US: First paycheck · 5 min read
Which student loan repayment plan should I choose?
How federal student loan repayment works after July 1, 2026: the Repayment Assistance Plan at 1 to 10% of income, the new standard plan and how to choose.
The short answer
Federal student loan repayment changed on July 1, 2026. New borrowers, meaning anyone whose first federal loan was disbursed on or after that date, have two choices: the Repayment Assistance Plan, where you pay 1% to 10% of adjusted gross income with a minimum of $10 a month, interest that doesn't grow your balance, and forgiveness after 30 years, or a standard plan with fixed payments over 10 to 25 years depending on balance. Borrowers with older loans keep access to Income-Based Repayment and can also move to RAP, while the SAVE plan has ended and its borrowers must pick a new plan. Payments start six months after you leave school. Choose by comparing the monthly payment under each plan against your income, and by whether you're likely to pay the loan off or work toward forgiveness.
Key takeaways
- New loans from July 1, 2026: RAP (1 to 10% of income, 30-year forgiveness) or the standard fixed plan. Nothing else.
- Older loans: IBR stays, RAP is available, and SAVE borrowers must switch. ICR and PAYE close to most borrowers by July 2028.
- RAP never lets unpaid interest grow your balance, and it adds a $50 a month principal match if your payment doesn't cover that much.
- Public Service Loan Forgiveness still forgives after 120 qualifying payments, and RAP and IBR both count.
On this pageThe plans after July 1, 2026
The plans after July 1, 2026
| Plan | Who can use it | Payment | Forgiveness |
|---|---|---|---|
| Repayment Assistance Plan (RAP) | All Direct Loan borrowers; the only income-driven plan for new loans | 1% to 10% of AGI by income band, minus $50 per dependent, $10 minimum; no balance growth | After 30 years of payments; counts for PSLF |
| Standard (tiered) | New borrowers from July 2026 | Fixed payment over 10 to 25 years depending on balance | None; paid in full |
| Standard (10-year) | Existing borrowers | Fixed over 10 years | None |
| Income-Based Repayment (IBR) | Existing borrowers only | 10% or 15% of discretionary income depending on loan date | After 20 or 25 years |
| ICR and PAYE | Existing borrowers, closing by July 2028 | Legacy income-driven formulas | Legacy terms |
| SAVE | Ended | Borrowers must choose a new plan | Not applicable |
How RAP works in practice
Your payment is set by your adjusted gross income from your last tax return: 1% of AGI below about $20,000, rising through bands to 10% above $100,000, with $50 a month knocked off per dependent and a floor of $10. If the payment doesn't cover that month's interest, the unpaid interest is waived rather than added to your balance, which was the problem that made old plans feel endless. If your payment covers less than $50 of principal, the government adds up to $50 so the balance always falls. After 30 years of payments, whatever is left is forgiven. For a new graduate earning $50,000 with no dependents, the payment lands around $250 a month.
Choosing
- Run the loan simulator at studentaid.gov with your actual balance and expected salary. It shows the monthly payment and total paid under each plan.
- If the standard payment is affordable and you want the loan gone, take standard; you'll pay least in total.
- If the standard payment is more than about 10% of your take-home pay, or your income is uncertain, take RAP and pay extra when you can.
- If you'll work in government or a nonprofit, take RAP or IBR and enroll in Public Service Loan Forgiveness from the first payment.
- Revisit yearly when you recertify income; you can switch.
What hasn't changed
The six-month grace period. The option to request deferment or forbearance if you lose your job. Public Service Loan Forgiveness after 120 payments while working for a qualifying employer. The fact that federal loans never require a cosigner and die with you. And the number of people who miss their first payment because they never looked up their servicer. Log in to studentaid.gov in month four and find out who holds your loans.
Illustrative example: $31,000 at $48,000
A graduate owes $31,000 in Direct Loans at a blended rate near 6% and takes a job at $48,000. The standard 10-year payment is about $345 a month. Under RAP, at her income band the payment is roughly $200 a month, with interest waived so the balance still falls. She takes RAP for the first two years while she builds an emergency fund, then switches to standard when a raise makes $345 comfortable, finishing in 11 years instead of 30 and paying far less interest than if she'd stayed on RAP throughout.
Questions people ask
- What is the Repayment Assistance Plan?
- RAP is the income-driven plan created by the 2025 budget law, available from July 1, 2026. Your payment is 1% to 10% of adjusted gross income depending on how much you earn, less $50 a month per dependent, with a $10 minimum. Unpaid interest is waived so the balance never grows, and remaining balances are forgiven after 30 years.
- What happened to the SAVE plan?
- It ended. Courts blocked SAVE and the 2025 law repealed it, so borrowers who were on it are being moved off. They have a window to choose RAP or IBR; those who don't choose are placed on a standard plan. If you were on SAVE, pick a plan before the deadline in your servicer's notice.
- When do student loan payments start after graduation?
- Six months after you graduate, leave school or drop below half time. Interest accrues on unsubsidized loans during the grace period. Your servicer will contact you before the first payment; if you've heard nothing by month four, log in to studentaid.gov to find your servicer and check your plan.
- Should I pay off my student loans early?
- If your rate is above about 6% and you have an emergency fund and get any employer 401(k) match, extra payments are a reasonable use of money. If you're heading for Public Service Loan Forgiveness, pay the minimum and don't prepay. On RAP with a large balance and modest income, forgiveness after 30 years may make prepaying pointless; run the numbers with the loan simulator on studentaid.gov.
Exercises are practice, not evidence of career fit or a qualification. How to read our guides and report a correction.
Sources
- Student loan repayment plans · Federal Student Aid, US Department of Education
- Federal student loans: subsidized and unsubsidized · Federal Student Aid, US Department of Education
How this page is written
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