A new federal income-driven student loan plan set to start in July 2026 will raise monthly payments for many borrowers, replacing the Biden-era SAVE plan that kept costs lower for low- and middle-income families, according to new policy analysis.
The incoming Repayment Assistance Plan (RAP) will become the primary income-driven option for new loans, and analyses shows it will require significantly higher payments than the Saving on a Valuable Education (SAVE) program for many as millions already struggle to stay on top of their debts.
Why It Matters
RAP will replace SAVE for new borrowing and become the lone income-driven plan for new loans issued on or after July 1, 2026, affecting affordability for future cohorts and many current borrowers who consolidate or switch plans.
The changes also come amid heightened levels of student loan debt delinquency, with Federal Reserve Bank of New York’s quarterly Household Debt and Credit Report released this week showing that millions of borrowers are falling behind on their payments.
More than 40 million people hold federal student loans, and roughly 7 million borrowers enrolled in SAVE will be moved to other plans as part of a legal settlement ending SAVE, a transition expected to raise monthly costs for many.
What To Know
RAP requires even the lowest-income borrowers to pay more than under SAVE, with a median-income family of four earning $81,000 seeing a monthly payment rise from $36 under SAVE to $440 under RAP, according to a new report from The Institute for College Access & Success.
RAP sets minimum payments using adjusted gross income with tiered percentages that rise with income, applies a $50 monthly reduction per dependent, and requires 30 years for forgiveness, while SAVE offered lower payments and shorter forgiveness timelines for many.
SAVE will end pursuant to a proposed legal settlement, with the department moving enrolled borrowers to remaining options, while PAYE (Pay As You Earn) and ICR (Income-Contingent Repayment) will sunset by mid-2028, leaving IBR (Income-Based Repayment) and RAP as the primary income-based choices for most current borrowers during the transition.
The U.S. Department of Education said the changes were directed by Congress in the One Big Beautiful Bill Act (OBBBA) and implemented through a 2026 notice of proposed rulemaking to simplify repayment options alongside new borrowing limits for graduate and professional programs.
What People Are Saying
Under Secretary of Education Nicholas Kent said in a department press release on January 29, 2026: “For years, American families have rightfully been concerned about the escalating cost of higher education… President Trump’s Working Families Tax Cuts Act offers a once-in-a-generation opportunity to lower tuition costs and improve the student loan system."
The Institute for College Access & Success said in its report: "Borrowers are losing access to the far-more-affordable SAVE Plan. Current borrowers will be left with fewer, more expensive income-based plans, while new borrowers will only have one income-based option, the new “Repayment Assistance Plan,” or RAP, which requires higher monthly payments and a longer repayment term than prior plans."
What Happens Next
RAP will take effect for new loans disbursed on or after July 1, 2026, and will become the sole income-driven option for those loans, while PAYE and ICR will phase out by July 2028 for most borrowers.
The DoE will finalize rules after a public comment period and will issue transition guidance for borrowers leaving SAVE, including details on plan selection and timing.
Borrowers will be advised to compare RAP and IBR using the department’s tools, while Parent PLUS borrowers who need income-based options will be urged to meet consolidation timelines before plan sunsets.