Federal Student Loan Repayment Plans Are Shifting — Here's What Borrowers Need to Know

For millions of Americans with federal student loans, the next few years could bring big changes. The SAVE plan — a key income-driven repayment option — may soon be ending, while a new Repayment Assistance Plan (RAP) is set to take its place by 2028. These shifts could impact how borrowers manage their debt and what the government collects in revenue. With over 7 million people enrolled in the SAVE plan, uncertainty is growing about what comes next.

Understanding the SAVE Plan and Its Uncertain Future

The Saving on a Valuable Education (SAVE) plan, introduced during the , was designed to lower monthly payments for borrowers based on income. However, the plan is currently under a court injunction, and many of its provisions are being phased out as part of the broader One Big Beautiful Bill Act. Borrowers in the SAVE plan will be gradually transitioned to the new RAP by 2028, but with payments still paused for now, uncertainty remains.

The Education Department has already begun implementing changes. Starting August 1, interest will begin accruing on current SAVE loans, though payments will still be suspended until the transition. For many borrowers, this means they may see their balances growing until they’re fully transitioned to RAP.

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The Rise of the Repayment Assistance Plan (RAP)

RAP, introduced under the , represents a major overhaul of federal student loan repayment. The new system will replace all other income-driven repayment (IDR) plans and offers changes to how payments are calculated and how long it takes to qualify for loan forgiveness. Under RAP, monthly payments will be based on a borrower's income, . Payments increase incrementally as income rises.

One of the biggest changes is the extension of the forgiveness period from 20 to 30 years of on-time payments. This could mean longer repayment timelines for borrowers, but it also includes subsidies for both principal and interest, which could help reduce debt faster for low-income individuals. A study by JPMorgan Chase Institute , .

What This Means for Borrowers and the Economy

These shifts in repayment policies have real-world implications for borrowers and the broader economy. For starters, the uncertainty surrounding the SAVE plan could push some borrowers into delinquency as they wait for clarity. As of 2025, over six million student loan borrowers are at least 60 days behind on their payments, .

RAP’s design could also reshape federal revenue streams. The JPMorgan Chase Institute estimates that the government could see a compared to pre-pandemic levels, . This means the financial burden could shift from borrowers to taxpayers or institutions, depending on how the program is implemented.

For investors and market observers, these policy changes reflect broader trends in education financing. The Trump administration’s recent proposal to cap graduate and professional student loan borrowing at lower amounts, for instance, could limit access to advanced education in fields like nursing, which already face workforce shortages. These shifts could influence long-term economic outcomes and labor market stability.

Looking Ahead: Policy Uncertainty and Financial Planning

With the transition from SAVE to RAP still underway and the One Big Beautiful Bill Act now in effect, the key question for borrowers is how to prepare. The Education Department has advised those enrolled in SAVE to stay informed about the transition, and some borrowers who applied for income-driven repayment plans before April 27, 2025, have had to reapply due to missing income data.

Looking ahead, it’s also important to watch the status of programs like the Pell Grant, which is at risk of running short due to growing funding gaps according to recent reports. If financial aid is reduced, more students may enter the workforce with higher debt loads, affecting both personal and national financial health.

For now, the most practical step for borrowers is to track their repayment status, explore eligibility for RAP, and consider how the new payment rules might affect their budgets. Meanwhile, investors and financial analysts will be watching how these changes influence student loan delinquency rates, federal spending, and long-term educational outcomes.