful Bill Act (OBBBA) will bring a major overhaul to the federal student loan system starting July 1, 2026. This transformation aims to simplify the complex loan process, curb excessive borrowing, and create a fairer, more sustainable aid framework. The changes respond to ongoing challenges in the current system, with new repayment options like the Repayment Assistance Plan and Tiered Standard Plan replacing older plans. Borrowers will need to understand and adapt to these updates, as the reforms are designed to make student loans easier to manage while addressing the root causes of the student debt crisis.