Americans owe $1.66 trillion in student loans (New York Fed). On July 1, the rules for paying them back change in a big way.
Most borrowers won't feel it on day one. But a few decisions are better made before the switch flips, not after.
What's changing
The SAVE plan is over. A federal appeals court ended the Saving on a Valuable Education plan on March 10 (CNBC). Forbes reported that borrowers still in SAVE will get notices from their servicers starting July 1, with at least 90 days to choose another plan, and that those who don't choose will be moved into a plan automatically (Forbes).
A new plan arrives. Last year's tax and spending law created the Repayment Assistance Plan, or RAP, to take effect no later than July 1, 2026. Payments under RAP count toward Public Service Loan Forgiveness (U.S. Department of Education).
How RAP payments work, according to the Education Department's student aid site (StudentAid.gov):
- Your payment is 1% to 10% of your adjusted gross income, depending on how much you earn.
- It drops by $50 a month for each dependent you claim.
- The minimum is $10 a month.
- The repayment period runs up to 30 years.
New loans get fewer choices. Loans disbursed on or after July 1, 2026, including new consolidation loans, can only be repaid under RAP or a new Tiered Standard plan. Older plans such as ICR and PAYE are being phased out by July 1, 2028.
One door already opened. The law dropped the "partial financial hardship" requirement to get into Income-Based Repayment (IBR), so more borrowers can use it now (Education Department).
Run the numbers
An example of how RAP's formula works. (Illustrative: we assume a 5% rate; your actual percentage depends on your income bracket.)
| No dependents | 2 dependents | |
|---|---|---|
| Adjusted gross income | $60,000 | $60,000 |
| 5% of income, per year | $3,000 | $3,000 |
| Monthly, before dependents | $250 | $250 |
| Dependent reduction | $0 | −$100 |
| Monthly payment | $250 | $150 |
Compare that with what you pay now. For some borrowers RAP will be cheaper. For others, especially those who were paying very little under SAVE, it won't be.
4 moves to make now
- Log in to StudentAid.gov. Confirm which loans you have, which plan you're on and who your servicer is. You can't plan without this.
- If you're in SAVE, don't wait for the deadline. Use the Loan Simulator on StudentAid.gov to compare plans now, so you're ready when your notice arrives.
- Think hard before consolidating after July 1. A new consolidation loan made on or after that date can only go into RAP or Tiered Standard. If you were planning to consolidate in order to use an older plan, the timing matters. Check with your servicer first.
- Make sure your contact info is current. Servicer notices will carry deadlines. An old email address is how people miss them.
Fee check
- Repayment plan changes are free. You never need to pay anyone to switch plans or apply for forgiveness. Anyone charging for this is a red flag. The FTC has repeatedly warned about student loan "relief" scams.
- Collections: defaulted loans can be referred to collections. If you're behind, contact your servicer before it gets to that point.
Do this today: log in to StudentAid.gov and screenshot your current plan, balance and servicer. Five minutes now saves a scramble in July.
Sources
- CNBC, Federal appeals court orders end to SAVE plan , March 10, 2026
- Forbes, Student loan borrowers will have 90 days to change plans , March 27, 2026
- U.S. Department of Education, Dear Colleague Letter on One Big Beautiful Bill Act loan provisions , July 18, 2025
- U.S. Department of Education, Federal Student Aid, Income-Driven Repayment Plans
- Federal Reserve Bank of New York, Household Debt and Credit Report, Q1 2026 , May 12, 2026
Student loan rules are changing and depend on your loan types and dates. This article is for general information, not individual advice. Check StudentAid.gov or your servicer for your situation.