WASHINGTON — New federal student loan repayment rules took effect nationwide on July 1, reshaping how millions of Americans will repay education debt by introducing new repayment options for future borrowers while beginning the phaseout of several existing income-driven plans.
The changes, implemented by the U.S. Department of Education under legislation enacted in 2025, reduce the number of repayment choices available for borrowers who receive new federal student loans on or after July 1. New borrowers are generally limited to either a Tiered Standard Repayment Plan or the new Repayment Assistance Plan (RAP), an income-based option intended to replace several previous income-driven repayment programs.
The overhaul also affects some existing borrowers. According to the Education Department, borrowers who take out a new federal loan after July 1, including certain consolidation loans, will generally have all of their federal loans repaid under the new framework. Borrowers who do not receive new loans may continue using several existing repayment plans during a transition period, although the Biden administration's Saving on a Valuable Education (SAVE) plan is being discontinued following court rulings and subsequent policy changes.
The department has begun notifying borrowers enrolled in the SAVE plan that they must select a new repayment option within a specified transition period. Officials said notifications will be issued in phases over the coming months, with borrowers remaining in administrative forbearance while the transition proceeds. Interest may continue to accrue during that period, according to the department.
Education officials have said the revised repayment system is intended to simplify a federal loan program that previously offered multiple income-driven repayment plans. Under RAP, monthly payments are tied to a borrower's income, while the Tiered Standard Plan provides fixed repayment schedules whose length varies based on the amount borrowed.
The policy changes accompany broader revisions to federal student lending that took effect this month, including new borrowing limits for graduate and Parent PLUS loans. Supporters have argued the measures streamline the student loan system and improve fiscal accountability, while borrower advocates and higher education groups have warned that reducing repayment flexibility could increase monthly costs for some borrowers and make higher education less affordable.
The Education Department said implementation of the new repayment framework will continue over the coming months as borrowers receive transition notices and submit applications for the available repayment plans.
