Millions of federal student loan holders will gain access to two new repayment options effective July 1, following amendments enacted under the One Big Beautiful Bill Act. The legislation also eliminates several existing repayment plans.
The first new option is the Repayment Assistance Plan (RAP), the Department of Education’s latest income‑driven repayment plan. Under RAP, a borrower’s monthly payment is calculated as a percentage of adjusted gross income, ranging from 1% to 10%, with a minimum payment of $10. Unlike other income‑driven plans, RAP does not shield a portion of income; it uses AGI directly. Payments made under RAP contribute toward a 30‑year forgiveness timeline, and borrowers may receive a $50 monthly credit per qualifying dependent. Eligible borrowers also benefit from a small subsidy that can reduce principal when the standard payment does not.
The second option is the Tiered Standard Plan, which offers fixed payments over four term lengths based on total debt. Borrowers with debt up to $24,999 retain the current 10‑year term. Balances between $25,000 and $49,999 spread over 15 years; $50,000 to $99,999 over 20 years; and $100,000 or more over 25 years.
Existing borrowers retain access to several current income‑driven plans, including Income‑Based Repayment (IBR). For loans taken on or after July 1, 2014, IBR requires 10% of discretionary income each month, with 20‑year forgiveness; for earlier loans, 15% of discretionary income and 25‑year forgiveness. Income‑Contingent Repayment (ICR) and Pay As You Earn (PAYE) remain available until July 1, 2028, but neither plan now offers loan forgiveness. Borrowers can stay on ICR or PAYE until that date and then switch to IBR or RAP, preserving credit toward forgiveness on previous payments.
Borrowers are facing a great deal of confusion and anxiety ahead of the changes.
Jaylon Herbin
Director of federal campaigns at Center for Responsible Lending
When selecting a plan, compare estimated monthly payments, total repayment costs, and the time required to become debt‑free. Experts advise that borrowers with lower income and higher debt should consider RAP, while those with smaller balances might prefer the quicker, fixed‑payment Tiered Standard Plan. Additionally, borrowers pursuing the Public Service Loan Forgiveness program will benefit from loan forgiveness after 10 years under RAP.
