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KEY TAKEAWAYS
- The ‘Big, Beautiful Bill’ was recently signed into law, and will replace the older student loan repayment system with one that is simpler but potentially more expensive for some borrowers.
- The bill includes a revised standard plan for borrowers who take out loans after July 1, 2026. The new standard plan will be less expensive monthly for some borrowers.
- It also eliminates all older income-driven repayment plans and replaces them with the newly created Repayment Assistance Plan for future borrowers. This plan has cheaper monthly payments for the average single borrower, but can be more expensive for borrowers with families.
A new student loan repayment system that is simpler, but potentially more expensive, is set to roll out next summer.
The ‘One Big, Beautiful Bill’ that President Donald Trump signed into law on July 4 will change the rules for all borrowers who take out federal student loans after July 1, 2026. The law will eliminate all older income-driven repayment plans and revise the standard repayment plan option.
New borrowers will be automatically assigned to the revised standard plan, or they can move to the newly created income-driven Repayment Assistance Plan (RAP).
Previously, all borrowers were placed in a standard repayment plan that gave them 10 years to pay off their loans. If borrowers wanted lower monthly payments, they could enroll in one of three income-driven plans: Income-Based Repayment (IBR), Income-Contingent Repayment (ICR), and Pay As You Earn (PAYE). Those plans will not be available to future borrowers.
The Revised Standard Plan Lowers Monthly Payments
For new borrowers who hold more than $25,000 in student loans, the revised standard plan’s monthly payments may be smaller than what they would have paid under the older standard plan.
The older standard plan gave borrowers 10 years to pay off their loans, regardless of how much they borrowed. However, if borrowers wanted cheaper payments, they could have enrolled in an extended standard plan, a graduated repayment plan, or consolidated their loans.
In the revised standard plan, the repayment period varies depending on the loan size. Some borrowers might get 15 to 25 years to pay off their loans. That lowers the monthly payments, but it also requires these borrowers to pay more in interest over time.
| How The Revised Standard Plan Works | |
|---|---|
| Total Outstanding Balance Amount | Repayment Period |
| Less Than $25,000 | 10 years |
| $25,000 to $49,999 | 15 years |
| $50,000 to $99,999 | 20 years |
| $100,000 or more | 25 years |
The New Income-Driven Plan Is Cheaper For Some Borrowers
If future borrowers can’t afford the standard plan payments, they can opt for the new income-driven plan, RAP.
RAP uses a different calculation method than older income repayment plans. Monthly payments are based on a percentage of the borrowers’ adjusted gross income (AGI), as opposed to older income-driven plans, which use discretionary income to calculate payments.
This new calculation method means the “average recently graduated” single borrower will pay less under RAP than they would have under the Income-Based Repayment (IBR) Plan, which won’t be available for future borrowers.
Future borrowers can subtract $50 a month from their payments for every dependent child they have. Despite this, in many cases, borrowers with a family will pay almost $50 more each month than if they were in IBR.
The RAP plan also requires all borrowers to pay at least $10 a month, whereas some borrowers can have payments as low as $0 a month on existing income-driven plans.
| How The New RAP Plan Works | |
|---|---|
| Borrowers’ Adjusted Gross Income | Monthly Payment Amount |
| Less Than $10,000 | $10 a month |
| $10,000 to $19,999 | 1% of monthly AGI |
| $20,000 to $29,999 | 2% of monthly AGI |
| $30,000 to $39,999 | 3% of monthly AGI |
| $40,000 to $49,999 | 4% of monthly AGI |
| $50,000 to $59,999 | 5% of monthly AGI |
| $60,000 to $69,999 | 6% of monthly AGI |
| $70,000 to $79,999 | 7% of monthly AGI |
| $80,000 to $89,999 | 8% of monthly AGI |
| $90,000 to $99,999 | 9% of monthly AGI |
| More than $10,000 | 10% of monthly AGI |
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