July 1, 2026 is the federal student-loan reset. It is the biggest shift in how federal student loans are repaid in over a decade, driven by the One Big Beautiful Bill Act. If you have federal student loans, the July 1 student loan changes affect your plan, your payment, and possibly your path to forgiveness. Here is the whole picture in plain English, with links to go deeper on each piece.
What changed on July 1, 2026?
Three things converged:
- A new income-driven plan called RAP (the Repayment Assistance Plan) became available.
- The SAVE plan was struck down by the courts, and borrowers on it must choose a new plan.
- PAYE and ICR closed to new enrollment and will fully sunset by July 1, 2028.
IBR, the Income-Based Repayment plan, remains. The non-income-driven plans (Standard, Graduated, Extended) are unaffected.
The new plan: RAP
RAP bases your monthly payment on your income and dependents. It charges a tiered percentage of your full adjusted gross income (AGI), with no poverty-line subtraction, then subtracts $50 per dependent, with a $10 minimum. The rate steps up one point for every $10,000 of AGI:
| Your annual AGI | RAP rate |
|---|---|
| $10,000 or less | flat $10/month |
| $10,001 to $20,000 | 1% |
| $20,001 to $30,000 | 2% |
| $30,001 to $40,000 | 3% |
| $40,001 to $50,000 | 4% |
| $50,001 to $60,000 | 5% |
| $60,001 to $70,000 | 6% |
| $70,001 to $80,000 | 7% |
| $80,001 to $90,000 | 8% |
| $90,001 to $100,000 | 9% |
| $100,001 or more | 10% |
A worked example. Say your AGI is $60,000 and you have one dependent. You fall in the 5% tier, so 5% of $60,000 is $3,000 a year, or $250 a month. Subtract $50 for your dependent and your RAP payment is $200 a month.
Two features make RAP stand out:
- If your payment does not cover the month’s interest, the leftover interest is waived, so your balance does not grow.
- Your principal drops by at least $50 every month, backed by a government subsidy if your payment alone would not get there.
Most borrowers reach forgiveness on RAP after 30 years (360 payments). Public-service workers pursuing PSLF still reach forgiveness in 10 years (120 payments), tax-free. Full detail is in what RAP means for your student loans.
The plans that are ending or closing
- SAVE has been struck down. If you were on it, you will get a transition notice starting July 1, 2026 and a 90-day window to choose a new plan. See is my income-driven repayment plan going away?
- PAYE and ICR closed to new enrollment July 1, 2026 and fully sunset July 1, 2028.
- IBR stays.
What it means for new borrowers
If you take out a federal student loan on or after July 1, 2026, RAP will be your only income-driven repayment option. You can still choose a fixed plan like Standard, but among income-driven plans, RAP is it.
There are other new-borrowing changes worth knowing too: Grad PLUS loans are eliminated for new borrowers, and Parent PLUS borrowing is now capped ($20,000 per year and $65,000 in total per child). Those caps push more families toward private loans to fill the gap.
What it means for current borrowers
If you already have federal loans and do not take out new ones, you generally have a choice: keep your current plan (subject to the phase-outs above) or switch to RAP. The right answer depends on your situation. We compare the options in RAP vs SAVE vs PAYE vs IBR.
What about PSLF and forgiveness?
Public Service Loan Forgiveness still exists, OBBBA did not repeal it, and RAP counts as a qualifying plan for it. Payments you make on RAP count toward your 120 PSLF payments, and PSLF forgiveness remains tax-free. If you are pursuing forgiveness, the plan you pick matters a lot, see RAP and PSLF: what forgiveness-seekers need to know.
One thing to plan for: forgiveness that is not PSLF (like the 30-year RAP forgiveness) is treated as taxable income at the federal level, and a handful of states tax discharged student debt too. As of 2026, the states that tax forgiven student debt are Arkansas, Indiana, Mississippi, North Carolina, and Wisconsin. That “tax bomb” can be significant, and it is part of why running your real numbers matters.
Will my payment go up or down?
Honestly, it depends. RAP lowers payments for some borrowers and raises them for others, depending on income, family size, balance, and which plan you are leaving. There is no shortcut around this, the only reliable answer is to compare the plans on your actual numbers.
Your 3-step action plan
- Find out what plan you are on today (check studentaid.gov or your servicer).
- Compare your current plan against RAP on your real income, family size, and balance.
- Choose on purpose, based on lowest lifetime cost, not just the lowest monthly payment.
A student-loan advisor using Finology Software runs that comparison with verified math, so you see the true cost of each option, including any forgiveness tax. You can also compare Finology Software against other student-loan tools.
Keep reading
- What RAP means for your student loans
- RAP vs SAVE vs PAYE vs IBR: which plan now?
- Is my income-driven repayment plan going away?
- Signs you are on the wrong repayment plan after July 1
- RAP and PSLF: what forgiveness-seekers need to know
- RAP payment calculator: what you will actually pay
See exactly what July 1 means for your loans. Get matched with a student-loan advisor who runs your numbers on verified math, or start a free trial.
