2026 Student Loan Changes: SAVE’s End, RAP Plan, & PSLF

What changed on July 1, 2026?

The short version: the federal government replaced a patchwork of older repayment options with a narrower set of plans and started moving borrowers off SAVE. Two changes matter most. First, the SAVE plan — the Biden-era income-driven plan that had enrolled millions of borrowers — is being ended under a legal settlement, so the borrowers still on it will need to choose a new plan or be moved to a standard one. By NPR’s reporting, roughly 7 million borrowers were affected by SAVE’s wind-down. Second, the One Big Beautiful Bill Act (OBBBA, Public Law 119-21) created two new options that came online July 1, 2026: a revised standard repayment plan and a new income-driven plan, the Repayment Assistance Plan (RAP).

If you’re on SAVE, the key takeaway is: don’t wait to be reassigned. Picking your own plan puts you in control of your monthly payment and your forgiveness timeline, rather than defaulting into whatever plan the system assigns.

The DC metro feels this more than most. The region has one of the highest concentrations of federal workers, nonprofit employees, attorneys, and advanced-degree holders in the country — exactly the groups most likely to hold large federal balances and to be pursuing Public Service Loan Forgiveness. A change that’s an inconvenience elsewhere can be a five- or six-figure decision here, which is why it’s worth slowing down and getting the plan choice right rather than clicking whatever option is fastest.

What is the Repayment Assistance Plan (RAP)?

The Repayment Assistance Plan is a new income-driven repayment plan, created by OBBBA and available July 1, 2026, that bases your monthly payment on your total income and forgives any remaining balance after 30 years. Here’s how it works, according to the Congressional Research Service analysis of P.L. 119-21:

• Payments are based on your total adjusted gross income (AGI), not “discretionary” income like older plans used.
• The payment is a sliding percentage of AGI, ranging from 1% to 10%. For AGI above $10,000, the percentage rises by one point for each additional $10,000 of income. If your AGI is $10,000 or less, your monthly payment is just $10.
• Forgiveness comes after 360 monthly payments (30 years) — at which point any remaining principal and interest is forgiven.
• Two borrower-friendly features: unpaid accrued interest is not charged when your payment doesn’t cover it (so your balance won’t balloon from unpaid interest), and if your monthly payment covers less than $50 of principal, the government adds a matching principal payment of up to $50. That means your balance goes down every month, even on a small payment.

Because taxability of forgiven balances can change over time and depends on your situation, confirm the current rules and how forgiveness would be treated with a CPA or tax professional before counting on a specific outcome.

RAP vs. SAVE: how your payment could change

Here’s the honest comparison. For many borrowers, RAP will mean a higher monthly payment than SAVE did, but a more predictable path and no runaway interest. SAVE calculated payments on discretionary income with a generous income exemption, which produced very low — sometimes $0 — payments for lower earners. RAP instead applies its percentage to your total AGI with a much smaller floor, so the same borrower may owe more each month.

What RAP gives back is stability: the interest waiver stops your balance from growing when your payment is small, and the $50 principal match keeps your balance moving down every month. SAVE offered low payments but got tangled in litigation that left borrowers in limbo for long stretches. In other words, the trade is lower-but-uncertain (SAVE) versus higher-but-durable (RAP). Which is better depends entirely on your income, balance, and whether you’re pursuing forgiveness — exactly the kind of math worth modeling before you enroll.

To make the RAP formula concrete: a single borrower with an AGI of about $60,000 falls in the 5% band, which works out to roughly $250 a month before other adjustments (this is an illustrative estimate, not a quote — your actual payment depends on your exact AGI, family size, and loan details). A borrower earning $40,000 would land closer to the 3% band, and someone over $100,000 hits the 10% ceiling. Running your own number is the only way to know whether RAP raises or lowers your bill versus what you were paying, so plug your AGI into the official estimator before you commit.

What about PSLF? (This matters a lot in DC)

Public Service Loan Forgiveness still exists, and for DC-area workers it remains one of the most valuable programs around. PSLF forgives your remaining federal Direct Loan balance after 120 qualifying monthly payments (10 years) while you work full-time for a government agency or a 501(c)(3) nonprofit, and that forgiveness is tax-free at the federal level. If you’re a federal employee, work at a nonprofit, or are a public-interest lawyer, PSLF can be worth far more than shaving a few dollars off your monthly payment.
Two 2026 wrinkles to know. First, qualifying payments generally must be made on an income-driven plan, so your choice among the new plans directly affects your PSLF progress — this is where getting the plan selection right really pays off. Second, the administration attempted to add a rule denying PSLF to workers whose employers engage in activities with a “substantial illegal purpose,” but courts blocked it, so the traditional eligibility rules remain in place for now. Because this area is actively changing, verify your employer’s eligibility and your payment count directly at studentaid.gov and keep your certification forms up to date.
Take Kat, a composite example of a federal employee in DC who’s five years into PSLF. For her, the goal isn’t the lowest possible payment — it’s choosing a plan whose payments count toward PSLF while keeping her budget intact for the next five years. A borrower with no forgiveness path might optimize completely differently. This is why we treat student loans as part of federal employee financial planning rather than a standalone decision.

A note on future borrowing limits

Answer first: if you or your kids will borrow for school going forward, expect lower federal borrowing caps than in the past. OBBBA also changed how much students and parents can borrow, tightening limits on graduate and parent borrowing for new loans. The exact caps depend on the loan type and when the loan is taken out, so if you’re planning for graduate school or a child’s education, check the current limits at studentaid.gov and factor any gap into your college and education savings plan — because a smaller federal loan ceiling may mean saving more in advance or rethinking the school budget.

How to fold this into your financial plan

The plan you choose shouldn’t be decided in a vacuum. A few principles we use with clients at District Capital Management:

• Match the plan to your goal. Chasing forgiveness (PSLF or the 30-year RAP timeline) argues for the lowest qualifying payment. Planning to pay the loan off argues for the plan that minimizes total interest, which may mean paying more than the minimum.
• Don’t stop investing to attack low-interest debt. For many professionals, capturing a full employer 401(k) match and funding retirement still comes first. Loan payoff and long-term investing aren’t either/or.
• Keep an emergency fund. Higher required payments under RAP make a cash cushion more important, not less.
• Re-certify income on time. Income-driven plans require annual income certification; missing it can spike your payment or interest.
• Coordinate with your taxes. Your AGI now directly drives your RAP payment, so decisions like retirement contributions (which lower AGI) can also lower your student loan payment — a genuine planning lever worth discussing with a CPA.

One more caution worth stating plainly: think hard before refinancing federal loans with a private lender to chase a lower rate. Doing so permanently gives up federal protections — income-driven plans like RAP, PSLF eligibility, and interest waivers. For a borrower on a forgiveness track, refinancing away those benefits can be a costly mistake, even if the headline interest rate looks better. Because we’re fee-only and don’t earn anything from loans or refinancing, we can look at that trade-off with no stake in the answer.

Getting this right is worth real money over a decade. This is the kind of decision a fee-only financial planning relationship is built for — modeling your specific numbers rather than guessing.

If you’d like help choosing a plan and building it into your broader financial picture:

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