The New Tiered Standard Repayment Plan: How Your Monthly Payment Will Be Calculated Starting July 1, 2026

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

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.

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