Don’t Switch Your Student Loans To This New Repayment Plan, Says Group

Two New Repayment Plans For Federal Student Loans Are Now Live

On July 1, as part of the legislative changes mandated by the One Big, Beautiful Bill Act that Republican lawmakers passed on largely party-line votes last year, the Education Department launched two new repayment plans:

• The Tiered Standard repayment plan bases a borrower’s monthly payment on “the amount of your principal balance that you owe at the time that you enter the plan, the interest rate on your loans, and the length of the repayment period,” said the department in updated online guidance. The plan would require that federal student loans be paid in full within 10 to 25 years, depending on the size of the balance.
• The Repayment Assistance Plan, or RAP, is a new income-driven repayment plan that can provide affordable payments tied to a borrower’s income, as well as interest subsidies and principal benefits that can prevent a borrower’s student loans from ballooning due to interest accrual. But the plan would require 30 years in repayment before a borrower could qualify for student loan forgiveness, far longer than other income-driven plans.

The new plans are intended to replace other federal student loan repayment plans that are being phased out. These include the SAVE plan, which the department is currently in the process of winding down, as well as the ICR and PAYE plans, which will be phased out by July 2028.

But new borrowers, defined as those who take out new federal student loans or consolidate their existing loans on or after July 1, will lose access to all legacy repayment plans. Their only choices for repayment will be either the Tiered Standard repayment plan, or RAP. And new Parent PLUS loans won’t even be able to access RAP; their only repayment plan option would be the Tiered Standard repayment plan.

“If you have at least one loan first disbursed on or after July 1, 2026, you’ll be required to repay all of your eligible Direct Loans under the Repayment Assistance Plan (RAP) or the Tiered Standard Plan,” said the Education Department in its updated guidance. “If you have parent PLUS loans or a Direct Consolidation Loan that includes a parent PLUS loan, you’re permitted to repay those loans only under the Tiered Standard Plan.”

Group Warns Borrowers Not To Switch Student Loans To Tiered Standard Plan For PSLF

Last week, the PSLF Coalition, a group of more than 100 nonprofit and service organizations that advocate for borrowers enrolled in Public Service Loan Forgiveness, warned borrowers pursuing student loan forgiveness not to enroll in the Tiered Standard repayment plan. The Education Department clarified in updated regulations released earlier this year that payments made under the Tiered Standard plan will not count toward student loan forgiveness under IDR plans or PSLF. This differs from payments made under the traditional 10-year Standard repayment plan, which can count toward student loan forgiveness for the PSLF program if all other eligibility criteria are met.

“Payments made while enrolled in the Tiered Standard Plan are not considered qualifying payments for PSLF or Temporary Expanded Public Service Loan Forgiveness (TEPSLF),” said the department in online guidance updated this week.

“As a result of the One Big Beautiful Bill Act, if you are a new borrower, you must choose the Repayment Assistance Plan (RAP) to participate in PSLF,” said the PSLF Coalition in a statement last week. “Borrowers who choose or are placed into the new Tiered Standard Repayment Plan will no longer be able to make qualifying payments toward PSLF. Borrowers with Parent PLUS Loans, who are automatically placed into the Tiered Standard Repayment Plan, are similarly excluded from earning PSLF credit.”

The coalition called on Congress to pass legislation allowing payments made under the Tiered Standard Repayment plan to count toward student loan forgiveness under PSLF. This would allow Parent PLUS borrowers, as well as new student loan borrowers who cannot afford payments under RAP, to pursue PSLF.

“Public service professionals are serving a nation where need continues to grow, and resources continue to shrink,” said Verna Williams, CEO of Equal Justice Works, in a statement. “Congress should not make their jobs even harder by changing the PSLF rules arbitrarily. Lawmakers should act now to ensure public servants can continue serving the communities that depend on them.”

New Student Loans Can Be Eligible For PSLF Through RAP, But With Caveats

Payments made under the other new repayment plan, RAP, can count toward student loan forgiveness, unlike the Tiered Standard repayment plan.

“Generally, payments made under the RAP are eligible for Public Service Loan Forgiveness (PSLF) as long as the payment is made on time and in full,” said the Education Department. That means borrowers pursuing PSLF can enroll in RAP to make their qualifying payments. But other student loan borrower advocacy groups have warned against RAP, as well.

“RAP has some important pros and cons that are different from the existing income-driven repayment plans,” said the National Consumer Law Center in an article last week. “As in other IDR plans, payments in RAP will count towards Public Service Loan Forgiveness (PSLF).”

Moreover, said NCLC, “Your loan balance will always decrease while you’re in the RAP plan and making on-time payments because any interest that accrues during a month that is not paid off via your monthly payment will be waived (canceled). In addition, if your monthly payment does not reduce your principal by at least $50 on its own, the government will reduce your principal by up to $50.”

But RAP also has some downsides.

“Your monthly bill may be more expensive than it would be in the other IDR plans, particularly if you took out your loans after 2014, are low income, high income, or have a spouse or children,” said NCLC. That’s because RAP has a minimum required monthly payment, no cap on payments, and a narrower definition of family size than other income-driven repayment plans. That means that while RAP can offer more affordable student loan payments for some borrowers, it could be much more expensive for others.

Borrowers who take out new student loans going forward, or consolidate their existing loans, will be limited to RAP if they want to enroll in an income-driven repayment plan and pursue PSLF. But legacy borrowers who are already in repayment should carefully weigh the benefits and drawbacks of RAP and compare them against other available income-driven repayment options, such as IBR, before deciding to enroll.