Students are changing loan repayment schemes: what do you know

Federal student loan repayment schemes are being overhale. After the passage of a large beautiful bill, borrowers on existing income-powered repayment plans will be automatically taken to IBR between 2026 and 2028.

Meanwhile, a new scheme called Reporting Assistance Scheme (RAP) will be launched in July 2026. These changes will affect millions of borrowers and consolidate almost all current repayment options in a few options.

While the Education Department has not yet finalized the exact time of each infection, the direction is clear. And for many borrowers, understanding what comes next can affect whether they change or wait for repayment plans.

Income inspired repayment will be consolidated

The borrowers enrolled in Save, Pay, or ICR will be transferred to a new version of the income-based repayment (IBR), when they took their debt. If the loans were distributed before 1 July 2014, the borrowers would move to the original IBR, where the payment is 15% of the discretionary income. For loans made after that date, the borrower will move to the new IBR version with 10% payment.

The only real change for IBR is to remove the need for partial financial difficulty.

Both schemes will maintain forgiveness after 20 or 25 years on the basis of loan and enrollment date. The borrowers will also have the option to leave IBR and join the new RAP scheme starting from July 1, 2026.

The Department of Education will finalize a time -term for this migration, but is expected to be in waves between July 2026 and June 2028.

According to Scott Buchanan, Executive Director of Student Loan Ceremony Alliance, the loan servant will stop processing Paye and ICR applications at some point before 1 July 2028 with a practical processing concern.

Rap will be a new income-based repayment scheme

Repayment Assistance Scheme (RAP) is a new income-operated scheme that calculates payment based on a certain percentage of adjusted gross income. Payment for income under $ 10,000 starts only at $ 10 per month and scales up to 10% of AGI for people earning more than $ 100,000.

The scheme will be the only income-operated repayment option from new loans extracted after July 1, 2026, but can choose existing borrowers.

The complete structure is:

• $ 0 to $ 10,000: $ 10/month flat
• $ 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%
• Over $ 100,000: 10%

The RAP also applies a decrease of $ 50/month to each dependent listed on the tax return of the borrower, but never brings monthly payments below $ 10. The remaining loan is forgiven after a 30 -year repayment.

RAP payment can count towards public service loan forgiveness. However, parent plus borrowers are excluded and they should use the standard plan.

Standard repayment plan

The new law also shapes the standard repayment structure for new borrowers. Existing borrowers can live in their existing plans (standard, graduate, or extended), assuming that they do not borrow a new loan after June 2026.

While the borrowers can miss 10-year and 25-year plans, the revised approach adds new levels based on the total loan balance:

• Under $ 25,000: 10 years
• $ 25,000 to $ 50,000: 15 years
• $ 50,000 to $ 100,000: 20 years
• Over $ 100,000: 25 years

This model replaces the old standard, graduated, and there are extended plans, and do more functioning like a hybrid of standard and extended plans. You can check our new standard repayment scheme calculator and see the effect.

looking ahead

While RAP promises more estimated payment for something, its 30 -year term may cost higher than IBR. For most borrowers, the near-term decision is whether to stay on their current plan or be ready to switch in 2026. Processing time for planning changes is slow, and with the start of interest, in time.

The education department is expected to release further updates to this decline. Till then, borrowers should look for communication with their debt servants.

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