The US student debt system is undergoing a massive overhaul. Starting July 1, the SAVE plan and older income-based plans are being phased out or replaced, entirely streamlining the system into just two options: the Repayment Assistance Plan (RAP) and the Standard Repayment Plan.Millions of borrowers are affected and need to take immediate action to prevent being placed into costlier plans.
Key Changes to Know
- Elimination of Old Plans: Enrollment in older plans like Income-Based Repayment (IBR) and the SAVE plan will be cut off. If you were on SAVE, you have a limited window to select a new plan or you risk being automatically defaulted into a higher standard payment.
- Repayment Assistance Plan (RAP): This is the main new income-driven option. Payments are calculated as 1% to 10% of your Adjusted Gross Income (AGI), rather than discretionary income. For borrowers making below $10,000 per year, payments will be capped at $10 per month.
- Loan Forgiveness: Under RAP, any remaining balance is forgiven after 30 years of repayment.
- Standard Repayment Plan: This is the other option, which is a fixed-payment plan lasting between 10 and 25 years, with payments being at least $50 a month.
What You Should Do Next
- Identify Your Current Loans: Go to your official StudentAid.gov Dashboard to see exactly what federal loans you hold and which plan you are currently enrolled in.
- Review Your Timeline: Millions of borrowers have received or will receive notices regarding the end of the SAVE plan with deadlines (often 90 days) to switch. Check your email and loan servicer dashboard.
- Compare Your Options: Evaluate whether RAP or the Standard plan makes more financial sense for your budget before the upcoming July 1 deadlines.
To help you navigate these student debt changes, it would be useful to know:
