The federal student loan system changed more between 2025 and 2026 than it had in the previous twenty years. The SAVE plan was struck down and erased. Three income-driven plans are being retired. A brand new plan called RAP launched on July 1, 2026. Forgiven balances became taxable again in January. If you are working from advice written before 2026, almost all of it is now wrong.
If you were enrolled in SAVE, your servicer started sending 90 day notices on July 1, 2026. If you do not pick a new plan, you get moved automatically, and the automatic destination can carry a far higher payment than an income-driven plan would. Log in to your servicer and choose a plan rather than letting the clock run out.
The scale of the problem in 2026
The numbers below come from Federal Student Aid's own quarterly portfolio reporting and from the Department of Education's rate announcement for the current academic year. They are the figures worth knowing, and they are current as of the most recent published data.
| Measure | Figure | As of |
|---|---|---|
| Federally managed loan portfolio | About $1.64 trillion | March 31, 2026 |
| Borrowers in default | Roughly 9 million, holding about $220 billion | March 31, 2026 |
| Borrowers delinquent 30 to 270 days | About 2.97 million | March 31, 2026 |
| Undergraduate Direct Loan rateSubsidized and unsubsidized | 6.52% fixed | Disbursed 7/1/26 to 6/30/27 |
| Graduate Direct Unsubsidized rate | 8.07% fixed | Disbursed 7/1/26 to 6/30/27 |
| Direct PLUS rate | 9.07% fixed | Disbursed 7/1/26 to 6/30/27 |
Portfolio and default figures: Federal Student Aid quarterly portfolio reports. Interest rates: U.S. Department of Education, Federal Student Aid electronic announcement of June 4, 2026. Federal rates are fixed at the moment of disbursement, so a rate change never touches a loan you already have.
Default is the part of that table that deserves a second look. Roughly one in eight federal borrowers is in default, and the count jumped by about 1.3 million in a single quarter. That is not a story about people refusing to pay. It is largely a story about a system that spent three years paused, restarted unevenly, and then rewrote its own rules twice.
What actually changed, and what died
Old articles on this subject are full of programs that no longer exist. Here is the honest status of each of them.
The one-time broad cancellation never happened
The $10,000 and $20,000 debt relief plan announced in August 2022 was struck down by the Supreme Court in Biden v. Nebraska in June 2023. No money was ever cancelled under it, no application is pending, and it is not coming back through that route. If a page is still telling you to check your eligibility for it, that page has not been touched in three years.
The payment pause is long over
The pandemic payment pause ended in September 2023 and the twelve month on-ramp that followed it ended on September 30, 2024. Interest accrues normally and missed payments are reported to credit bureaus normally.
SAVE has been vacated
SAVE was blocked by litigation in 2024, and a March 10, 2026 court judgment vacated the rule that created it. The generous payment formula, the unpaid interest subsidy and the accelerated forgiveness timeline are all gone. About seven million people were enrolled when it ended. Interest had already restarted on SAVE forbearance balances in August 2025.
Fresh Start and the IDR account adjustment closed
Fresh Start, the temporary route out of default, closed on September 30, 2024. The one-time IDR account adjustment, which retroactively credited past months toward forgiveness, was completed on January 16, 2025. Both were genuinely valuable and both are finished.
Forgiven balances are taxable again
The temporary federal tax exclusion for discharged student debt expired on schedule at the end of 2025. Balances forgiven on or after January 1, 2026 through an income-driven plan are generally treated as cancellation of debt income and taxed as ordinary income. Death discharge, total and permanent disability discharge, and PSLF are the meaningful exceptions and remain tax free. This is a large planning problem for anyone approaching a 20 or 25 year forgiveness date, and it is the change most often missing from older guides.
The repayment plans that exist right now
This is the part that matters most, because the menu is genuinely different from what it was a year ago.
| Plan | How the payment works | Forgiveness | Status in 2026 |
|---|---|---|---|
| RAPRepayment Assistance Plan | 1% to 10% of total adjusted gross income on a sliding scale, minus $50 per dependent, with a $10 monthly floor. Unpaid accrued interest is waived, and the government adds up to $50 a month toward principal if your payment would not reduce it by that much. | After 360 qualifying payments, roughly 30 years. Taxable. | Launched July 1, 2026. Not open to Parent PLUS borrowers. |
| IBRIncome-Based Repayment | 10% of discretionary income if you first borrowed on or after July 1, 2014, otherwise 15%. The partial financial hardship gate was removed, so income no longer blocks enrollment. | 20 years for the newer cohort, 25 for the older one. Taxable. | The only legacy income-driven plan still taking new enrollees. Generally closed to you if you take out a new federal loan on or after July 1, 2026. |
| Tiered Standard | Fixed payment with the term set by balance: 10 years under $25,000, 15 years to $49,999, 20 years to $99,999, 25 years at $100,000 and above. Minimum $50 a month. Income is irrelevant. | None. | Launched July 1, 2026 for borrowers whose first loan is disbursed on or after that date. Does not build PSLF credit. |
| PAYE and ICR | Existing terms continue for now. | 20 or 25 years. Taxable. | Closed to new enrollment and scheduled to sunset July 1, 2028. |
| SAVE | Not applicable. | None. | Vacated March 10, 2026. Gone. |
RAP and Tiered Standard terms: One Big Beautiful Bill Act loan provisions and the Department of Education's implementing guidance and fact sheet. Plan availability reflects rules effective July 1, 2026.
Borrowing a new federal loan on or after July 1, 2026 does not just govern the new loan. It generally pulls all of your federal loans, including old ones sitting happily on IBR, into the RAP or Tiered Standard world. If you are close to an IBR forgiveness date and thinking about going back to school, work out that interaction before you sign anything.
Public Service Loan Forgiveness survived
PSLF is intact. It still forgives the remaining balance on Direct Loans after 120 qualifying monthly payments made while working full time for a government body or a qualifying nonprofit, and PSLF forgiveness is still tax free.
Two things happened in 2026 that are worth knowing. First, the Department of Education finalized a rule in October 2025 that would have let the Secretary strip employers of qualifying status for having a “substantial illegal purpose.” A federal court vacated that rule on June 30, 2026, one day before it was due to take effect, so the older qualifying employer definition still governs. Second, the buyback program, which lets you pay for months spent in certain forbearances, got more expensive: as of March 31, 2026 the Department stopped using the SAVE formula to price buyback and switched to the IBR, PAYE or ICR formulas instead.
One practical note. The Tiered Standard plan does not generate PSLF credit, and Parent PLUS loans taken out on or after July 1, 2026 are limited to that plan. If you work in public service, plan selection is not a minor administrative choice.
If you are already in default
About 9 million people are, so this is not a niche section.
Involuntary collections restarted in 2025, with the Treasury Offset Program resuming on May 5, 2025 and administrative wage garnishment notices following. Then on January 16, 2026 the Department of Education announced it was delaying involuntary collections, both wage garnishment and Treasury offset, while it stood up the new repayment plans. That delay was still in place as of August 2026 with no announced restart date.
Read that carefully, because it is easy to misread as good news. A delay is not a discharge. The loan is still in default, the balance is still growing, the credit damage is still there, and the government still holds the authority to garnish wages and seize tax refunds the moment the pause lifts. The window is an opportunity to get out of default, not a reason to ignore it. The two standard exits are loan rehabilitation, a series of agreed affordable payments after which the default notation comes off your credit report, and consolidation, which is faster but leaves the default history intact. Fresh Start is no longer an option. One useful change from the 2025 law is that borrowers now get a second rehabilitation opportunity, where previously rehabilitation was a once per loan privilege.
If you are borrowing for school now
The borrowing side changed as much as the repayment side. Effective July 1, 2026, the Grad PLUS program was eliminated for new borrowers. Graduate borrowing is capped at $20,500 a year and $100,000 in total, professional programs at $50,000 a year and $200,000 in total, and there is an overall $257,500 lifetime cap on federal student loans excluding Parent PLUS. Parent PLUS itself is now capped at $20,000 a year and $65,000 per student. Students who received a Direct or Grad PLUS disbursement before July 1, 2026 and stay continuously enrolled in the same program can generally keep borrowing under the old rules for up to three more academic years.
The practical consequence is that a gap has opened between what graduate and professional programs cost and what the federal system will lend. That gap will be filled by private borrowing, which is exactly the moment to be careful. If you are looking at that gap, compare terms properly before you sign, and exhaust federal eligibility first. Our guide to the best private student loans covers what to actually compare.
A blunt warning about refinancing
Refinancing a federal student loan means a private lender pays it off and issues you a new private loan. That is permanent and cannot be undone. You give up income-driven repayment, RAP, IBR, PSLF, death and disability discharge, borrower defense, closed school discharge, deferment and forbearance rights, and any future federal relief. There is no path back to the federal system afterward. Refinancing federal debt makes sense for a narrow group: high income, stable employment, no interest in public service work, and a rate meaningfully below what you hold. For most people carrying federal loans in 2026, it is the wrong move.
Refinancing private loans into other private loans carries none of that risk, because there are no federal protections to lose. If that is your situation, the calculus is simply whether the new rate and terms beat the old ones. Our walkthrough on whether you should refinance your student loans works through the decision.
What to actually do this month
In rough priority order. Start by logging in to StudentAid.gov and confirming three facts: who your servicer is, what plan you are actually on today, and whether you have a notice with a deadline attached. Servicers have changed hands repeatedly and a surprising number of people are corresponding with the wrong company.
If you were in SAVE, choose a plan before your 90 day window closes rather than accepting the automatic assignment. If you work in public service, verify that your chosen plan builds PSLF credit and submit an employment certification for every year you have worked, because reconstructing employment history years later is genuinely painful. If you are approaching an income-driven forgiveness date, get advice on the tax bill before the balance is discharged, because a large forgiven balance in 2026 is ordinary income. If you are in default, use the current collections pause to enter rehabilitation instead of waiting for it to lift.
Then, and only then, look at the arithmetic of paying it down faster. Our guide on how to pay off student loans covers the mechanics, and student loan repayment plans goes deeper on comparing the plan options above. If the vocabulary here is unfamiliar, student loans 101 is the place to start.
