📊 Quick Summary — What's Changing on July 1, 2026

❌ The SAVE Plan — Already Gone Since March 2026

The Biden-era Saving on a Valuable Education (SAVE) plan was the most generous income-driven repayment plan in US history — capping payments at 5% of discretionary income for undergraduate loans and preventing interest from accruing on borrowers who made full payments. Republican-led states filed suit immediately after its creation, and a federal court vacated the SAVE plan on March 10, 2026, eliminating it entirely.

What SAVE Borrowers Need to Know Right Now

If you were enrolled in SAVE: your plan no longer exists. According to CBS News, the Trump administration restarted interest accrual on SAVE loans on August 1, 2025 — meaning interest has been building on your balance for nearly a year. Your loan servicer should have notified you of this change, but many borrowers haven't yet acted. Log in to StudentAid.gov immediately to check your current plan status.

Your options as a former SAVE borrower: switch to IBR (available now), switch to RAP (available July 1, 2026), or choose Standard, Graduated, or Extended repayment if you have pre-July 2026 loans. PAYE and ICR remain available until 2028 if you qualify. Do not wait — every month you delay costs you in accruing interest and missed forgiveness credit.

🆕 The New Repayment Assistance Plan (RAP) — Fully Explained

The Repayment Assistance Plan (RAP) was created by the One Big Beautiful Bill Act signed into law July 4, 2025. According to Fidelity, RAP launches July 1, 2026 and becomes the only income-driven repayment option for new borrowers. Here is exactly how it works:

How RAP Calculates Your Monthly Payment

According to The College Investor, RAP payment calculation works as follows: the Department of Education applies a percentage to your total Adjusted Gross Income (AGI) — not discretionary income like older plans. The percentage ranges from 1% to 10% of AGI depending on your income bracket, divided by 12 for monthly amount. Each dependent you claim on taxes reduces your payment by $50/month. Minimum payment: $10/month regardless of income.

RAP's Interest Subsidy — How It Protects You

One of RAP's most important features: according to SoFi, RAP waives any unpaid interest on full, on-time payments. This means your balance cannot grow due to interest if you make your required monthly payment — unlike older plans where negative amortization was possible. Additionally, when your income-based payment reduction falls short of $50, the government adds a matching principal payment to your loan. This accelerates repayment for low-income borrowers.

RAP Forgiveness — 30 Years, Not 20 or 25

RAP offers forgiveness after 360 qualifying payments — that's 30 years. This is longer than IBR's 20-year new borrower forgiveness — an important distinction. For borrowers who expect low lifetime earnings and are targeting forgiveness, RAP's 30-year timeline may produce a worse outcome than IBR's 20-year path. Use a RAP calculator to compare your personal outcome before switching.

Who is NOT Eligible for RAP

According to Federal Student Aid via Mass.gov: Parent PLUS loans are not eligible for RAP — including Direct Consolidation Loans that paid off Parent PLUS loans. FFEL, Perkins, and HEAL Program loans also cannot be repaid under RAP.

⏳ What Happens to PAYE and ICR Borrowers

According to CNBC, PAYE (Pay As You Earn) and ICR (Income-Contingent Repayment) are both being phased out, but the timeline gives you room to act. Here's exactly what happens:

✅ IBR — The One Income-Driven Plan That Survives Long-Term

Income-Based Repayment (IBR) is the only existing income-driven plan that has no sunset date under the One Big Beautiful Bill Act. According to Yahoo Finance, IBR remains available indefinitely for borrowers with pre-July 2026 loans.

For most borrowers who were on SAVE hoping for 20-year forgiveness, New IBR is the closest equivalent still available — 10% of discretionary income and 20-year forgiveness. The key difference from SAVE: IBR uses discretionary income (income above 150% of the federal poverty level) while RAP uses total AGI. For many borrowers, IBR's discretionary income calculation produces a lower monthly payment than RAP's AGI-based calculation.

💰 IBR vs RAP — Real Payment Examples Side by Side

*Estimates. Actual payments depend on family size, exact AGI, poverty level for your state, and loan type. Use the Federal Student Aid Loan Simulator for personalized calculations.

📋 New Borrowing Limits Starting July 1, 2026

According to uAspire, the One Big Beautiful Bill Act also changes how much students and parents can borrow, effective July 1, 2026:

For graduate and professional students: The elimination of Graduate PLUS loans is a major change. Students in law, medical, dental, and MBA programs who previously relied on Grad PLUS to cover full tuition will need to find alternative financing for amounts above standard Direct Loan limits. Private student loans from lenders like Earnest, SoFi, and Sallie Mae will become more important for graduate borrowers. See our full Earnest Student Loans Review 2026 for private loan alternatives.

🎯 What to Do Right Now — 5-Step Action Plan

Step 1 — Log in to StudentAid.gov Today

Go to StudentAid.gov → Manage Loans → Repayment. Check which plan you're currently on and verify your monthly payment amount. If it shows SAVE, you need to switch immediately. If it shows PAYE or ICR, you have until July 2028 but should start comparing IBR and RAP now.

Step 2 — Use the Federal Loan Simulator

The Federal Student Aid Loan Simulator lets you compare your monthly payment and total interest paid under every available plan — including the new RAP. Run your numbers for New IBR and RAP side by side before deciding which to choose. Input your actual AGI, loan balance, and number of dependents for accurate results.

Step 3 — Don't Borrow New Federal Loans After July 1 Unless Necessary

If you borrow any new Direct Loan on or after July 1, 2026, all your existing Direct Loans immediately become subject to the new rules — you lose access to IBR (except as a standalone remaining option), PAYE, ICR, Graduated, and Extended plans for all your loans. This is the most important — and most commonly misunderstood — rule. As Dream Bigger Financial explains: once you cross into new borrower status, there is no going back.

Step 4 — Consider Consolidating Before July 1 (Carefully)

Some borrowers need to consolidate before July 1 to access IBR or other plans. According to uAspire, borrowers must consolidate their loans before July 1, 2026 to qualify for certain existing income-driven plans. However, consolidation resets your forgiveness timeline — consult a student loan professional before consolidating if you're within 10 years of forgiveness.

Step 5 — Ask About PSLF If You Work in Public Service

If you work for a government or nonprofit employer, you may qualify for Public Service Loan Forgiveness — which provides full loan forgiveness after 120 qualifying payments (10 years). Both IBR and RAP qualify for PSLF. Use the PSLF Help Tool at StudentAid.gov to check eligibility and track progress. PSLF forgiveness may be far more valuable than the 20-30 year income-driven forgiveness timeline for eligible borrowers.

❓ Frequently Asked Questions — Student Loan Changes July 2026

✅ Final Verdict — What Student Loan Borrowers Must Do in June 2026