Which student loan repayment plan should you choose?
Check when your loans were first paid out, then compare the fixed plan with the income-based plans you're allowed to use.
New to this?
A repayment plan is the set of rules that decides your monthly federal student loan bill and how many years you pay. Some plans have a fixed payment based on what you owe. Others, called income-driven plans, base it on your income and family size. Your loan servicer, the company that collects payments, puts you on the plan you pick.
Read first
Myth
SAVE is still the plan with the lowest payment, so I'll just stay in it.
Truth
A federal court blocked the SAVE Plan on March 10, 2026. Borrowers in SAVE forbearance must pick a new plan, or their servicer will move them to one.
Worth memorizing
- 1
One new loan changes every loan's options.
A loan first paid out on or after July 1, 2026, even a consolidation, limits all your Direct Loans to RAP or Tiered Standard.
- 2
RAP is 1% to 10% of income.
The yearly payment is a share of your AGI, divided by 12, minus $50 a month per dependent. Never below $10.
- 3
Tiered Standard runs 10 to 25 years.
Owe under $25,000 and it is 10 years. At $30,000, Sam's term is 15 years and his payment about $253.
Here's what I'd do. Look up the first disbursement date of every loan before you borrow again or consolidate, because one new loan changes your options for all of them. Then run the official Repayment Calculator and pick the plan you can pay on time every month.
Do this today
Log in at StudentAid.gov, write down each loan's type and first disbursement date, then run the Repayment Calculator with your latest tax return. Note the two plans with the lowest payment you can keep up and call your servicer to switch.
Practice
1 of 3
Under RAP, what is the monthly payment for an AGI of $45,000 with one dependent?
$45,000 is in the 4% band: 4% × $45,000 = $1,800 a year, or $150 a month. One dependent takes off $50, so $150 − $50 = $100.
2 of 3
You owe $42,000 and enter the Tiered Standard Plan. What is the longest repayment period?
Balances of $25,000 to under $50,000 get 15 years under the Tiered Standard Plan.
3 of 3
Which loan type can't be repaid under RAP?
Parent PLUS loans, and consolidation loans that repaid them, are limited to the Tiered Standard Plan under the new rules.
Tips
Find each loan's first disbursement date
Log in at StudentAid.gov and open each loan. The first disbursement date tells you which plans are open to you, so check it before you consolidate or borrow again.
Run the official Repayment Calculator
StudentAid.gov's calculator uses your real loans and income to show which plans you qualify for and estimates of your monthly and total payments on each.
Let the IRS share your income
When you apply for an income-driven plan, consent to share your federal tax information. Your plan then recertifies each year without paperwork, and a missed deadline can raise your payment.
Turn on auto pay
StudentAid.gov says auto pay cuts the rate by 1% on eligible Direct Loans through June 30, 2028 if you enroll by Dec. 31, 2026. Ask your servicer if your loans qualify.
A worked example: RAP or Tiered Standard on $30,000
Sam owes $30,000 in Direct Loans, one first paid out after July 1, 2026, so only RAP and Tiered Standard are open. Assume a 6% rate. His AGI is $55,000, with no dependents.
- RAP: 5% × $55,000 = $2,750 a year, and $2,750 ÷ 12 = $229.17 a month. That covers his first month's interest of $150, so no subsidy applies.
- Tiered Standard: $30,000 falls in the 15-year tier. At 6%, 180 payments of $253.16 pay it off with $15,568 in interest.
- If his income never changed, $229.17 a month would take 214 months and $18,837 in interest. RAP payments rise as his income does.
- Sam picks RAP while his income is modest and pays extra when he can.
- Sam's AGI$55,000
- RAP rate for $50,001 to $60,0005%
- Yearly RAP amount$2,750
- Tiered Standard, 15 years$253
- Minus RAP payment per month−$229
- RAP is lower by, per month=$24
- Interest, Tiered Standard$15,568
- Interest, RAP if income stays flat$18,837
Try your numbers
Common mistakes
Consolidating without checking the date
A new Direct Consolidation Loan made on or after July 1, 2026 counts as a new loan. It moves all your Direct Loans off IBR, ICR and PAYE and onto RAP or Tiered Standard, and it can't be undone.
Missing the yearly recertification
Income-driven plans need your income each year. Miss the deadline on RAP and your bill jumps to the 10-year standard amount. On IBR, unpaid interest is also added to your balance.
Waiting in SAVE forbearance
Loans parked in SAVE forbearance must go on a new plan. Pick your own so you get the payment that fits, not whatever your servicer assigns.
Going deeper
Your federal repayment options now depend on one date: whether any of your loans was first paid out on or after July 1, 2026. If one was, you choose between the Repayment Assistance Plan, which follows your income, and the Tiered Standard Plan, which has a fixed payment.
The law changed the plans
The One Big Beautiful Bill Act, signed July 4, 2025, created two new plans for federal Direct Loans: the Repayment Assistance Plan (RAP) and the Tiered Standard Plan. It also ends the PAYE and ICR plans no later than July 1, 2028.
Newer loans get two choices
If any of your loans, including a consolidation loan, was first paid out on or after July 1, 2026, all your Direct Loans must be repaid under RAP or the Tiered Standard Plan. If you don't choose, your servicer uses Tiered Standard.
Older loans keep more choices
If every loan was first paid out before July 1, 2026 and you borrow no more, you keep the Standard, Graduated and Extended plans, IBR and RAP, plus PAYE and ICR until they close.
SAVE is blocked
A court order on March 10, 2026 stopped the Department of Education from running the SAVE Plan. If your loans sit in SAVE forbearance, you have to choose another plan and start paying.
Start with your loan dates
Before you compare payments, find out which plans you can use. StudentAid.gov sorts borrowers by whether a loan was first disbursed (paid out) on or after July 1, 2026.
If all your loans came before that date and you never borrow again, you keep the older menu of plans. If even one loan is first paid out on or after it, including a new Direct Consolidation Loan, all your Direct Loans move to the new menu of RAP and Tiered Standard. You lose access to IBR, ICR and PAYE even if you were already enrolled in one of them.
Parent PLUS loans, and consolidation loans that paid one off, can't use RAP and go on the Tiered Standard Plan. FFEL and Perkins loans can't use either new plan and stay on the older plans they qualify for.
How the Repayment Assistance Plan works
RAP sets your yearly payment as a percentage of your adjusted gross income (AGI), the income figure on your tax return. The rate climbs one point for each $10,000 of AGI: 1% from $10,001 to $20,000, up to 10% above $100,000. Divide by 12, then subtract $50 for each dependent. The payment is never below $10, and at an AGI of $10,000 or less it is $10.
RAP also keeps the balance from growing. If your full, on-time payment doesn't cover the month's interest, the unpaid interest is waived. If it lowers your principal (the amount you borrowed) by less than $50, the government adds a matching payment to bring the drop to $50, or to the amount you paid if that is smaller.
Any balance left after 360 qualifying payments, over at least 30 years, may be discharged. On-time, full payments under RAP generally count toward Public Service Loan Forgiveness (PSLF). RAP payments are not capped, so a high income can mean a payment above a 10-year fixed plan.
How the Tiered Standard Plan works
Tiered Standard is a fixed payment, at least $50 a month, that pays the loan off by a deadline set by how much you owe when you enter the plan. Under $25,000 gets 10 years, $25,000 to under $50,000 gets 15 years, $50,000 to under $100,000 gets 20 years, and $100,000 or more gets 25 years.
Payments on Tiered Standard do not count toward PSLF, so public service workers who want PSLF need an income-driven plan.
The older plans and when they close
Borrowers whose loans all predate July 1, 2026 can still use the Standard Plan (fixed, up to 10 years), the Graduated Plan (lower at first, rising about every two years) and the Extended Plan (up to 25 years, for balances over $30,000).
IBR is 10% of discretionary income with a 20-year term if you first borrowed on or after July 1, 2014, or 15% with a 25-year term if you borrowed before that. It is never more than the 10-year standard payment, and you no longer need to show a financial hardship to join. PAYE is 10% over 20 years, and ICR is 20% over 25 years. Both close no later than July 1, 2028, and enrolled borrowers must pick a new plan by then.
You can switch between plans you qualify for. One catch from StudentAid.gov: payments made under RAP don't count toward forgiveness under IBR, ICR or PAYE if you switch back later, although they do count for PSLF.
If you were in SAVE
The court order of March 10, 2026 blocked the SAVE Plan. Loans held in forbearance because of a SAVE application must now go on another plan, and if you don't choose one, your servicer will.
Use the Repayment Calculator to compare the plans you qualify for. If your loans all came before July 1, 2026, IBR and RAP are the income-driven options that stay open long term.
Questions people ask
What happened to the SAVE plan?
A federal court order on March 10, 2026 stopped the Department of Education from running SAVE. Borrowers with loans in forbearance because of SAVE must choose a new plan, and their servicer will place them in one if they don't.
Can I still sign up for IBR?
Yes, if all your loans were first paid out before July 1, 2026 and you don't take a new loan, including a consolidation loan. You no longer need a partial financial hardship to enroll. Parent PLUS loans need special steps through consolidation and ICR.
Is forgiven student loan debt taxed?
It can be. Except for PSLF, StudentAid.gov says you might owe federal or state income tax on a discharged balance. You get 21 days' notice to opt out.
Do RAP payments count toward Public Service Loan Forgiveness?
Generally yes, as long as each payment is on time and in full. Tiered Standard payments do not count toward PSLF.
What if my income is very low?
On RAP, an AGI of $10,000 or less means a $10 monthly payment. On the other income-driven plans, a low enough income can mean $0. The Repayment Calculator shows your figure.
Printable worksheet with answer key, free for classrooms. Lesson plan for this unit.
Sources
- StudentAid.gov: Federal student loan repayment plans
- StudentAid.gov: One Big Beautiful Bill Act updates
- StudentAid.gov: Important definitions (RAP and Tiered Standard Plan)
- StudentAid.gov: Income-driven repayment plans
- StudentAid.gov: IDR plan court actions
- StudentAid.gov: Standard Repayment Plan
Updated October 4, 2026. General education, not personalized financial, tax or legal advice. Figures are examples. Check current rates and limits before you act.
Terms on this page
Related lessons
Get your money plan by email
One step each morning: what to do, why it comes in that order, and one small thing to try. About 5 minutes. Then one short note a week. Free, unsubscribe anytime.