New Repayment Assistance Plan for Student Loans Set to Launch in July 2026
The federal government is rolling out a new Repayment Assistance Plan for student loan borrowers in July 2026, offering income-based payments and interest subsidies. The plan comes as 2.6 million borrowers entered default in the first quarter of 2026.
The federal government is set to launch a new student loan repayment program in July 2026, offering income-based payments and interest subsidies to borrowers struggling to keep up with their debt.
The Repayment Assistance Plan, known as RAP, features a tiered payment structure based on income. It also includes interest subsidies designed to prevent balances from growing for borrowers who make their required payments.
The program comes as the student loan default crisis has deepened. Approximately 2.6 million federal student loan borrowers entered default in the first quarter of 2026, according to data from the Federal Reserve Bank of New York. That followed roughly 1 million defaults in the fourth quarter of 2025.
The surge in defaults reflects the end of pandemic-era protections. After a three-year payment pause and a 12-month "on-ramp" period, missed payments began appearing on credit reports in late 2025. Borrowers who default face damaged credit scores, wage garnishment, and the seizure of tax refunds and Social Security benefits.
Research from the New York Fed found that the current wave of defaults is concentrated among borrowers in Southern states and those aged 40 and older, many of whom were current on their loans before the pandemic.
The RAP plan is intended to give struggling borrowers a more manageable path forward. The government has also signaled that loan rehabilitation options will be expanded starting in July 2027, giving defaulted borrowers a way to restore their credit standing.
Advocates for borrowers say the new plan is a step in the right direction but warn that implementation will be critical. "The details matter enormously," said one consumer advocacy group. "Borrowers need clear information and easy access to enroll."
Approximately 7 million borrowers who were enrolled in the now-defunct SAVE plan remain in forbearance due to ongoing litigation, and analysts warn they remain at high risk of default when that forbearance ends.
