Student Loans in 2026: What Just Changed

The federal student loan system was rewritten by the One Big Beautiful Bill Act, and the new rules took effect on July 1, 2026. If you learned this system before 2025, most of what you know about repayment is now out of date.

Last verified 2026-08-02

The system was rewritten, and the old map is stale

Three things changed at once on July 1, 2026. The menu of repayment plans collapsed: anyone whose first federal loan is dated on or after that day chooses between a tiered Standard plan and the new Repayment Assistance Plan, not the long historical alphabet of IBR, PAYE, ICR and SAVE. SAVE itself is being wound down after litigation, under a settlement reached in December 2025.

Borrowing changed too. Grad PLUS is gone for new borrowers, and Parent PLUS is now capped at $20,000 per student per year and $65,000 over a lifetime. Neither cap is retroactive — families who already had a federal loan before July 1, 2026 can generally keep borrowing under the old rules for up to three more academic years, or until the student finishes their programme.

And there's a deadline with teeth: borrowers still on SAVE, PAYE or ICR have to move to a compliant plan by July 1, 2028. Notices started going out in July 2026, which is why a current address and a reachable email are doing more work this year than usual.

How a RAP payment is actually calculated

RAP is a percentage of adjusted gross income, and the percentage steps up with income rather than applying to the amount above a threshold. Roughly: 1% while AGI is between $10,001 and $20,000, rising a point per $10,000 band, and reaching 10% once AGI passes $100,000. Below $10,001 the payment is the floor.

That floor is $10 a month, and there's a $50 monthly reduction for each dependent you claim. So the arithmetic is: take the percentage for your income band, apply it to your whole AGI, divide by twelve, subtract $50 per dependent, and never go below $10.

One eligibility trap worth knowing now rather than later. Parent PLUS borrowers are shut out of RAP, even though Parent PLUS loans are technically Direct Loans. If a parent took one before July 1, 2026, consolidating it in time was the route into income-driven repayment at all.

The feature that stops a balance ballooning

On a conventional amortizing loan, a payment that doesn't cover the month's interest leaves a shortfall, and that shortfall gets added to what you owe. Income-driven payments plus a modest income can therefore mean a balance that grows every single year while you never miss a payment — which is how people end up owing more than they borrowed and stop believing the system works.

RAP waives that unpaid interest. If your calculated payment doesn't cover the month's interest, the remainder isn't capitalised onto the principal. There's a second piece as well: if your payment wouldn't reduce the principal by at least $50, the Department makes up the difference so it does.

Between them, those two rules change the balance from something that can run away from you into something that only ever moves down. That's structurally more important than the payment percentage — and it's the fair trade against RAP's forgiveness taking 30 years, which is longer than several of the plans it replaced.