RAP vs IBR vs Tiered Standard: The 2026 Decision Guide for Existing Borrowers

📐 Figures verified Sep 27, 2026 against Public Law 119-21, the Education Department's final rule of May 1, 2026 (34 CFR 685.208 to 685.210), the 2026 HHS poverty guidelines and the Department's June 2026 autopay announcement. How we check numbers →

Numbers That Matter: The 2026 Repayment Rules

What Changed on July 1, 2026

For a decade, picking a federal repayment plan meant sorting through a crowded menu: Standard, Graduated, Extended, ICR, IBR, PAYE and finally SAVE. The 2025 budget law, Public Law 119-21, which federal agencies now call the Working Families Tax Cuts Act, collapses that menu. On July 1, 2026 the Education Department opened two new plans, the Repayment Assistance Plan (RAP) and the Tiered Standard plan, under a final rule published May 1.

What you can choose now depends on a single date. If every loan you owe was made before July 1, 2026, you keep the old menu for the time being: the 10-year Standard plan, the Graduated and Extended plans, IBR, and now RAP. PAYE and ICR are closing, and borrowers on them have until July 1, 2028 to move. If you have any federal loan made on or after July 1, 2026, a Direct Consolidation Loan included, the law gives you exactly two choices, and they apply to all of your loans: Tiered Standard or RAP. Skip the choice and the Department puts you on Tiered Standard.

Meanwhile SAVE, the plan most income-driven borrowers had signed up for, is gone. It ended by court order on March 10, 2026, and millions of borrowers who had been sitting in its forbearance are being told to choose a new plan within 90 days of a notice from their servicer. The Department said in a June 2026 court filing that no borrower would be required to leave that forbearance before September 29, 2026, so the first deadlines are arriving now.

How Each Plan Figures Your Payment

RAP: a share of all your income

RAP ignores your balance and looks only at adjusted gross income, the figure on line 11 of Form 1040. With AGI of $10,000 or less, the payment is $10 a month. Above that it is a flat percentage of every dollar: 1% of AGI between $10,000 and $20,000, 2% between $20,000 and $30,000, and so on up to 10% above $100,000. Divide by 12, subtract $50 for each dependent you claim, and that is the payment. It never drops below $10.

Because the percentage applies to all of your income, RAP has steps. A single borrower earning $59,999 pays 5%, about $3,000 a year; at $60,001 she pays 6%, about $3,600. The steps are written into the statute in fixed dollars, so they don't rise with inflation. A borrower whose pay merely keeps up with prices will drift into higher percentages over a 30-year repayment.

Two features make RAP unusual. If an on-time payment doesn't cover the month's interest, the unpaid interest is simply not charged. And if your payment reduces principal by less than $50, the Department adds a matching principal reduction to close the gap, capped at the amount you paid. The effect: every on-time payment of $50 or more lowers your principal by at least $50, so the balance can only go down. Whatever remains after 360 qualifying payments, 30 years, is forgiven.

Married borrowers who file jointly are measured on combined AGI. File separately, and only your own income, and the dependents on your own return, count. When both spouses have federal loans and file jointly, the payment is split by each spouse's share of the couple's combined balance.

IBR: a share of income above a poverty allowance

Income-Based Repayment protects a slice of income first. It takes your AGI (plus your spouse's, if you file jointly), subtracts 150% of the federal poverty guideline for your family size and charges 10% of what is left, divided by 12. Under the 2026 HHS guidelines, 150% is $23,940 for one person, $32,460 for two and $49,500 for four in the 48 contiguous states; Alaska and Hawaii are higher. If you owed any federal student loan before July 1, 2014, the rate is 15% instead of 10%, and forgiveness takes 25 years instead of 20.

IBR has a ceiling: the payment never exceeds what the 10-year Standard plan would have charged on your balance when you entered IBR. It also has a floor of zero. If the formula gives less than $5 a month you pay nothing, and anything from $5 to $10 is rounded up to $10. The 2025 law removed the old requirement that you show a "partial financial hardship" to get in, so any eligible borrower can enroll, however high the income.

The weak spot is interest. When an IBR payment is smaller than the month's interest, the rest keeps accruing; for the first three years the government covers that gap on subsidized loans only. Unpaid interest is added to your principal if your payment reaches the Standard-plan cap or you leave IBR. A balance that grows for 20 years produces a bigger forgiveness amount, and a bigger tax bill.

Tiered Standard: fixed payments sized to your balance

Tiered Standard is the new default. It is a plain fixed-payment loan whose length depends on how much you owe when you enter repayment: 10 years below $25,000, 15 years from $25,000, 20 years from $50,000 and 25 years at $100,000 or more, with a $50 minimum payment. There is no forgiveness, and the plan is not among those the law lists as counting toward Public Service Loan Forgiveness.

For a $38,000 balance at 6%, Tiered Standard means 15 years at $320.67 a month, where the 10-year Standard plan would charge $421.88. Existing borrowers can only get it by borrowing again or consolidating after June 30, 2026, which is itself a one-way door.

The 10-year Standard plan: still the cheapest way out

For loans made before July 1, 2026, the 10-year Standard plan remains, and it is still where those borrowers land if they never choose a plan (for newer loans, the default is Tiered Standard). It carries the highest payment and the lowest total interest, and its payments count toward PSLF. If your budget can carry it and forgiveness isn't in your future, it usually wins on cost.

Who Can Choose What

• All loans made before July 1, 2026, and no new loans since: RAP, IBR, the 10-year Standard plan, and the Graduated and Extended plans. You can move between them.
• Any federal loan made on or after July 1, 2026, including a Direct Consolidation Loan: Tiered Standard or RAP, for every loan you owe. You can switch between those two at any time.
• Coming out of the SAVE forbearance: any plan you are eligible for. Miss the deadline in your servicer's 90-day notice and you are placed on a standard plan.
• On PAYE or ICR: move before July 1, 2028. If you don't, your loans go to RAP, or to IBR if RAP doesn't accept them.
• Parent PLUS borrowers: RAP is off-limits. A Parent PLUS consolidation made before July 1, 2026 can use IBR if it is repaid on IBR or ICR at some point before July 1, 2028. Parent PLUS loans that were never consolidated are limited to fixed-payment plans, and a new Parent PLUS loan or consolidation can use only Tiered Standard.
• FFEL and Perkins borrowers: RAP is a Direct Loan plan, so these loans need a Direct Consolidation Loan first, and a consolidation made now puts all of your loans in the two-plan system.

Worked Example: Dana Leaves the SAVE Forbearance

The Math That Decides It

Everyone's numbers differ, but the answer usually turns on five things.

1. How long your forgiveness clock runs

RAP forgives after 360 payments; IBR after 240 or 300. Months you have already spent on IBR, ICR, PAYE or the 10-year Standard plan count toward RAP's 360, and most of them count toward IBR's clock too. The catch runs one way: months on RAP don't count toward IBR forgiveness. If you have years of credit and a balance you won't clear in time, IBR may forgive far sooner, as it does for Dana.

2. Whether your payment covers the interest

When the payment falls short of the month's interest, RAP forgives the gap and still takes $50 off principal, while IBR lets the gap pile up. Borrowers with modest incomes and no realistic path to forgiveness, such as a short credit history and a balance they will eventually repay, come out ahead on RAP's interest waiver.

3. Where your income is headed

RAP's steps are fixed dollars. A raise can push you across a $10,000 line, and inflation will push you across them over the years. IBR grows only with the income above an allowance that rises with the poverty guideline each year. Single borrowers on the 10% version of IBR who earn well above $70,000 generally pay less on IBR; on the 15% version, RAP is usually lower.

4. The tax on forgiveness

The American Rescue Plan made forgiven student debt tax-free from 2021 through 2025. That exclusion wasn't renewed; the 2025 law kept it only for discharges on account of death or disability. From 2026, a balance forgiven under RAP or IBR is taxable income in the year it is forgiven, unless you are insolvent then. PSLF forgiveness falls under a separate exclusion in the tax code and stays tax-free. The bill can be large: forgive $80,000 on top of a six-figure income and the federal tax alone can run to five figures.

5. PSLF and how you file

If you are working toward Public Service Loan Forgiveness, the goal flips. You want the lowest qualifying payment, because whatever you don't pay is forgiven tax-free after 120 payments. RAP, IBR and the 10-year Standard plan all count; Tiered Standard isn't listed. Married borrowers should price filing separately, because on separate returns only your own income counts toward RAP or IBR. For the married teacher in our calculator's sample, filing separately cuts IBR from $404.17 to $141.83 a month, while the couple's federal tax before credits stays at $7,400.

Decision Rules

How to Switch Plans

1. Log in at StudentAid.gov and use the income-driven repayment application to choose RAP or IBR, or ask your servicer for a fixed plan. Consenting to let the Department pull your tax information from the IRS speeds things up and handles future recertifications.
2. If you're married, decide how you'll file before you apply; the application uses the AGI and dependents from your return.
3. Expect a processing period. Your servicer may place you in a short forbearance while it works; before you rely on those months, check whether they count toward PSLF or forgiveness.
4. Turn on autopay with your servicer. It cuts your rate by 0.25 point, and the Department's June 2026 announcement gives borrowers enrolled by September 30, 2026 a full point through June 30, 2028, as long as they stay enrolled.
5. Confirm the new plan and payment in your servicer account, then recheck your forgiveness and PSLF counts on StudentAid.gov about a month later.
6. Recertify every year, and rerun the comparison whenever your income, family size or marital status changes.

For the Department's own summary of the two new plans, see its fact sheet on the repayment changes. For the full list of repayment options, including the Graduated and Extended plans this guide leaves aside, read our student loan repayment strategies guide. Student Loan Forgiveness: Every Program Explained covers PSLF, disability discharge and the other programs, and if you are already behind, start with what happens if you can't pay your student loans. The national picture, with balances and defaults by state, is in our student loan debt statistics, and more guides sit in the Debt & Credit hub.

Frequently Asked Questions