New Student Loan Plan to Raise Monthly Payments for Many Starting in 2026 OR Student Loan Repayment: New Income-Driven Plan Means Higher Bills for Borrowers
- Millions of federal student loan borrowers face higher monthly payments as new repayment regulations take effect, reversing a trend toward affordability established under the Biden administration.
- The new RAP will become the primary income-driven repayment option for new loans starting July 1, 2026.
- More than 40 million Americans hold federal student loan debt.
Millions of federal student loan borrowers face higher monthly payments as new repayment regulations take effect, reversing a trend toward affordability established under the Biden administration. The shift, driven by a Republican-led overhaul of student lending, will see the phasing out of income-driven repayment (IDR) options like SAVE and PAYE, replaced by a new Repayment Assistance Plan (RAP).
Why It Matters
The new RAP will become the primary income-driven repayment option for new loans starting . Analysis indicates that RAP will generally require higher payments than the SAVE plan, impacting both current borrowers transitioning to new plans and future borrowers. This comes at a time of increasing delinquency rates in student loan debt, with millions of borrowers already falling behind on payments, according to recent data from the Federal Reserve Bank of New York.
More than 40 million Americans hold federal student loan debt. Approximately 7 million borrowers currently enrolled in SAVE will be transitioned to other plans as part of a legal settlement that effectively ends the SAVE program, a move expected to increase monthly costs for many.
What to Know
The RAP plan requires even borrowers with the lowest incomes to contribute more towards their loans than under the SAVE plan. For example, a family of four with an income of $81,000 would see their monthly payment increase from $36 under SAVE to $440 under RAP, according to a recent report by the Institute for College Access & Success.
The SAVE plan will be discontinued following the legal settlement, and the Department of Education will move enrolled borrowers to remaining options. The PAYE (Pay As You Earn) and ICR (Income-Contingent Repayment) plans are slated to end by , leaving IBR (Income-Based Repayment) and RAP as the main income-driven repayment choices for most borrowers during the transition.
The Department of Education stated that these changes were mandated by Congress through the One Big Beautiful Bill (OBBBA) and are being implemented to simplify repayment options alongside new loan limits for graduate and professional programs.
What People Are Saying
Nicholas Kent, Under Secretary of Education, stated in a press release: “For years, American families have legitimately been concerned about the rising cost of higher education… The President Trump Working Families Tax Relief Act offers a once-in-a-generation opportunity to reduce tuition costs and improve the student loan system.”
The Institute for College Access & Success stated in its report: “Borrowers are losing access to the much more affordable SAVE Plan. Current borrowers will be left with fewer income-based repayment plans, which are more expensive, while new borrowers will only have one income-based repayment option: the new Repayment Assistance Plan (RAP), which requires higher monthly payments and a longer repayment timeline than previous plans.”
What Happens Next
RAP will go into effect for new loans disbursed on or after , becoming the sole income-driven repayment option for those loans. PAYE and ICR will be phased out by for most borrowers.
The Department of Education will finalize the rules after a period of public comment and issue transition guidance for borrowers leaving SAVE, including details on plan selection, and timelines. Borrowers will be advised to compare RAP and IBR using the department’s tools, while Parent PLUS borrowers needing income-driven options will be urged to meet consolidation deadlines before the plan ends.
The changes implemented through the OBBBA extend a student loan tax break that primarily benefits higher-income borrowers, according to analysis from the Brookings Institution. The shift from a variety of income-driven repayment plans to a more standardized system, while intended to simplify the process, is projected to increase the financial burden on many student loan borrowers.