Borrowing Federal Grad Loans After July 1, 2026? Here’s What You Need to Know About Repayment Options

If you’re taking out your first federal student loan for graduate school on or after July 1, 2026, welcome to a new era of repayment. Congress passed a law in 2025 (commonly referred to as HR1) that reshaped federal repayment plans—and you’re in the first wave of borrowers under the new system.

The changes are big: instead of multiple income-driven plans to choose from, you’ll have just two options—and only one of them is income-driven. Here’s what you need to know to make smart choices after graduation

Your Two Repayment Options

1. Standard 10-Year Plan
This is the default plan if you don’t actively choose another. You’ll pay off your loan with fixed monthly payments over 10 years.

• Pros:
• Debt-free in 10 years
• Least total interest paid
• No risk of a tax bill from forgiveness
• Cons:
• Payments can be high, especially for graduate-level debt
• No flexibility if your income is low or unstable

2. Repayment Assistance Plan (RAP) – The new income-driven repayment option
This is the replacement for older plans like PAYE, IBR, and SAVE. It’s designed to make payments more affordable for new borrowers.

• How it works:
  Your monthly payment is based on your Adjusted Gross Income (AGI)—but instead of subtracting a poverty-level shield like old plans did, RAP uses a straight percentage of your total AGI, based on income bands.
  Here’s the breakdown:
  
• $0–$10,000 income → $10 minimum monthly payment
  
• $10,001–$20,000 → 1% of AGI
  
• $20,001–$30,000 → 2% of AGI
  
• …
  
• $100,001 and above → 10% of AGI
  
• Each $10,000 jump in income raises your percentage by one point. There’s also a $50-per-dependent credit that reduces your monthly payment.
  
• Forgiveness terms:
  
• If you haven’t paid off your loans after 30 years (360 payments), the remaining balance is forgiven.
  
• If you work in public service (government or nonprofit), you may qualify for Public Service Loan Forgiveness (PSLF) after just 10 years (120 payments).
  
• Interest benefit:
  If your RAP payment is too low to cover the monthly interest, the government waives the unpaid interest—so your balance doesn’t grow even if your payment doesn’t fully cover the cost.
  
• Pros:
  
• Payments scale with your income
  
• Built-in interest protection
  
• Forgiveness is still an option
  
• Great for public-service careers or low-earning early years
  
• Cons:
  
• No 10-year payment cap like the old plans (e.g., PAYE or IBR)
  
• 30 years is a long timeline
  
• Forgiven balance would be taxable (unless tax law changes)
  
• Higher-income borrowers may eventually pay more
  

Which Plan Should You Choose?

Let’s break it down by situation:

• Planning to work in public service?
  RAP is your best bet. Your low early payments still count toward PSLF, and you’ll get tax-free forgiveness after 10 years.
  
• Unable to Pay because of High Debt?
  Many graduates simply can't afford to make the payments. Go with RAP
• The Math Says Don't Pay?
  For many people, paying the minimum and waiting for forgiveness will mathmatically make them wealthier.
• Expecting a high income soon?
  The Standard plan (or refinancing) may save you more long-term. RAP’s payment percentage grows with your income and doesn’t have a built-in cap. If you can handle the higher fixed payment, it may cost you less overall.
  
• Uncertain income or planning family leave/school transitions?
  RAP offers the flexibility you need. Your payment adjusts annually and drops during lean years.
  
• Interested in maximizing retirement or investing early?
  Choosing RAP could let you keep payments low while you invest the difference, especially in your early career. Just remember—you’re trading short-term cash flow for long-term repayment.
  
• Worried about rising balances?
  Don’t be. RAP’s interest waiver means your balance won’t balloon due to underpayments. This was one of the biggest complaints under earlier IDR plans—and it’s been addressed in RAP.
  

Can You Switch Plans?

Yes. You can move between RAP and the Standard plan at any time. You’re not locked into your first choice, and no “once-per-year” rule exists.

So choose thoughtfully, but don’t stress—you’re not stuck.

Quick Reminders Before You Graduate

• Make sure you know your loan servicer and set up your online account
  
• Estimate your AGI if you’re entering RAP—your first year’s payment could be based on your tax return or a manual income form
  
• Certify your public-service employment early if you plan to pursue PSLF
  
• Run repayment simulations at StudentAid.gov using the Loan Simulator to test different income scenarios
  

Final Takeaway

Borrowing after July 1, 2026 means you’re entering a simplified repayment system—but one with major implications depending on your career, income, and goals.

The Standard 10-Year plan offers certainty and speed.
RAP offers flexibility, forgiveness, and protection against runaway balances.

Both are valid paths—but only one will be right for you.

Before you finish school, take the time to understand your projected payments, career trajectory, and goals for the next 10–30 years. Making a smart choice now could save you tens of thousands later.

And if you’re unsure? That’s what good financial planning is for. Don’t be afraid to ask for help.