Key Takeaway
- If you’re pursuing PSLF and took out a federal loan after July 1, 2026, you must actively select RAP. The Tiered Standard Plan is the default and earns zero PSLF credit, meaning every month you sit in the wrong plan is a month that doesn’t count toward your 120.
The Grace Period Is Gone, and Nobody Sent a Memo
Three changes to the Public Service Loan Forgiveness program took effect July 1, and if you’re among the roughly 9 million borrowers who may qualify for the program, at least one of them affects you right now.
The most dangerous change got the least attention. As of July 1, Federal Student Aid requires that every PSLF payment be made on time, meaning on or before your due date, regardless of which repayment plan you’re on. That sounds obvious. It wasn’t the rule before. For years, a payment that arrived within a 15 day window after the due date still counted toward your 120. That cushion is gone.
What makes this genuinely unusual: according to reporting by The College Investor, Federal Student Aid implemented the change through updated language on its website. The underlying regulations at 34 CFR 685.219 were not amended. No negotiated rulemaking. There was no notice-and-comment period. The rule just appeared in the new website copy.
That matters for two reasons. First, borrowers who set up auto-pay and assume they’re covered should confirm that their payment posts on or before the due date each month, not just that the bank draft goes out. Auto-pay timing can slip during servicer transitions or bank processing delays. A payment that debits on the 15th but posts on the 18th is now a payment that doesn’t count. Second, because the change wasn’t formalized through rulemaking, it may be legally vulnerable. Until a court says otherwise, the rule applies.
The Tiered Standard Trap, and the Math Behind It
The second change is structural, and it’s going to catch borrowers who don’t read their enrollment notices carefully.
Under the One Big Beautiful Bill Act, signed July 4, 2025, any borrower who takes out a new federal loan on or after July 1, 2026, is automatically placed in the Tiered Standard Repayment Plan if they don’t actively choose something else. The Tiered Standard Plan is a fixed-payment plan. Predictable, straightforward, and completely ineligible for PSLF credit. As Scott Buchanan of the Student Loan Servicing Alliance noted in a CNBC report published July 15:, new borrowers who don’t actively pick a plan get placed in the Tiered Standard Plan automatically, earning zero PSLF credit.
The only income-driven plan available to new borrowers is the Repayment Assistance Plan, or RAP. RAP does count towards PSLF. Under the RAP, monthly payments run between 1% and 10% of your adjusted gross income, with a $10 minimum and a $50 reduction per dependent.
Run that through a realistic scenario. A new nurse with $60,000 in grad school debt and a $58,000 starting salary has an AGI of around $52,000 after standard deductions. At 5% of AGI, her RAP payment is roughly $217 a month. Under the Tiered Standard Plan, a $60,000 balance falls in the $50,000–$99,999 tier, which carries a 20 year repayment term. At the 2026-27 graduate unsubsidized rate of $8.07%, that same balance runs about $505 a month. The Tiered Standard payment is manageable, but every one of those months counts as nothing toward her 10-year PSLF forgiveness clock. Ten years of misallocated payments is roughly $60,600 paid toward a loan she thought she was retiring through public service. She wasn’t. She was just paying it.
If she’s in PSLF-qualifying employment at a government hospital, she should be on RAP. Choosing a plan is not automatic. MOHELA’s repayment portal and StudentAid.gov both require an active election.
I’ve seen this kind of error happen in the servicing world, and it’s easier to make than it sounds. When my sister consolidated her private debt a few years ago, she nearly let a servicer auto-enroll her in a plan she didn’t intend to choose simply because she didn’t respond to a paper notice. Federal loan servicers are handling millions of plan elections simultaneously right now. The difference between clicking “submit” on a RAP application and letting the clock run is the difference between qualifying for payments and wasted months.
One practical note: RAP payments must be on time too, now under the new grace-period rule. The RAP on-time requirement was written into the One Big Beautiful Bill Act from the start. The grace-period change extends that same requirement to every other qualifying plan. For PSLF borrowers, the message is the same across the board: set up auto-pay, confirm posting dates, and check your MOHELA or servicer account monthly.
Parent PLUS Borrowers and the Employer Rule That Courts Blocked
The third change is a two-part story. One piece stuck, one didn’t.
On the part that stuck: If you’re a parent who borrowed a Parent PLUS loan for a child’s education after July 1, 2026, that loan has no path into income-driven repayment and no path to PSLF. New Parent PLUS loans are only eligible for the Tiered Standard Plan. That’s it. If you work for a qualifying public employer and hoped PSLF would eventually clear that debt, the window has closed. Parents who held Parent PLUS loans before July 1 and did not consolidate them into a Direct Consolidation Loan by the June 30, 2026 deadline lost access to IDR and PSLF as well.
On the part that didn’t: The Department of Education had finalized a rule, effective July 1, that would have let Secretary of Education Linda McMahon disqualify employers from PSLF if they were found to have a “substantial illegal purpose.” Federal judges blocked that rule on June 30. One day before it was set to take effect. The rule now faces an uncertain legal path. Three lawsuits challenging it remain active: one brought by a coalition of 21 states and the District of Columbia, one by nonprofit organizations, and one by cities, unions, and advocacy groups. Until the courts resolve those cases, the pre-July-1 employer eligibility standards remain in place. If you work for a nonprofit, a government agency, or a public university, your employer’s PSLF status is currently unchanged.
For existing PSLF borrowers on legacy plans like IBR, PAYE, or ICR, the practical guidance is the same as it’s been: stay enrolled in a qualifying IDR plan. PAYE and ICR are scheduled to sunset on July 1, 2028. If you’re on either of those, you’ll need to switch to IBR or RAP by that date. Monthly payments you’ve accumulated don’t disappear when you switch. Your payment count carries over to whatever qualifying plan you move into.
If you’ve been sitting in SAVE forbearance and haven’t yet received a notice from your servicer directing you to choose a new plan, expect one soon. As of July 1, roughly 7 million SAVE borrowers began receiving 90-day notices to select a new repayment option. If you do nothing within that window, servicers are required to auto-enroll you in the Standard Plan. That will almost certainly raise your payment, and the window for making a more favorable choice is finite.
For new borrowers looking to borrow privately to fill federal gaps, particularly graduate students who lost access to Grad PLUS after July 1, the private market is relevant. For context on what’s currently available, see our roundup of the best private student loans and, for those approaching forgiveness or refinancing decisions, our list of best student loan refinancing companies. Refinancing federal loans into private debt forfeits PSLF eligibility entirely, so that tradeoff is worth understanding clearly before making it.
