Big changes are coming to federal student loans in 2026—and if you’re a borrower, future student, or parent helping to finance education, it’s time to get familiar with what’s ahead.
Thanks to the newly passed One Big Beautiful Bill Act (OBBB), the federal student loan repayment system is being streamlined. Starting July 1, 2026, the number of repayment options will shrink, and the rules around forgiveness, loan types, and monthly payments will shift significantly.
What’s Changing?
The OBBB simplifies repayment into two main options for new borrowers:
1. Standard Repayment Plan – Fixed monthly payments over 10 to 25 years, depending on loan balance.
2. Repayment Assistance Plan (RAP) – A new income-based plan that calculates payments as a percentage of your total income.
Legacy plans like PAYE, SAVE, and ICR will be phased out by July 1, 2028, and new Parent PLUS and Grad PLUS loans will no longer be eligible for income-driven repayment.
How RAP Works
RAP introduces a tiered payment structure based on your Adjusted Gross Income (AGI). Here’s how it scales:
- Under $10,000 AGI: Flat $10/month minimum payment.
- $10,000–$19,999 AGI: 1% of AGI.
- $20,000–$29,999 AGI: 2% of AGI.
- This pattern continues, increasing by 1% for every $10,000 in income.
- $100,000+ AGI: 10% of AGI.
For example:
- A borrower earning $30,000 would pay 3% of their AGI, or $900/year ($75/month).
- A borrower earning $70,000 would pay 7% of AGI, or $4,900/year ($408/month).
Borrowers can deduct $50/month per dependent, which reduces the monthly payment accordingly.
Other features include:
- Interest won’t grow if your payment doesn’t cover it—unpaid interest is waived.
- Up to $50/month may be applied to principal if your payment is below the required amount.
- Forgiveness occurs after 30 years (360 payments), and forgiven balances will be taxable.
Who Will Be Affected?
New Borrowers: Anyone taking out federal loans after July 1, 2026, will be placed into this new system.
Current Borrowers: Can stay in their current plan until July 1, 2028, then must switch to RAP or revised IBR.
Parent and Grad PLUS Borrowers:
- New Parent PLUS loans will no longer qualify for income-driven repayment.
- Grad PLUS loans will be discontinued for new borrowing after July 1, 2026.
- Consolidated Parent PLUS loans taken out before the cutoff may still access IBR until 2028.
Forgiveness and Public Service
The Public Service Loan Forgiveness (PSLF) program remains intact. Qualifying borrowers can receive forgiveness after 10 years of payments under RAP or IBR.
For all other borrowers, forgiveness now comes after 30 years, and the forgiven amount will be considered taxable income.
Why the Change?
Supporters of the OBBB say the law simplifies repayment, reduces confusion, and helps manage federal costs. By limiting borrowing and standardizing repayment, the government aims to create a more predictable system for both borrowers and taxpayers.
What Should You Do Now?
- Review your current repayment plan and consider whether consolidating or switching plans before 2028 makes sense.
- Plan ahead if you’re considering graduate school or using Parent PLUS loans.
- Track PSLF eligibility if you’re working in public service.
Final Thoughts
The 2026 student loan reform marks a major shift in how education debt is managed. While the system is becoming more streamlined, it’s also more structured—with fewer options and longer repayment timelines.
Whether you’re borrowing now or planning for the future, staying informed is key. As more details emerge from the Department of Education, we’ll continue to provide updates and insights to help you navigate the new landscape.
**This post was written with the assistance of Microsoft Copilot AI