Income-Driven Repayment in 2026: What Replaced SAVE

The rules that bind, and where they come from

• SAVE is gone. Terminated by court judgment on 10 March 2026 and repealed by the 2025 reconciliation act effective 1 July 2028. Servicers began issuing 90-day exit notices on 1 July 2026, in staggered waves running into early 2027 (Department of Education).
• The SAVE forbearance is not interest-free. Interest resumed on 1 August 2025. Many guides still say otherwise (Department of Education).
• A new plan, RAP, opened on 1 July 2026. It charges 1 to 10 percent of adjusted gross income, forgives after 360 payments, and has a hard $10 monthly minimum — there is no $0 payment under RAP (RISE final regulations).
• The 2026 poverty guideline for one person is $15,960. Guides still quoting a figure in the fifteen-thousand-and-sixties are two cycles behind. IBR and PAYE protect 150 percent of it; RAP protects none of your income (HHS, January 2026).
• Income-driven forgiveness is federally taxable again. The American Rescue Plan exclusion lapsed on 31 December 2025 and was not renewed. PSLF is unaffected — it sits under a separate, permanent provision (IRS Taxpayer Advocate).
• Enrol in auto-pay by 30 September 2026 for a temporary one percentage point interest reduction, on top of the usual quarter point, through June 2028 (Department of Education).

What closes, and when

The plans that still exist

Five, and which ones you can use depends on when your oldest loan was disbursed. The old-versus-new IBR distinction still matters: it is the difference between 15 percent of income for 25 years and 10 percent for 20.

One barrier that used to exist is gone: since 4 July 2025 you no longer need to demonstrate a partial financial hardship to enrol in IBR. Any borrower with eligible Direct or FFEL loans can enrol regardless of income. Your payment is still capped at what the ten-year Standard plan would have charged when you entered.

RAP, and the switch you cannot undo

RAP charges a flat percentage of your adjusted gross income — not discretionary income — on a sliding scale: 1 percent at $10,001 to $20,000 of AGI, rising a point per $10,000, to 10 percent above $100,000. Subtract $50 a month for each dependent. Below $10,001 the payment is the $10 floor.

Two features genuinely improve on the older plans. Unpaid interest is waived rather than capitalised: if your full on-time payment does not cover the month's interest, the shortfall is written off rather than added to your balance. And if an on-time payment reduces principal by less than $50, the Department contributes the difference, up to $50 a month.

RAP is not available for Parent PLUS loans, or for consolidation loans that repaid a Parent PLUS loan. Published guidance is not fully consistent on how this applies to parents who borrow after 1 July 2026, so confirm with your servicer rather than relying on any summary, including this one.

If you borrow on or after 1 July 2026

The menu narrows to two: the Tiered Standard plan and RAP. Nothing else. Tiered Standard sets your term by your balance at entry — ten years under $25,000, fifteen to $50,000, twenty to $100,000, twenty-five above that — and offers no forgiveness at the end.

Taking out a single new loan on or after 1 July 2026 moves you into this regime for all of your loans. That is a real trap for anyone returning to study.

The PSLF trap, which is the sharpest thing on this page

Public Service Loan Forgiveness still exists and is still tax-free. But which repayment plans earn credit toward its 120 payments has changed, and the default you land on by doing nothing may earn none.

Earns PSLF credit: the legacy ten-year Standard plan, Old and New IBR, RAP, and — only through 30 June 2028 — PAYE and ICR.

Earns no PSLF credit: Graduated, Extended, and Tiered Standard in every one of its tiers, including the ten-year tier.

Here is why that matters right now. If you are on SAVE, pursuing PSLF, and you let your 90-day notice expire, you are auto-enrolled into Standard or Tiered Standard. If it is Tiered Standard, every payment you make earns zero credit, and Temporary Expanded PSLF cannot rescue you. Choose your plan actively, then log into your servicer account and confirm which plan you are actually on.

Two further things about PSLF in 2026. Payments you genuinely made under SAVE still count toward your 120 — it is the forbearance months that do not, and buyback exists to convert those. But buyback repricing on 31 March 2026 moved from the SAVE formula to the IBR, PAYE and ICR formulas, which has roughly tripled some quotes, and the queue runs long. Separately, a rule effective 1 July 2026 excludes employers found to have a “substantial illegal purpose” from qualifying as public service, with only the employer able to contest the finding (NASFAA summary of the final rule). Check your own employer's status rather than assuming any nonprofit qualifies.

Forgiveness is taxable again — with one important exception

The American Rescue Plan excluded student loan discharges from federal gross income for discharges through 31 December 2025. Congress did not extend it. Income-driven forgiveness granted in 2026 or later is generally taxable as ordinary income, reported to you on Form 1099-C.

The exception is worth knowing because the Department has a processing backlog. Under a federal court settlement, the discharge date that governs is the date you reached your 240th or 300th qualifying payment, not the date the paperwork cleared. If you hit your threshold on or before 31 December 2025 but your discharge was processed in 2026, it remains tax-free.

PSLF is not affected. It is excluded under a separate, permanent provision that never depended on the American Rescue Plan, as are Teacher Loan Forgiveness and death or total-and-permanent-disability discharges. The insolvency exclusion on Form 982 is still available if you were insolvent at discharge. A handful of states do not conform to the federal treatment, so check your own.

Recertification and interest capitalisation

Most of the old capitalisation triggers were removed in 2023. Forbearance ending, the grace period ending, entering repayment, defaulting, leaving PAYE or ICR — none of those capitalise unpaid interest any more, and leaving SAVE because the plan ended does not either.

What survives concentrates on one plan. On IBR, unpaid interest capitalises if you leave for another plan, if your payment rises to the ten-year Standard cap, or if you miss your annual recertification deadline. On PAYE and ICR, missing recertification does not capitalise. Commercially held FFEL loans follow older rules with more triggers.

The practical rule: if you are on IBR, treat the recertification date as a hard deadline. Everyone else should still recertify on time, because missing it moves you to a standard payment, but the balance consequence is smaller.

Default and collections

The Department of Education paused involuntary collections on 16 January 2026 — wage garnishment, tax refund offset and Social Security offset — to allow RAP implementation (Department of Education). As far as we can establish it is still in force.

Two cautions belong with that. The pause is discretionary, has no statutory end date, and the 2025 reconciliation act expressly reauthorised every one of these tools, so it can lift with little notice. And guaranty agencies holding older FFEL loans are not covered by it and can still garnish. If your loans are FFEL, the pause does not protect you.

When collection is active the limits are 15 percent of disposable pay for administrative wage garnishment, with a floor that leaves you at least $217.50 a week (Department of Labor), and 15 percent of a Social Security benefit, which cannot be reduced below $750 a month — a floor set in 1996 and never indexed, now below the poverty line (CFPB).

Default begins at 270 days delinquent. Two routes out. Rehabilitation takes nine voluntary on-time payments within ten consecutive months, calculated at roughly 15 percent of discretionary income divided by twelve — though you can instead demand a formal calculation from an income-and-expense review, which often produces far less. It is the only route that removes the default notation from your credit report, and an active garnishment must be lifted after your fifth payment. Consolidation is faster but does not clear the credit record, and it is unavailable once wage withholding has started.

What to do this month

1. Enrol in auto-pay before 30 September. It is the only item here with a hard national deadline and it costs nothing.
2. If you were on SAVE, apply for a new plan now rather than waiting for your notice. Compare IBR against RAP on total cost to forgiveness, not on the monthly payment.
3. If you are pursuing PSLF, verify your plan on your servicer's site after the switch. Tiered Standard earns nothing, and the auto-enrolment default can put you there.
4. Check your recertification date, and set a reminder two months before it.
5. If you are in default, start rehabilitation while collections are paused rather than after they resume.

Where this page is uncertain

Three points could not be confirmed to a standard we would want before you act on them. Whether the PSLF employer-eligibility rule is currently subject to any injunction; whether parents borrowing after 1 July 2026 have any RAP access, where published guidance conflicts; and whether collections have restarted since late August 2026. On each, check studentaid.gov or ask your servicer directly. We would rather flag a gap than fill it with a confident guess.

Sources

• Department of Education, next steps for borrowers enrolled in the SAVE plan.
• Department of Education, interest accrual restart on SAVE forbearance, 1 August 2025.
• Department of Education, fact sheet on simplifying student loan repayment.
• Department of Education, delay of involuntary collections, 16 January 2026.
• Department of Education, temporary interest rate reduction for auto-pay, June 2026.
• RISE final regulations, Federal Register, 1 May 2026, effective 1 July 2026.
• 2026 HHS poverty guidelines, Federal Register, 15 January 2026.
• IRS Taxpayer Advocate, student loan forgiveness and your taxes, March 2026.
• NASFAA, repayment plan chart (PDF).
• NASFAA, final PSLF regulations on employer eligibility, November 2025.
• Department of Labor, Fact Sheet 30, wage garnishment limits.
• Consumer Financial Protection Bureau, Social Security offsets and defaulted student loans.
• studentaid.gov — the authoritative source for your own loans, plans and deadlines.

Related

• Student loan default in 2026 — what happens at 270 days, and the two routes out.
• What to do financially after losing your job — where student loans sit in the order of bills to protect.
• Debt management during a financial crisis — ranking bills by consequence.