As of July 1, 2026, federal student loan plans like Pay As You Earn (PAYE) and Saving on a Valuable Education (SAVE) are being replaced by two new options: the Repayment Assistance Plan (RAP) and the Tiered Standard Plan.
Picking between RAP or Tiered Standard isn’t just a loan decision. Whatever you commit to now affects how much you can save, how fast you can build credit, and when you can afford the next big milestone, like a car or your first apartment on your own.
Intuit TurboTax explains how a simple plan and a clear picture of your numbers make repayment far more manageable.
First, what’s changed
Anyone borrowing federal student loans after July 1, 2026, is entering repayment under the biggest change to federal student aid in decades. Two new repayment plans have replaced older options like SAVE, PAYE and Income-Contingent Repayment (ICR):
- The Repayment Assistance Plan (RAP): Your payments are based on your income.
- The Tiered Standard Plan: Your payments are fixed and predictable.
A note for existing borrowers
If you’re on SAVE, you have 90 days from July 1, 2026, to choose your new plan. If you’re on PAYE or ICR, you have until July 1, 2028. And, if you miss your window, you’ll be automatically moved to the Tiered Standard Plan.
You can choose from RAP, the Tiered Standard Plan, or the Income-Based Repayment (IBR).
Note that IBR is the only legacy income-driven repayment plan that’s available, but only to existing borrowers. However, if you take out any new federal loan on or after July 1, 2026, say, for grad school, RAP becomes the only income-driven option for all your loans, old and new combined.
Your two real choices
Whether RAP and Tiered Standard are your only choices as a new borrower, or you’re weighing them against IBR as an existing borrower, here’s how each option works.
Option 1: The Repayment Assistance Plan (RAP)
RAP sets your payment as a percentage of your income. That percentage goes up as you earn more. Here’s what it looks like in real numbers for a new grad earning $40,000-$55,000 a year, with no dependents:
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What makes RAP different from older income-based plans (like IBR)
- There's a $10 per month minimum for everyone now. You can no longer pay $0.
- If your payment doesn't cover your monthly interest, the government waives the rest, so your balance won't grow.
- If your on-time payment doesn't cover at least $50 toward principal, the government contributes up to $50 to guarantee your principal balance drops every month.
- Any remaining debt is forgiven after 30 years, up from 20–25 years under old plans.
- If you work in government or for a nonprofit, you may qualify for Public Service Loan Forgiveness (PSLF) after 10 years.
- Forgiven RAP debt counts as taxable income, unless it's forgiven through PSLF. Keep that in mind for your long-term planning.
Option 2: The Tiered Standard Plan
This plan gives you a fixed monthly payment based on what you owe, with your repayment term set by your loan balance. If you have a higher loan balance, you’ll have a lower monthly payment for a longer period:
Intuit TurboTax
The Tiered Standard Plan has higher monthly payments but saves you money over the life of the loan. This option allows you to pay off your loan in full, so there’s no forgiveness component.
The real question
There's no universally "best" plan. Choose the one that fits your budget today while supporting your long-term goals.
A bigger loan payment today can mean less going into savings or retirement. Those early years matter more than people expect, because money saved in your 20s has decades to grow before you need it.
It also affects your cushion. A repayment plan that barely fits your budget today leaves nothing for a car repair, a medical bill, or a slow month at work. That’s often what turns a manageable loan into a missed payment. It’s not the loan itself but having zero buffer.
None of this means one plan is right and the other is wrong. The loan decision doesn’t stay contained to the loan but touches everything else you’re trying to build at the same time.
Ask yourself: Can I genuinely fit the Tiered Standard payment into my current budget?
Let’s say you earn $45,000 a year and you owe $30,000.
The Tiered Standard plan would run you about $261 per month. RAP at that income would run about $150 per month. That’s a $111 difference every month.
If you can swing $261 a month, take it. You’ll pay less interest and be done with paying your loan faster.
If $261 a month feels impossible alongside rent, utilities, and groceries, then choose RAP. See RAP as a tool. Use it deliberately while you grow into higher income. Then, revisit your plan annually as your earnings increase.
Build the payments into your budget
Student loan payments only become manageable once you treat them like any other essential monthly expense. Once you’ve chosen a plan, treat your loan payment like rent or groceries: a fixed, nonnegotiable line item in your monthly budget.
Here’s a simple structure to start:
- Set up autopay. Most servicers offer a 0.25% interest rate reduction for automatic payments. That's free savings.
- Build a small emergency fund before you pay extra on your loan. Even setting aside $1,000–$2,000 prevents a single unexpected bill from derailing your repayment. Resources like the Consumer Financial Protection Bureau (CFPB) offer free budgeting guidance.
- Don't overthink it. In your first year, just making the payments matters more than the perfect payoff strategy. You are learning to manage these responsibilities. Make the payment and build the habit.
Your first step
If you haven't already, log in to StudentAid.gov, the official U.S. Department of Education portal. Look up your loan balance, your servicer's name, and your current repayment status.
From there, you’ll have the information you need to choose a repayment plan that works with your new paycheck, not against it. Once you understand your options and build a plan that fits your budget, those numbers start to feel much less intimidating.
This story was produced by Intuit TurboTax and reviewed and distributed by Stacker.
