What are Your Student Loan Repayment Options Starting on July 1, 2026?

Attention graduates! Loan repayment options are changing (once again), beginning on July 1, 2026. Now is the time to understand your loan repayment options before your six-month grace period comes to a screeching end in a few months from now. There are two paths for loan repayment: student and parent. Let’s first start with student borrowers.

Students who received a subsidized, unsubsidized, or Graduate PLUS Loan are responsible for making federal student loan payments. If a student is borrowing any new loans on or after July 1, 2026, and does not plan to pursue Public Service Loan Forgiveness (PSLF) or Time-Based Forgiveness (TBF), they can expect two loan payment plans: the tiered standard repayment plan and the repayment assistance program (RAP).

The Tiered Standard Plan offers fixed payments over a long period. As the standard loan payment option, it’s suitable for most borrowers who want a manageable payment that stretches over a 10-year period. However, it may not be the best repayment option for those with higher incomes.

The Repayment Assistance Program (RAP) is equally wonky in its structure. RAP is an income-driven payment plan that calculates payments based on a fixed percentage of your income, which means those with higher incomes may find it more affordable than the tiered standard plan. Although this option offers predictable payments for those with growing incomes, it can hinder lower-income individuals. Loan borrowers with lower incomes may find this payment option daunting, as it could lead to higher loan payments over the life of the loan.

As usual, the PSFL and TBF loan payment programs offer income-based payment plans, which may be more suitable for this population, which is unlikely to earn substantial career earnings early on. Students pursuing those two payment options should also review the covenant terms for each option. Too many students fail to fully understand the payment terms for PSFL and TBF, which can impair their ability to make those loan payments.

Now, students who do not have new loans on or after July 1, 2026, will enter a confusing maze of loan payment options. If a loan borrower is currently participating in the PSFL or TBF programs, they will have a variety of loan repayment options available to them. The three main ones to consider are the standard ten-year plan, RAP, and income-based repayment (IBR). IBS is a federal student loan repayment plan that caps monthly payments of 10% to 15% of a student’s discretionary income, based on family size and income. Initially designed for borrowers with high debt-to-income ratios, it applies to direct loans and the federal family education loan programs. It also provides a pathway to potential forgiveness of the remaining loan balance after 20-25 years of consistent loan repayments.

One notable point to emphasize is that the TBF program does not allow students to access the standard repayment plan. Loan borrowers in the TBF program can only participate in income-based repayment options.

Students who are not pursuing a PSFL or TBF program can anticipate an expanded array of repayment options. In fact, non-PSFL and non-TBF students have the following loan repayment options:

• Standard 10-year
• Graduated payment
• Extended payment
• Tiered Standard
• RAP
• IBR

Students can experiment with each option during an exit counseling session. As an interactive tool, students can explore each option in more detail while adding subtle details such as earnings levels after graduation and expected budget expenses. Financial aid counselors can also walk students through each option. Selecting the correct option the first time is better than choosing a poor one that leaves you worse off during repayment.

Parents who have a Parent PLUS Loan in their name have similar repayment options as regular federal student loan borrowers. Nevertheless, the number of options narrows depending on when the last federal student loan disbursement is for their student.

Parents who are pursuing the PSFL or TBF loan programs with new loan disbursements on or after July 1, 2026, will only have one loan repayment option: tiered standard. There are no PSFL- or TBF-eligible repayment plan options for parents. Parents with sensitive income levels should be aware of this.

Now, assuming a parent has no new loans after July 1, 2026, their options widened a bit depending on whether they pursue a PSFL or TBF repayment program. Parents who decide to pursue a PSFL or TBF repayment program can expect the following repayment options:

PSFL-Eligible Plans:

• Standard ten-year plan
• ICR (only if consolidated into a direct consolidation loan and enrolled in ICR before July 1, 2026, and is only available through June 30, 2028)

TBF-Eligible Plans

• ICR (only if consolidated into a direct consolidation loan and enrolled in ICR before July 1, 2026) is only available through June 30, 2028.

Parents who are not pursuing PSFL or TBF will have four options to consider: standard ten-year plan, graduated, extended, and tiered standard. Once again, parent borrowers will need to weigh their options carefully before selecting a repayment plan. Parents with sensitive income levels may be more risk-averse toward standard plans than those with steadier income levels. As always, financial aid counselors can explain your options to help you make an informed decision.

Your repayment choice will differ depending on your personal circumstances and preferences. Choosing the wrong option now can disadvantage you financially many years from now. When completing your exit counseling requirement, take it seriously. And if you are ever in doubt about what repayment option to select, contact a financial aid counselor to discuss your situation with them. While a financial aid counselor cannot tell you outright what to do, they can help you make an educated decision that works well for your financial situation.