Beginning July 1, 2026, borrowers taking out federal student loans will have access to two new repayment options: the Repayment Assistance Plan (RAP) and one additional plan yet to be detailed. These plans will mark a major departure from the existing extended or graduated plans in their repayment structure, specifically for future borrowers. Whatever their motivation, they are not likely aware of just how many debt repayment options are now available to them—options such as Income-Based Repayment (IBR) and the 10-year Standard Plan still in effect today.
Michele Shepard Zampini, the senior director of college affordability at The Institute For College Access & Success (TICAS), emphasized the positive changes in this new Standard Plan. Here’s what she had to say in a recent conversation. The new framework creates different repayment terms depending on how much a borrower takes out. Borrowers with loans of $25,000-$49,999 will now be on a 15-year repayment plan. This shift is supposed to offer more affordable repayment options for those borrowers. If your balance is between $50,000 and $99,999, you will qualify for a 20-year repayment term. For all debts in excess of $100,000, the repayment term will be 25 years.
Borrowers with a balance under $25,000 will continue to enjoy the 10-year standard repayment period with interest. Under the updated proposal, a borrower with a high level of debt would pay back more than $175,000 over their lifetime. That is almost a $50,000 increase from today’s code. For context, when a borrower borrows $100,000 in federal student loans, they will pay back roughly $125,000 over the next decade. This estimate is based on the transport Standard Plan.
Unlike old plans, the new plans will automatically assume a 5% interest rate. Those millions of current borrowers will begin to move into these updated programs starting next year. Those with older loans who decide to take out a new loan after the cutoff date will forfeit access to the existing repayment options for that new loan.
Zampini flagged some red flags in the design of the oncoming new plan. She warned that the system’s tiered approach could lead some borrowers to face what she described as a ‘cliff effect.’
“The design of the new plan, in which a borrower’s payment term is scaled up in five-year increments based on arbitrary thresholds, means some borrowers will face a problematic ‘cliff effect,’” – Michele Shepard Zampini
The ‘cliff effect’ When a borrower’s outstanding balance changes even slightly, this can result in them jumping into a higher repayment tier. This change can double or triple their repayment term.
“A small difference in their balance will tip them into the next tier and extend their term,” – Michele Shepard Zampini
She emphasized that as a result, most borrowers will pay more over the life of their loans. This would all be against what they would owe under the existing Standard Plan.
“However, many such borrowers will pay more in total over the life of the loan, as compared to the current Standard Plan,” – Michele Shepard Zampini
Scott Buchanan, executive director of the Student Loan Servicing Alliance, echoed these sentiments about the anticipated financial burden on borrowers. He underscored that knowing what these changes mean is absolutely key for consumers looking to borrow in the months ahead.
Her response by documentary filmmaker Astra Taylor perfectly captured the moment. She expects the implementation of these new plans to result in an increase in elderly debtors.
“We anticipate an explosion of senior debtors,” – Astra Taylor
The landscape of student loan repayment strategies is changing quickly. This one policy shift is transforming what it will look like for future borrowers to manage their financial obligations. It’s important for stakeholders to understand and adjust to the coming changes in borrowers’ terms and conditions. Whatever the outcome, it’s imperative to be ready for the massive changes coming to repayment plans.