Income-Driven Repayment, Post-OBBBA

The IDR landscape was scrambled by the courts in 2024, by OBBBA in 2025, and by the rollout calendar through 2026. The 2026 picture:

Repayment Assistance Plan (RAP)

The only IDR plan available to new borrowers (loans first disbursed on or after July 1, 2026). Payments are tiered to AGI: $10/month for AGI at or below $10,000, rising in bands to 10% of AGI for the top tier, with a $50/month per-dependent reduction. Remaining balance is forgiven after 360 qualifying payments (30 years). Interest does not capitalize during RAP, and the government subsidizes any shortfall between the calculated payment and the accruing interest so the principal does not grow. RAP is administratively simpler than the prior alphabet soup, but it has no upper cap on the monthly payment: at the top 10%-of-AGI band, and with no discretionary- income deduction to soften it, a graduate whose AGI climbs into the high six figures pays more under RAP than under the Standard 10-Year plan, with no relief. Borrowers on a high-income career track (medicine, law, big-tech engineering) should model both side-by-side before enrolling — if projected total RAP payments exceed the loan balance plus interest under Standard, RAP is the worse plan and the only reason to stay in it is to keep PSLF eligibility (see below).

Income-Based Repayment (IBR)

Remains available to pre-2026 borrowers. Payments are 10% (post-2014 borrowers) or 15% (pre-2014 borrowers) of discretionary income, with forgiveness after 20 or 25 years respectively. Pre-2026 borrowers stranded by the SAVE shutdown have IBR as their only IDR path forward.

Standard 10-Year Repayment

The default for borrowers who do not enroll in an IDR plan. Fixed monthly payment that pays the loan in full over 10 years. The only path available on private loans (in roughly equivalent form) and the right choice for any borrower who can afford it and who does not have a credible PSLF or 20–30-year forgiveness pathway.

Gone, and going: SAVE, REPAYE, PAYE, ICR.

SAVE and REPAYE are finished. The Missouri litigation ended in a settlement announced in December 2025; the Department began directing SAVE borrowers out of the plan in March 2026, and servicers started issuing 90-day exit notices on July 1, 2026. A borrower who lets that window close is auto-enrolled in the Standard or the new Tiered Standard plan instead of an IDR plan, which is how a borrower who needed income-driven terms ends up with a payment sized to the balance instead. PAYE and income-contingent repayment (ICR) are on a slower clock: both remain open to borrowers already enrolled and sunset on July 1, 2028, when anyone still in them must move to IBR or RAP. Payments already made carry over — 150 payments under PAYE arrive in IBR as 150 payments toward its threshold — so the transition costs credit only if you fall out of a qualifying plan while making it. Any planning advice written before mid-2025 that references SAVE is obsolete; advice that assumes PAYE is already dead is premature.

Three mechanics worth knowing before the first payment. They are small individually and worth five figures together. First, file a tax return for your final year of school even with no income. IDR payments are computed from the most recent return, so a year of zero or near-zero AGI on file produces a first-year payment near $0 — and under PSLF, twelve $0 payments count exactly as much as twelve $3,000 ones. Second, consolidating immediately after graduation lets you skip the six-month grace period and start the payment clock three or four months earlier; on a PSLF track those are months of credit earned at trainee income, not attending income. Since the July 2023 rule change a Direct-to-Direct consolidation no longer zeroes your qualifying-payment count — the consolidation loan inherits a weighted average of the underlying loans’ counts — so consolidating after you have accumulated credit is far less punitive than it once was, though the weighting still costs you if the loans have very different histories. Third, deferment and forbearance during training are usually the wrong answer. Both stop the payment clock while the balance grows; an IDR plan at a trainee’s income often produces a payment near zero and counts toward forgiveness. A resident who spends four years in forbearance has not saved money, they have discarded four years of PSLF credit and capitalized the interest at the end of it.

Taxation of forgiveness. The American Rescue Plan Act of 2021 made student-loan forgiveness tax-free at the federal level only through December 31, 2025 ( IRC §108(f)(5), “Income from discharge of indebtedness”) — and that exclusion has now sunset, leaving IRC §108(f)(5) covering only death and disability discharges. As of 2026, IDR forgiveness (including RAP forgiveness at year 30) is once again taxable as ordinary income at the federal level: a $200,000 balance forgiven at year 30 becomes a $200,000 taxable event in the forgiveness year, on top of whatever else the borrower earns. PSLF is the exception — PSLF forgiveness remains permanently tax-free under IRC §108(f)(1), which excludes any discharge conditioned on working for a period in a qualifying profession, and never depended on the ARPA exclusion. Private-loan forgiveness and some state treatments differ. This ordinary-income hit is the “tax bomb” the borrower-advocacy community refers to, and for IDR forgiveness it is now live, not a distant future risk. Whether Congress restores the exclusion is a political question, not a planning one; plan as if the bomb is real, because for IDR it currently is.