If you're taking out federal student loans for the first time this year, the repayment rules look very different from what they did even twelve months ago. The SAVE plan is gone. Congress passed a sweeping bill that changed how repayment works. And starting July 1, 2026, new borrowers will have just two repayment plan options instead of the half-dozen that existed before. This matters right now, before you sign that promissory note, because the decisions you make about borrowing today will shape your monthly payments for the next decade or longer.
What Happened to the SAVE Plan
The Saving on a Valuable Education (SAVE) plan was introduced in 2023 as the most generous income-driven repayment plan ever offered for federal student loans. It lowered monthly payments for millions of borrowers and offered a faster path to forgiveness.
Then it was challenged in court. Multiple states sued, arguing the plan exceeded the Department of Education's authority. In December 2025, the Department of Education reached a settlement with the State of Missouri to end the plan. No new borrowers could enroll. Pending applications were denied. The more than 7 million borrowers already in SAVE were told to choose a different plan.
On top of that, the One Big Beautiful Bill Act (OBBBA), signed into law in 2025, statutorily ended SAVE. ICR and PAYE will terminate on July 1, 2028. If you're borrowing for the first time in 2026, SAVE is not an option.
Why this matters to you: You may have heard parents or older friends talk about income-driven repayment plans with low payments and loan forgiveness after 20 years. The rules have changed. What worked for them may not be available to you. Make sure you understand the current options before you borrow.
The Two Plans Available to New Borrowers Starting July 1, 2026
If your first federal student loan is disbursed on or after July 1, 2026, you'll choose between two repayment plans. That's it. Here's how each one works.
The Tiered Standard Plan
This is a fixed-payment plan. Your monthly amount stays the same for the life of your loan. The key difference from the old standard plan is that your repayment term now depends on how much you owe, according to Harvard's Student Financial Services summary of the new law:
- Borrowed up to $24,999: 10-year repayment term
- Borrowed $25,000 to $49,999: 15-year repayment term
- Borrowed $50,000 to $99,999: 20-year repayment term
- Borrowed $100,000 or more: 25-year repayment term
There's no income calculation. No annual recertification. No forgiveness at the end. You pay a fixed amount each month until the loan is gone. You can always pay more than the minimum without penalty.
Example: If you borrow $30,000 at the current undergraduate interest rate of 6.52 percent and land in the 15-year tier, your monthly payment would be roughly $263. Over 15 years, you'd pay about $17,300 in interest on top of the original $30,000.
The Repayment Assistance Plan (RAP)
RAP is the new income-driven option. It replaces SAVE, PAYE, ICR, and eventually all previous IDR plans for new borrowers. The Congressional Research Service analysis lays out the key features:
- Monthly payments are based on your adjusted gross income (AGI). Unlike older IDR plans that used discretionary income, RAP applies a percentage directly to your total AGI.
- The percentage scales with income. Borrowers earning less pay a smaller percentage. The range goes from 1 percent of AGI for low earners up to 10 percent for those earning over $100,000. The minimum payment is $10 per month.
- Dependent deductions apply. If you have dependents, $50 per dependent is deducted from your monthly payment.
- Interest is subsidized. If your monthly payment doesn't cover all the accrued interest, the Department of Education covers the rest. Your balance won't grow because of unpaid interest.
- Principal assistance. If your payment chips away at less than $50 of principal per month, the government will apply up to an additional $50 toward your balance.
- Forgiveness after 30 years. Any remaining balance is forgiven after 360 qualifying monthly payments.
Example: If you earn $40,000 per year and owe $30,000, your RAP payment would be roughly $150 to $200 per month depending on where you fall on the AGI scale. That's lower than the Tiered Standard payment, but you'd be in repayment much longer.
How Monthly Payments Compare Across Plans
Rankings
Compare private student loan options
Compare College Ave, Earnest, and Sallie Mae — with Sallie's rate matched to this program where available.
- 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, 3.75% - 16.95% 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 08/25/2026. 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.
Here's a simplified comparison for someone who borrows $30,000 at 6.52 percent interest:
- Tiered Standard (15-year term): About $260 per month. Total paid: roughly $46,700. No forgiveness.
- RAP at $40,000 salary: Roughly $150 to $200 per month initially. Payments rise as income grows. Forgiveness after 30 years if a balance remains.
- RAP at $60,000 salary: Roughly $300 to $350 per month initially. You may pay off the loan well before the 30-year mark.
The right choice depends on your expected career path, income, and how much certainty you want in your monthly budget. Neither plan is universally better.
Understand Repayment Before You Borrow
This is the most important section of this article. Too many students sign their loan paperwork without thinking about what repayment will actually look like. Then graduation arrives, the grace period ends, and the monthly bill is a shock.
The 10 Percent Rule
Here's a straightforward guideline that financial aid experts have used for years: your total monthly student loan payment should be no more than 10 percent of your expected gross monthly starting salary. If you expect to earn $45,000 in your first job out of college, that's $3,750 per month. Ten percent is $375. If your projected loan payment is higher than that, you may be borrowing too much.
How to Estimate Your Payment
Before you accept any loan, do this:
- Look up the average starting salary for your intended career on the Bureau of Labor Statistics website.
- Use the Federal Student Aid loan simulator to estimate your monthly payment based on the amount you plan to borrow.
- Run the numbers for both the Tiered Standard Plan and RAP so you can see the difference.
- Multiply your expected monthly payment by 12. That's how much of your annual income goes to loans. If it's more than 10 percent of your expected starting salary, consider borrowing less or choosing a more affordable school.
Borrow Only What You Need
Federal loans come with annual limits for a reason. For dependent undergraduates, the limit is $5,500 for first-year students and rises to $7,500 by junior year. You don't have to accept the full amount. If your family can cover part of the cost through savings, a 529 plan, or work income, borrow less. Every dollar you don't borrow is a dollar you won't pay interest on for the next 10 to 25 years.
Warning Signs You're Borrowing Too Much
- Your projected monthly payment is more than 10 percent of your expected starting salary.
- You're maxing out federal loans every year AND taking out private loans on top.
- You're borrowing for living expenses that could be reduced by choosing different housing, working part-time, or adjusting your meal plan.
- Your total debt at graduation will exceed your expected first-year salary.
- You don't know what your monthly payment will be. If you can't estimate it, that's a sign you need to run the numbers before borrowing more.
Private Loans: A Different Set of Rules
Everything above applies to federal student loans. Private loans, offered by banks and online lenders, work differently in important ways:
- Interest rates vary. Private loan rates can be fixed or variable, and the band between the best and worst offers is wide, driven by your credit history and whether you have a cosigner. Our private student loan comparison page carries the current ranges.
- No income-driven repayment. Private lenders don't offer RAP or any income-based plan. Your payment is fixed based on the loan terms you agreed to.
- No federal forgiveness. Private loans aren't eligible for Public Service Loan Forgiveness, RAP forgiveness, or any other federal program.
- Fewer protections. Federal loans offer deferment, forbearance, and the ability to switch plans. Private loans have much more limited options if you hit financial trouble.
The bottom line on private loans: Exhaust your federal loan options first. If you still need to borrow, shop around carefully, read every line of the terms, and understand that you'll have fewer safety nets.
What's Still Shifting
Federal student loan policy has changed dramatically in the past three years, and it may change again. Here's what to keep in mind:
- The RAP plan was created by the OBBBA but still requires federal rulemaking to finalize some implementation details. The broad strokes are set, but specific calculations and processes may be adjusted before July 2026.
- Existing borrowers who took out loans before July 1, 2026 keep access to older plans like Standard, Graduated, Extended, and IBR. But ICR, PAYE, and SAVE are being phased out by July 2028.
- Interest rates for loans disbursed in the 2026-27 academic year (July 1, 2026 through June 30, 2027) are 6.52 percent for undergraduates, 8.07 percent for graduates, and 9.07 percent for Parent PLUS loans (up from 6.39, 7.94, and 8.94 percent in 2025-26).
- If you're already enrolled and borrowed before July 1, 2026, you may be grandfathered into current rules for the duration of your program or up to three years, whichever is shorter.
Always verify the latest details with your loan servicer or your school's financial aid office. Policy is still being finalized, and the specifics can shift between now and when your first payment comes due.
Roadblocks to Watch
Ignoring repayment until after graduation. By then, you've already borrowed the money. Understand the terms before you sign.
Assuming income-driven repayment means low payments forever. RAP payments increase as your income grows. At higher salaries, your payment may not be much different from the Tiered Standard Plan.
Not accounting for interest. At 6.52 percent, a $30,000 loan accrues about $5.36 in interest per day. Over four years of school with unsubsidized loans, that adds up to thousands before you make your first payment.
Treating loan limits as targets. Just because you can borrow $5,500 doesn't mean you should. Borrow what you need, not what's offered.
Cosigning private loans without understanding the risk. Parents who cosign are equally responsible for repayment. If your student can't pay, the lender comes to you.
The Bottom Line
The student loan system in 2026 is simpler than before, but the stakes are just as high. New borrowers have two federal repayment options: the Tiered Standard Plan for predictable fixed payments, and RAP for income-based payments with eventual forgiveness. Both have tradeoffs. Neither is a safety net that makes borrowing risk-free.
Before you sign your promissory note, know your numbers. Estimate your monthly payment. Compare it to your expected starting salary. Borrow only what you truly need. And remember that the best time to think about repayment is before you borrow, not after.
Use CollegeLens to compare your net costs across schools and see how different aid packages affect what you'll need to borrow.
Sravani at CollegeLens
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