Two new federal student loan repayment plans, RAP (Repayment Assistance Plan) and Tiered Standard, launch July 1, 2026, replacing the court-blocked SAVE plan. RAP caps payments between 1% and 10% of your adjusted gross income with forgiveness after 30 years; Tiered Standard is a fixed payment whose term scales with your balance — 10 to 25 years — and offers no forgiveness. If you were on SAVE, you have 90 days from notification to choose a plan or you’ll be defaulted into Standard or Tiered Standard automatically.
Why This Is Happening Now
SAVE, the Biden-era income-driven repayment plan, was repeatedly blocked in federal court. A March 2026 court order formally barred the Department of Education from implementing it, following a December 2025 settlement that ended the SAVE and REPAYE litigation entirely. Roughly 7.5 million borrowers who were enrolled in SAVE — many sitting in interest-free forbearance for over a year — are now being notified that they need to act.
This isn’t a minor administrative update. It’s the biggest shift in federal loan repayment since the original 2023 payment restart, and it’s happening at a moment when the average federal borrower already carries about $39,600 in debt, with monthly payments commonly landing somewhere between $200 and $450 depending on whose estimate you use.
What Is RAP (Repayment Assistance Plan)?
RAP is the new flagship income-driven plan created under the One Big Beautiful Bill Act (OBBBA). Here’s how it works:
- Payment formula: 1% to 10% of your AGI on a progressive scale. The lowest earners (AGI under $10,000) pay a $10/month floor; the percentage rises roughly 1% for every additional $10,000 of income.
- Family discount: Your payment drops by $50/month per dependent.
- No negative amortization: Unpaid interest is fully subsidized by the government, so your balance never grows from unpaid interest alone.
- Forgiveness: Remaining balance is forgiven after 30 years of qualifying payments (the forgiven amount is taxable as income under current law).
- PSLF counts: As of an April 2026 final rule, RAP payments count toward the 120 payments required for Public Service Loan Forgiveness.
- Eligibility: Available to Direct Loan borrowers, including Grad PLUS. Parent PLUS loans and consolidation loans that include a Parent PLUS loan are excluded.
For loans disbursed before July 1, 2026, RAP is one option among several (alongside Standard, Graduated, Extended, and IBR). For loans disbursed on or after that date, RAP is the only income-driven option available — there’s no opt-out into PAYE or ICR for new borrowers.
What Is Tiered Standard?
Tiered Standard replaces the old flat 10-year Standard plan for loans disbursed after July 1, 2026. Instead of a fixed term regardless of balance, your repayment period scales with how much you owe:
| 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 |
Unlike RAP, Tiered Standard is not income-driven — your payment is fixed principal and interest, calculated to fully amortize the loan over the assigned term. There’s no forgiveness at the end; you simply finish paying off the full balance. If you took out a Parent PLUS loan after June 30, 2026, this is your only option — no income-driven plans, no PSLF eligibility, no forgiveness path.
What Happens If You’re Still on SAVE
If you were enrolled in SAVE, the Department of Education began notifying borrowers starting July 1, 2026. You have 90 days from your notification date to actively select a new plan. If you don’t choose, you’ll be automatically placed into Standard or Tiered Standard repayment — which, for many borrowers coming off an income-driven plan, means a noticeably higher monthly payment than they were used to.
If your income is low or unpredictable, RAP is almost always the better default than letting the auto-enrollment put you on a fixed-payment plan. If you’re closer to payoff and want to be debt-free on a predictable schedule, Tiered Standard might actually suit you better — just confirm the math before the switch happens automatically.
The Interest Rate Discount You Shouldn’t Miss
There’s a real, time-limited incentive buried in this transition: a temporary 1% interest rate reduction for borrowers enrolled in autopay. Normally, the standard autopay discount is 0.25%. From July 1, 2026, an additional 0.75% reduction applies — for a combined 1% off your interest rate — but only if you’re enrolled in autopay by 11:59 PM ET on September 30, 2026. Lock it in by that date and the discount holds through June 30, 2028. It applies to Direct Loans disbursed after July 1, 2012, which covers the large majority of current federal borrowers.
If you’re not already on autopay, this is a genuinely free way to lower your loan’s effective cost — no application, no income verification, just enrollment before the deadline.
How to Decide Between RAP and Tiered Standard
Run through these questions before September 30:
- Is your income variable or modest relative to your balance? RAP’s percentage-of-income formula protects you in low-income months and caps what you owe relative to what you earn.
- Are you pursuing Public Service Loan Forgiveness? RAP now counts toward PSLF; Tiered Standard does not offer forgiveness at all, so it’s the wrong choice if PSLF is part of your plan.
- Do you want to be debt-free on a fixed, known date? Tiered Standard gives you a hard payoff date with no income recalculation each year, which some borrowers find easier to plan around even though the payment is higher.
- Do you have dependents? RAP’s $50/month-per-dependent reduction can meaningfully lower your payment if you have kids or other dependents on your tax return.
There’s no universally correct answer — the right plan depends on your income stability, your debt balance, and whether forgiveness is realistically part of your timeline.
Budgeting for Your New Payment
Whichever plan you land on, treat your new monthly payment the same way you’d treat rent or a car payment: a fixed, recurring line item, not an afterthought that gets paid “whenever there’s money left.” This matters more than usual right now because payments under RAP can shift year to year as your income changes, while Tiered Standard locks in a number that may be meaningfully different from whatever you were paying under SAVE.
Log your new payment as a recurring monthly expense in Tefteri as soon as your plan is finalized, separate from your other debt categories. Seeing it sit alongside your rent, utilities, and subscriptions — rather than buried in a generic “loans” bucket — makes it much easier to spot if your new payment is squeezing your budget before it becomes a problem. Since Tefteri stores everything locally with no bank linking required, you can track this without connecting your loan servicer account to any third party.
Frequently Asked Questions
Do I have to switch plans right now if I’m on SAVE?
You have 90 days from when the Department of Education notifies you to actively select a new plan. If you let that window pass without choosing, you’ll be automatically placed into Standard or Tiered Standard repayment, which is often a higher monthly payment than borrowers had under SAVE’s income-driven calculation.
Is RAP better than the old IBR plan?
It depends on your situation. IBR remains available for loans disbursed before July 1, 2026, and in some cases caps payments lower than RAP would for the same income. RAP offers full interest subsidy (no negative amortization) and now counts toward PSLF, which IBR also does. Compare your actual projected payment under both using the Department of Education’s loan simulator before deciding.
What happens to PAYE, ICR, and REPAYE?
These plans are being phased out and will be fully eliminated by July 1, 2028. Borrowers still on those plans will eventually be transitioned to either IBR or RAP. If you’re currently on one of these plans, you don’t need to act immediately, but plan to revisit your repayment strategy well before the 2028 deadline.
Can I still get the 1% interest rate discount if I’m already enrolled in autopay?
Yes. If you’re already enrolled in autopay as of July 1, 2026, you qualify for the additional 0.75% reduction automatically — you don’t need to re-enroll. The September 30, 2026 deadline matters most for borrowers who haven’t set up autopay yet.
Will my monthly payment go up under the new plans?
It depends on your income and which plan you choose. Borrowers moving from SAVE’s relatively generous income calculation to Tiered Standard will likely see a payment increase. Borrowers choosing RAP may see a payment similar to or different from their old SAVE payment, since the percentage-of-income formula differs. Run the numbers for your specific income and balance before the 90-day window closes.
