Student Loan Repayment Update: SAVE, New Plans, and IDR Options

The biggest student loan repayment update for 2026 is that the SAVE plan is officially dead, two replacement plans are scheduled to open by July 1, 2026, and forgiveness under income-driven repayment is once again taxable at the federal level starting this year. If you were parked in SAVE forbearance, you have a 90-day window from your servicer to pick a new plan or you’ll be moved automatically. If you’ve fallen behind, the pandemic-era protections are gone and the full collection machinery is back on.

SAVE Is Gone. If You’re in SAVE Forbearance, Act Now

A federal court invalidated SAVE in early 2026, and the Department of Education settled the case by agreeing never to enroll new borrowers or process pending applications.¹ If you were enrolled in SAVE or had an application pending, your loans were likely placed into administrative forbearance while the litigation played out.

You need to choose a new repayment plan. Your servicer will give you a 90-day window; if you don’t act, you’ll be moved automatically to the Standard Repayment Plan or the new Tiered Standard Plan.²

The court order reaches further than SAVE itself. It also blocks the Department from calculating payments using the old REPAYE formula, applying SAVE-era interest subsidies, and letting defaulted borrowers access IBR.² Several features borrowers had been counting on are simply unavailable right now.

The Two New Plans Arriving July 1, 2026

Two replacement plans are scheduled to become available by July 1, 2026, under recent federal legislation:¹

The Repayment Assistance Plan (RAP) is a new income-driven option. Payments are based on income and number of dependents, and the plan is designed so that borrowers who make full, on-time payments won’t see their balance grow from runaway interest and will make progress on principal.
The Tiered Standard Plan is a fixed-term plan. Repayment runs 10, 15, 20, or 25 years depending on total outstanding balance, with higher balances getting longer terms and lower monthly payments.

Payments made under RAP will count toward Public Service Loan Forgiveness as long as all other eligibility requirements are met.³

Income-Driven Plans You Can Use Right Now

With SAVE and REPAYE off the table, three older income-driven plans are still accessible: Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Income-Contingent Repayment (ICR). Each calculates your monthly payment as a percentage of discretionary income, meaning what you earn above a threshold tied to the federal poverty level.

IBR for new borrowers on or after July 1, 2014: 10% of discretionary income above 150% of the federal poverty level, with remaining balance forgiven after 20 years of qualifying payments.
IBR for older borrowers: 15% of discretionary income above 150% of the federal poverty level, forgiveness after 25 years.
PAYE: 10% of discretionary income above 150% of the federal poverty level, forgiveness after 20 years. Only available if you received a Direct Loan disbursement on or after October 1, 2011, and were a new borrower as of October 1, 2007.
ICR: The lesser of 20% of discretionary income or what you’d pay on a fixed 12-year plan adjusted for income, forgiveness after 25 years.

The 2026 federal poverty guideline is $15,960 for a single-person household in the 48 contiguous states and $33,000 for a family of four.⁴ Under IBR and PAYE, 150% of those figures — roughly $23,940 for a single borrower and $49,500 for a family of four — is the income cutoff below which your calculated payment drops to $0. You still have to be enrolled and recertify annually, but your required payment can be nothing.

Recertification is not optional. Update your income and family size every year to stay on any IDR plan. Miss the deadline and your payment reverts to what you’d owe under the standard 10-year schedule, which can be dramatically higher. Unpaid interest also capitalizes at that point, getting added to your principal.

Marriage and Your IDR Payment

If you’re married and file taxes jointly, IDR plans use combined household income. File separately and, under IBR, PAYE, and ICR, the servicer uses only your individual income.⁵ For couples where one spouse has high income and the other carries large student debt, filing separately can meaningfully reduce the IDR payment. You’ll lose some tax benefits that come with joint filing, so run the numbers both ways.

Parent PLUS Loans

Parent PLUS loans are not directly eligible for most IDR plans. Consolidate first into a Direct Consolidation Loan. After consolidation, the only IDR plan available is ICR.⁶

Forgiven Balances Are Taxable Again Starting in 2026

This one surprises people. The American Rescue Plan Act temporarily excluded most forgiven student loan debt from federal income tax, but the exclusion only applies to loans forgiven through December 31, 2025. Starting in 2026, if your remaining balance is discharged under an income-driven repayment plan after 20 or 25 years of payments, the forgiven amount is generally treated as cancellation-of-debt income on your federal return.⁷

There are exceptions. Forgiveness through Public Service Loan Forgiveness, Teacher Loan Forgiveness, and discharges due to death or total and permanent disability remain tax-free regardless of when they occur.⁷ There’s also a potential escape hatch: if your total liabilities exceeded the fair market value of your assets when the debt was forgiven, meaning you were insolvent, you can exclude some or all of the forgiven amount by filing IRS Form 982.

If you receive forgiveness in 2026, expect a Form 1099-C from your servicer in early 2027 showing the cancelled amount. State tax treatment varies. Some states follow the federal rules automatically; others tax forgiven debt even when the federal exclusion was active. Check your state’s conformity rules before you file.

What Happens Now If You Fall Behind

The 12-month on-ramp that ran from October 1, 2023, through September 30, 2024, shielded borrowers who missed payments from credit reporting, default, and collection.⁸ That protection is over. The consequences now unfold on a schedule:

At 90 days past due, your servicer reports the delinquency to the credit bureaus. It shows up in 30-day intervals (90, 120, 150, 180+ days past due) on your credit report.⁹
At 270 days past due, your loan enters default, which is a separate and more severe status than simple delinquency.¹⁰
After 360 days without resolution, the government can begin involuntary collection: wage garnishment of up to 15% of your paycheck without a court order, plus withholding of your federal tax refund and other federal benefits through the Treasury Offset Program.¹⁰

Before a Treasury offset starts, you’ll get a notice at your last known address with 65 days to resolve the situation. Offsets then continue until the debt is paid or the default is cured.¹¹

Getting Out of Default

You get one shot at each of these, so pick carefully.

Loan rehabilitation requires nine payments within a 10-month period, calculated using an income-based formula that can produce very low amounts. Once rehabilitated, the default notation is removed from your credit report, though the late-payment history stays. Collection fees of up to 16% may be added, though the government currently waives those fees on Direct Loan rehabilitations.
Direct Consolidation combines your defaulted loans into a new Direct Consolidation Loan and gets you out of default immediately, with no preliminary payments required. The downside: collection fees of up to 18.5% can be added to the balance, and the default record stays on your credit report.

One current limit worth knowing: because of the court order tied to the SAVE litigation, defaulted borrowers currently cannot access the IBR plan.²

Better Options Than Missing a Payment

If you’re struggling but not yet behind, postponing payments beats missing them. Deferment is the better choice when you qualify, because subsidized loan interest doesn’t accrue during most deferment periods. Common categories include economic hardship (up to 36 months cumulative), unemployment (up to 36 months for most borrowers), in-school enrollment at least half-time, active military service, and cancer treatment (up to 18 months).¹²

Forbearance is easier to get but interest accrues on all loan types. Your servicer must grant mandatory forbearance in specific situations, including a medical or dental residency, total student loan payments equal to 20% or more of your gross monthly income, AmeriCorps service, or activation by a governor as a National Guard member. Discretionary hardship forbearance is available in 12-month increments at your servicer’s judgment. Either way, interest keeps accruing and capitalizes when the pause ends, increasing your overall cost.¹²

How to Switch or Apply for a Plan

You’ll need three things before you start: a verified FSA ID (your digital signature for federal student aid transactions), your most recent federal tax return showing adjusted gross income, and your Social Security number.⁶ If you haven’t filed taxes recently or your income has dropped significantly, you can submit alternative documentation like recent pay stubs.

You’ll also report household size, which includes any dependents who receive more than half their support from you, and marital status. If you’re married and filing jointly, the application uses combined income. Those details directly affect whether you qualify for a lower payment or a $0 payment under the poverty-level calculations above.

The application lives on the studentaid.gov portal under the income-driven repayment section. Log in with your FSA ID, complete the form, and submit electronically, or print the PDF and mail it to your servicer’s processing center. Electronic submissions are faster; expect roughly four to six weeks for your servicer to finalize the new plan. If your income or family size changes before your annual recertification date, you can recertify early and request a recalculation at any time.⁶

1
U.S. Department of Education. U.S. Department of Education Announces Next Steps for Borrowers Enrolled in Unlawful SAVE Plan
2
Federal Student Aid. IDR Court Actions
3
Federal Student Aid. Federal Student Loan Program Provisions Effective Upon Enactment Under One Big Beautiful Bill Act
4
HHS ASPE. 2026 Poverty Guidelines
5
Federal Student Aid. 4 Things to Know About Marriage and Student Loan Debt
6
Federal Student Aid. Income-Driven Repayment Plan Request
7
Taxpayer Advocate Service. What to Know About Student Loan Forgiveness and Your Taxes
8
U.S. Government Accountability Office. Federal Student Loans: How Education Has Communicated with Borrowers About Resuming Payments
9
Nelnet. Credit Reporting
10
Federal Student Aid. Student Loan Default and Collections: FAQs
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Federal Student Aid. How Do I Stop My Tax Refund or Other Federal Payments From Being Withheld
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Nelnet. Postpone Your Payments with Deferment or Forbearance