If your student is taking out their first federal student loan on or after July 1, 2026, the way they pay it back will look different from anything older borrowers have seen. The One Big Beautiful Bill Act (OBBBA) is replacing the old menu of repayment plans with a much shorter list — and the default option, called the Tiered Standard Repayment Plan, sets your monthly payment based on how much you owe in total. The bigger the loan balance, the longer the repayment term. This guide walks through exactly how the new plan works, what monthly payments could look like, and how to think about it before signing for a loan this fall.
What is the new Tiered Standard Repayment Plan?
The Tiered Standard Repayment Plan is the default federal repayment plan for any borrower who takes out a new federal student loan on or after July 1, 2026. It replaces the old 10-year Standard Plan, the Graduated Plan, and the Extended Plan for new borrowers.
Under the new rules, two things are true at the same time:
- Your monthly payment is fixed — it stays the same the whole time you are in repayment.
- Your repayment term changes based on your total federal loan balance when you start repaying.
This is a big shift from the old Standard Plan, where almost every borrower had 10 years to repay regardless of how much they owed. Now, the higher your balance, the more years you get to spread it out.
Why this matters for families
The Tiered Standard Plan is one of only two repayment options new borrowers will have. The other is the new income-driven Repayment Assistance Plan (RAP), which we cover in our explainer on how RAP forgiveness credits work. Older programs like SAVE, PAYE, and ICR are going away for new borrowers. (For more on that, see our piece on why the SAVE plan is ending.)
That means before your student signs a Master Promissory Note this summer, your family should already have a rough idea of what monthly payments could look like after graduation. The numbers below will help you do that math.
The four repayment tiers, explained
Here are the four balance tiers that decide how many years you have to repay your federal student loans:
- Under $25,000 owed: 10-year repayment term
- $25,000 to $49,999 owed: 15-year repayment term
- $50,000 to $99,999 owed: 20-year repayment term
- $100,000 or more owed: 25-year repayment term
Your tier is locked in when your loans first enter repayment, usually six months after you leave school. The tier is based on your total lifetime federal student loan balance, not your most recent loan or the balance from a single school.
How the monthly payment is calculated
The math is straightforward. Your servicer takes your total balance, adds the interest you will owe, and divides it across the months in your term. That gives you one fixed monthly payment for the life of the loan.
For example, a borrower who finishes school with $30,000 in federal loans falls into the $25,000 to $49,999 tier. That means a 15-year (180-month) term. The monthly payment is calculated to fully pay off the balance plus interest by the end of those 15 years.
What the payments could look like at 2025-26 rates
To give you a feel for it, here are rough estimated monthly payments at the current undergraduate federal loan rate of 6.39%. Real rates for new loans disbursed after July 1, 2026 will be set this summer, so treat these as illustrations, not exact quotes.
- $15,000 balance / 10-year term: about $169 per month
- $27,500 balance (the dependent undergrad cap) / 15-year term: about $238 per month
- $45,000 balance / 15-year term: about $389 per month
- $75,000 balance / 20-year term: about $556 per month
- $120,000 balance / 25-year term: about $807 per month
These payments are flat. They do not start small and grow over time the way the old Graduated Plan did. They are also not based on your income the way RAP is.
How the Tiered Standard Plan compares to the old rules
Rankings
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- Rank #1Editor's Pick
Undergrad
College Ave
Best for: Students who want flexible repayment options and no origination fees
- 0.25% rate reduction with auto-pay
- Four in-school repayment options
- No application, origination, or prepayment fees
- Borrow from $1,000 up to 100% of cost of attendance
Apply NowRates
Lowest Rate 1.94%
1.94% - 17.99% fixed APR, 3.89% - 17.99% variable APR
Disclosures+
College Ave's student loan products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or BTG Pactual Bank, N.A., member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply. (1) All rates include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. If a payment is returned, you will lose this benefit. Variable rates may increase after consummation. (2) As certified by your school and less any other financial aid you might receive. Minimum $1,000. (3) This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (APR): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. Information advertised valid as of 8/18/2026. Variable interest rates may increase after consummation. Approved interest rate will depend on creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of the Flat Repayment Option with the shortest available loan term.
- Rank #2
Undergrad
Sallie Mae
Best for: Undergraduate and graduate students, and parents, comparing competitive fixed- and variable-rate private student loans
- Competitive variable and fixed rates
- Multiple repayment options
- Cosigner release available
- No origination fees
Apply NowRates
Lowest Rate 1.95%
1.95% - 17.49% fixed APR, 3.62% - 16.83% variable APR
Disclosures+
Undergraduate School Loan/Smart Option Student Loan: Examples of typical transactions for a $10,000 Smart Option Student Loan with the most common fixed rate, Fixed Repayment Option, two disbursements, a 4-year in-school period, and a 6-month grace: For a borrower with the shortest loan term, it works out to 16.16% fixed APR, 51 payments of $25.00, 119 payments of $296.32 and one payment of $41.82, for a total loan cost of $36,578.90. For a borrower with the longest loan term, it works out to 16.38% fixed APR, 51 payments of $25.00, 177 payments of $265.54 and one payment of $173.00, for a total loan cost of $48,448.58. Loans that are subject to a $50 minimum principal and interest payment amount may receive a loan term that is less than 10 years. A variable APR may increase over the life of the loan. A fixed APR will not. Information advertised valid as of 08/17/2026. Rates: Advertised APRs for undergraduate students assume a $10,000 loan with a 4-year in-school period, a 6-month grace, and the longest loan term offered. Interest rates for variable rate loans may increase or decrease over the life of the loan based on changes to the 30-day Average Secured Overnight Financing Rate (SOFR) rounded up to the nearest one-eighth of one percent. Advertised variable rates are the starting range of rates and may vary outside of that range over the life of the loan. Interest is charged starting when funds are sent to the school. With the Fixed and Deferred Repayment Options, the interest rate is higher than with the Interest Repayment Option and Unpaid Interest is added to the loan's Current Principal at the end of the grace/separation period. To receive a 0.25 percentage point interest rate discount, the borrower or cosigner must enroll in auto debit through Sallie Mae. The discount applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month. It may be suspended during forbearance or deferment. Cosigner Release: Only the borrower may apply for cosigner release. To do so, they must first meet the age of majority in their state and provide proof of graduation (or completion of certification program), income, and U.S. citizenship or permanent residency (if their status has changed since they applied). In the last 12 months, the borrower can't have been past due on any loans serviced by Sallie Mae for 30 or more days or enrolled in any hardship forbearances or modified repayment programs. In addition, the borrower must have paid ahead or made 12 on-time principal and interest payments on each loan requested for release. The loan can't be past due when the cosigner release application is processed. The borrower must also demonstrate the ability to assume full responsibility of the loan(s) individually and pass a credit review when the cosigner release application is processed that demonstrates a satisfactory credit history including but not limited to no: bankruptcy, foreclosure, student loan(s) in default or 90-day delinquencies in the last 24 months. Requirements are subject to change.
- Rank #3
Undergrad
Earnest
Best for: Borrowers who want a zero-fee¹ lender with flexible repayment options² across undergrad, grad, and professional school programs
- 0.25% Auto Pay³ discount plus 0.25% Loyalty⁴ discount for eligible returning borrowers
- No origination fees, late fees, or prepayment penalties¹
- Borrow $1,000⁵ to $400,000 with 5, 7, 10, 12, or 15-year terms⁶
- Four repayment options², a 9-month grace period⁷, and cosigner release for eligible borrowers⁸
Check EligibilityRates
Lowest Rate 2.29%
2.29% - 16.24% fixed APR, 4.74% - 16.60% variable APR
Disclosures+
Earnest Private Student Loans are subject to credit approval. ¹Earnest does not charge fees for origination, late payments, returned check, or prepayments. Florida Stamp Tax: For Florida residents, Florida documentary stamp tax is required by law, calculated as $0.35 for each $100 (or portion thereof) of the principal loan amount, the amount of which is provided in the Final Disclosure. Lender will add the stamp tax to the principal loan amount. The full amount will be paid directly to the Florida Department of Revenue. Certificate of Registration No. 78-8016373916-1. ²Repayment terms and repayment options available vary based on loan type. ³You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment from a checking or savings account. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. It is important to note that the 0.25% Auto Pay discount is not available when loan payments are deferred during the interim period as a result of selecting the deferred repayment option. ⁴To be eligible for the Loyalty Discount, applicants must have previously obtained an Earnest Private Student Loan and apply using the same email address associated with that loan. Only one Loyalty Discount may be applied per eligible Earnest Private Student Loan. Not all applicants may qualify. This offer cannot be combined with Earnest’s Rate Match program. Earnest may modify or discontinue this offer at any time and without notice, however, once a Loyalty Discount is earned, it will not be taken away. ⁵Residents of Hawaii must request a loan of at least $1,501. ⁶Available interest rates are subject to change. Interest rates as of 03/19/2026. Earnest’s Loan Cost Examples: 1.) These examples provide estimates based on principal and interest payments beginning immediately upon loan disbursement. Variable annual percentage rate ("APR"): A $10,000 loan with a 15-year term (180 monthly payments of $152.84) and a 16.85% interest rate without Auto Pay (16.85% APR) would result in a total estimated payment amount of $27,511.20. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 15-year term (180 monthly payments of $150.30) and a 16.49% interest rate without Auto Pay (16.49% APR) would result in a total estimated payment amount of $27,054.10. 2.) These examples provide estimates based on interest-only payments while in school. Variable interest rate: A $10,000 loan with a 15-year term (180 monthly payments of $152.84) and a 16.85% interest rate without Auto Pay (16.85% APR) would result in a total estimated payment amount of $35,515.14. For a variable loan, after your starting rate is set, your rate will then vary with the market. Your actual repayment terms may vary. Other repayment options are available. The calculation assumes that the “in-school” period is 4 years (48 months) and includes our 9 month grace period, during which the monthly payment will be $140.42 for 57 months. Fixed interest rate: A $10,000 loan with a 15-year term (180 monthly payments of $150.30) and a 16.49% interest rate without Auto Pay (16.49% APR) would result in a total estimated payment amount of $34,886.94. Your actual repayment terms may vary. Other repayment options are available. The calculation assumes that the “in-school” period is 4 years (48 months) and includes our 9 month grace period, during which the monthly payment will be $137.42 for 57 months. 3.) These examples provide estimates based on fixed $25 payments while in school. Variable interest rate: A $10,000 loan with a 15-year term (180 monthly payments of $253.39) and a 16.85% interest rate without Auto Pay (14.92% APR) would result in a total estimated payment amount of $47,035.20. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed interest rate: A $10,000 loan with a 15-year term (180 monthly payments of $246.61) and a 16.49% interest rate without Auto Pay (14.65% APR) would result in a total estimated payment amount of $45,814.80. Your actual repayment terms may vary. Other repayment options are available. The calculation assumes that the “in-school” period is 4 years (48 months) and includes our 9 month grace period, during which the monthly payment will be $25.00. 4.) These examples provide estimates based on deferred payments. Variable interest rate: A $10,000 loan with a 15-year term (180 monthly payments of $275.17) and a 16.85% interest rate without Auto Pay (14.67% APR) would result in a total estimated payment amount of $49,530.60. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed interest rate: A $10,000 loan with a 15-year term (180 monthly payments of $268.03) and a 16.49% interest rate without Auto Pay (14.39% APR) would result in a total estimated payment amount of $48,245.40. Your actual repayment terms may vary. Other repayment options are available. It is important to note that the 0.25% Auto Pay discount is not available when the deferred repayment option has been selected and the loan is in the interim period. The calculation assumes that the “in-school” period is 4 years (48 months) and includes our 9 month grace period, during which the monthly payment will be $0. ⁷Nine-month grace period is not available for borrowers who choose our Principal and Interest Repayment plan while in school. ⁸To qualify for automatic cosigner release, the outstanding principal balance of your loan must be paid down to 50% or less of the original principal balance. The primary borrower must have made 36 months of required payments after the end of the Interim Period. The primary borrower must meet our eligibility and minimum credit requirements. Additional terms and conditions may apply. To request cosigner release, the primary borrower must have made 12 consecutive, monthly on-time principal and interest payments (or an amount equal thereto) immediately preceding the cosigner release application. The primary borrower must satisfy certain eligibility and credit criteria at the time of application. Additional terms and conditions may apply. ⁹Includes 0.50% combined Auto Pay and Loyalty discounts. Actual rate and available repayment terms will vary based on your financial profile. Fixed annual percentage rates (APR) range from 2.79% to 16.74% (2.29% - 16.24% with Auto Pay and Loyalty discounts). Variable annual percentage rates (APR) range from 5.24% to 17.1% (4.74% - 16.6% with Auto Pay and Loyalty discounts). Earnest variable interest rate student loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent plus a margin and will change on the 1st of each month. The rate will not increase more than once a month, but there is no limit on the amount that the rate could increase at one time. Our lowest rates are only available for our most credit qualified existing cosigned loan borrowers who receive the 0.25% Loyalty discount and requires selection of our shortest term offered, full principal and interest payment while in school, and enrollment in our 0.25% Auto Pay discount. Enrolling in Auto Pay is not required as a condition for approval. Interest rates are subject to change. Earnest Private Student Loans are made by FinWise Bank, Member FDIC. FinWise Bank, 756 East Winchester, Suite 100, Murray, UT 84107. Earnest student loans are serviced by Earnest Operations LLC, 300 Frank H. Ogawa Plaza, Suite 340, Oakland, CA 94612. NMLS #1204917, with support from Higher Education Loan Authority of the State of Missouri (MOHELA) (NMLS# 1442770). FinWise Bank and Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by agencies of the United States of America. © 2026 Earnest LLC. All rights reserved.
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If you have older relatives or friends who took out student loans before July 2026, their experience will look different. Here is how the new plan stacks up.
The old Standard Plan was always 10 years
For decades, the federal Standard Plan gave every borrower 10 years to repay, no matter how much they owed. Borrowers with very high balances often switched to the 25-year Extended Plan or an income-driven plan to keep payments manageable.
Under the new Tiered Standard Plan, that choice is made for you automatically based on your tier. If you owe a lot, you get more time built in. If you owe a little, you finish faster.
Forgiveness is no longer part of the picture
The old Income-Based Repayment (IBR), PAYE, and SAVE plans all included loan forgiveness after 20 or 25 years of qualifying payments. The Tiered Standard Plan does not include any forgiveness — you pay the full balance plus interest over the term.
If you want forgiveness, you will need to use RAP, the new income-driven option. RAP offers forgiveness, but the rules are stricter than the old plans (more details in our post on the OBBBA final rules).
Parent PLUS borrowers are also affected
Parents borrowing new Parent PLUS loans on or after July 1, 2026 will be limited to the Tiered Standard Plan. That is the only repayment option available for new Parent PLUS loans — no income-driven plan, no RAP. Parents also face the new $20,000-per-year, $65,000-lifetime cap per child. We unpack the bigger picture in our guide to the 2026 Parent PLUS changes.
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What this means for your family right now
The Tiered Standard Plan is built around one simple idea: the more you borrow, the longer you carry that debt. That makes the borrowing decisions you make this summer more important than ever.
Borrow only what you really need
Because higher balances trigger longer repayment terms, every extra dollar you borrow today buys you more years of monthly payments later. A student who borrows $24,000 finishes in 10 years. A student who borrows $26,000 (just $2,000 more) is on the hook for 15 years — and pays much more in total interest over that extra time.
Some practical ways to keep your balance below the next tier line:
- Apply the maximum amount of grant and scholarship aid before adding loans.
- Use a tuition payment plan to spread the bill across the semester instead of borrowing.
- Take only the federal Direct Subsidized portion (where interest doesn't grow while in school) before reaching for Unsubsidized.
- Live at home or with a relative for one year if it is realistic for your family.
- Look for outside scholarships you can stack into your aid package.
For more ideas, our piece on how much to borrow based on your expected salary walks through a simple rule of thumb.
Plan for the monthly number, not just the total
It is easy to look at a $40,000 student loan balance and feel overwhelmed. Try flipping the math. At that balance, you are looking at a 15-year term and a monthly payment somewhere around $345 at today's undergrad rate.
Would that payment fit in a starting salary budget after rent, food, transportation, and a small amount for savings? If your expected first-year take-home pay is $3,000 a month, a $345 student loan payment is roughly 11% of that. That is a meaningful chunk, but it is workable. If the expected take-home is $2,200, that same payment is closer to 16% — and you may want to borrow less, choose a different school, or plan for a side income.
The point: do this math before signing for the loan, not after the bill arrives.
Decide between Tiered Standard and RAP carefully
New borrowers can switch into the RAP income-driven plan if their payments would be lower under RAP than under the Tiered Standard Plan. RAP caps payments at 1% to 10% of income and offers forgiveness after 30 years.
Here are quick questions that help families think through which plan fits:
- Is the starting salary in your career field high enough to cover the Tiered Standard payment without hardship? If yes, sticking with the Standard Plan often costs less in total interest.
- Will your income be very low at first (think: residency for doctors, fellowships, low-paid public service)? RAP can keep monthly payments tiny in those early years.
- Are you planning to pursue Public Service Loan Forgiveness? PSLF requires payments under an income-driven plan, which means RAP after July 1, 2026.
- Do you hate the idea of being in repayment for 25 to 30 years? The Standard Plan finishes faster at the lower tiers.
There is no universally "right" answer. The best plan depends on your career, your balance, and your tolerance for long-term debt.
How to estimate your future payment today
You do not have to wait until graduation to know what your monthly payment will be. You can make a solid estimate right now using just three pieces of information.
Step 1: Estimate your total federal balance
Start with how much your student plans to borrow per year in federal loans, then multiply by the number of years to graduation. Don't forget interest that accrues on Unsubsidized loans while in school — a rough way to add this is to multiply your average annual balance by about 6% per year of enrollment.
Dependent undergraduate federal loan limits stay the same in 2026-27:
- Year 1: up to $5,500
- Year 2: up to $6,500
- Years 3 and 4: up to $7,500 each
A typical dependent undergrad who borrows the full federal amount for four years finishes around $27,000 in principal, plus a few thousand in accrued interest on the Unsubsidized portion.
Step 2: Find your tier
Match your estimated total balance to one of the four tiers above. Under $25,000 = 10 years. $25,000 to $49,999 = 15 years. $50,000 to $99,999 = 20 years. $100,000+ = 25 years.
Step 3: Calculate the monthly payment
Use any free loan calculator (search "amortization calculator") and plug in your balance, your tier's term length in months, and an interest rate. For 2025-26, undergrad federal rates are 6.39%, grad rates are 7.94%, and PLUS rates are 8.94%. New rates for 2026-27 loans are set in late spring and will be announced before disbursement.
Then ask yourself the most important question: does that monthly payment fit comfortably into the salary I expect after college? A common rule is to keep total student loan payments under 10% of your gross monthly income in your first job.
File the FAFSA, then plan the rest
Before you can take a single federal loan, your student needs to file the FAFSA. The FAFSA is your gateway to Pell Grants, work-study, federal subsidized and unsubsidized loans, and most state and college aid. The earlier you file, the more aid options stay open.
Once your FAFSA is in and you have offers on the table, the next step is to map out the full funding picture: grants, scholarships, savings, payment plans, federal loans, and (if needed) private loans. That is where the federal vs private decision becomes important — see our breakdown of federal versus private student loans for help thinking it through.
If you want a single place to see how it all fits together for your family's specific situation, create your free CollegeLens plan. It pulls your costs, aid, and borrowing options into one view so you can see the full monthly payment picture before you sign for anything.
The bottom line
The new Tiered Standard Repayment Plan is the default for federal student loans starting July 1, 2026. It locks in your repayment term based on how much you owe — 10, 15, 20, or 25 years — and gives you one fixed monthly payment for the life of the loan. There is no forgiveness built in, and Parent PLUS borrowers from this point forward have no other federal repayment option.
For most families, the takeaway is simple: keep your federal loan total as low as you reasonably can, run the monthly payment math before borrowing, and decide upfront whether RAP or the Standard Plan fits your career better. The decisions you make this summer will shape your monthly budget for the next decade or longer. Take the time now — your future self will thank you.
If you have not yet read it, our countdown to July 1 guide is a good companion piece for everything else changing under OBBBA.
Paying for college is stressful, and these new rules add a layer of complexity that nobody asked for. You don't have to figure it out alone — and you don't have to figure it out perfectly. Start with the FAFSA, run the numbers on a likely monthly payment, and borrow with eyes open.
Sravani at CollegeLens
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