The federal student loan system is heading into one of its biggest overhauls in years — and for borrowers, that means major changes to how they'll repay their debt.
Starting July 1, several existing income-driven repayment (IDR) options will begin to be phased out and replaced with a new program called the Repayment Assistance Plan, or RAP.
RAP is designed to become a central repayment option for new federal student loan borrowers, with monthly payments based on income and number of dependents. Borrowers who take out federal student loans on or after July 1 will have RAP as their only income-driven option, while most current borrowers can stay in their existing plan for now or choose to switch to RAP.
The shift brings new rules and a fair amount of confusion as borrowers adjust to a smaller set of repayment options and a potentially longer path to forgiveness. For millions of borrowers, understanding how RAP works — and how it compares to current plans — will be key to deciding their next move. Here's what you need to know.
What is the Repayment Assistance Plan?
RAP is a new federal income-driven repayment program set to launch in July. It was created in the sweeping tax and spending bill Congress passed last summer. Like earlier income-driven plans, it ties monthly payments to a borrower’s income and offers a path to eventual loan forgiveness.
Under RAP, borrowers would need to make qualifying payments for 30 years before any remaining balance is canceled, which is longer than the timelines offered under existing income-driven plans.
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How does the Repayment Assistance Plan work?
While the philosophy of setting payments based on income is the same, the details of how RAP works are significantly different.
How monthly payments are calculated
Monthly payments under RAP are based on a borrower’s adjusted gross income (AGI) — a measure of income reported on your tax return before certain deductions. Married borrowers who file taxes separately may have their payments calculated based on their individual AGI.
Payments range from 1% to 10% of income, with a minimum of $10 a month. Payment amounts increase gradually as income rises, ticking up one percentage point for every $10,000 increase. For example, monthly bills for those earning around $20,000 will be based on 2% of their AGI; those earning about $30,000 will see payments based on 3% of AGI. Payments are capped at 10% for those earning $100,000 or more. Those baseline amounts can be adjusted based on household factors, including the number of dependents.
Interest and principal protections
Similar to the Saving on a Valuable Education (SAVE) plan, RAP cancels out any unpaid interest as long as the borrower continues making their payments. In other words, if your monthly payment is less than the amount of interest that accrues each month, your payment would go toward interest and the remaining interest would be waived instead of added to your balance.
In addition, if your full monthly payment isn't enough to reduce your loan’s principal by at least $50, a subsidy will be applied to make up the difference and ensure the balance goes down.
Adjustments for dependents
Payments are also reduced by $50 for each dependent claimed on your tax return. So, for example, a borrower with an AGI of $60,000 and no dependents would pay about $250 per month, while a borrower with the same AGI but one dependent would pay about $200 per month.
When will RAP launch?
Borrowers in existing repayment plans can start switching over to RAP as soon as July 1.
Those who take out loans after July 1 will generally be limited to RAP or the revised Standard Repayment Plan, which sets payments based on how much you borrowed.
The transition away from current IDR plans is expected to happen gradually over a few years, with some options remaining available to existing borrowers through at least 2028. (More on that below.) However, borrowers enrolled in SAVE will need to move to a new repayment option more immediately after the plan was struck down in court. Beginning July 1, they will have 90 days to select a new plan or be automatically placed in standard repayment.
Who is eligible for RAP?
RAP is available only for federal Direct Loans, meaning loans borrowed directly from the U.S. Department of Education.
Parent PLUS Loans are not eligible for RAP. While Parent PLUS Loans fall under the Direct Loan category, they have historically been excluded from most of these income-driven options. In some cases, borrowers were able to access income-driven repayment through the Income-Contingent Repayment (ICR) plan if they first consolidated their Parent PLUS loans. But under the new rules, Parent PLUS loans taken out on or after July 1 will no longer qualify for any income-driven option and will be limited to the Standard Repayment Plan.
Pros and cons of the Repayment Assistance Plan
Compared with current IDR plans, RAP does have some unique benefits. But many borrowers will face much higher monthly payments and a longer path to forgiveness. Here's a closer look at the potential advantages and drawbacks:
Pros
- Interest protections: If monthly payments don’t cover all accrued interest, the unpaid portion may be waived rather than added to the loan balance.
- Principal support: Borrowers whose payments don’t reduce the principal may receive a small monthly principal reduction subsidy (up to $50).
- Income-based flexibility: Payments are adjusted based on AGI and the number of dependents.
- Separate filer adjustment: Married borrowers who file taxes separately can exclude their spouse's income from their payment calculations.
Cons
- Longer path to forgiveness: Borrowers must make qualifying payments for 30 years before remaining balances can be forgiven. If you've already been in an IDR plan, your payment history should transfer over. You will not start the 30-year count from zero.
- Higher baseline payments for some borrowers: Compared with SAVE, which was the most generous income-driven plan before it was struck down, borrowers will see higher required monthly payments, especially lower-income borrowers.
- Income-based calculation limits: Using AGI (as compared to discretionary income) can make payments less responsive to cost-of-living pressures like inflation.
- Reduced repayment flexibility: The shift leaves new borrowers with fewer choices, only RAP or a fixed-payment plan.
What are the other options besides the Repayment Assistance Plan?
If you don't like how your payments are structured under RAP, your other options will depend on whether you're finished borrowing.
New borrowers
New borrowers who take out loans after July 1 will have limited flexibility. If they want an income-driven repayment option, RAP will be the only choice available.
The alternative is a revised standard repayment plan. Unlike income-driven plans, the standard plan is not based on income. Instead, it divides your loan balance into fixed monthly payments between 10 and 25 years, depending on the principal amount of loans.
Current borrowers
Borrowers who already have federal student loans will generally have more options, at least for now. Most can remain in their current repayment plan, though those enrolled in the SAVE Plan will need to transition to a different option following its legal challenges.
Existing income-driven plans like the ICR and Pay As You Earn (PAYE) Plan are expected to remain available until at least July 2028. After that, the options will narrow even further, leaving RAP and IBR as the primary income-driven options.
Importantly, current borrowers generally will not have to switch to the new standard repayment plan. Borrowers with federal loans issued before July 1 are expected to retain access to the existing repayment options, including the current 10-year standard plan as well as the extended and graduated repayment plans, unless they take out new loans or consolidate after July 1.
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RAP vs. Income-Based Repayment (IBR)
Both RAP and Income-Based Repayment (IBR) are designed to make federal student loan payments more manageable, but they differ in how payments are calculated, how long borrowers stay in repayment and how forgiveness is structured. Here are the key differences:
IBR | RAP | |
|---|---|---|
Payment calculation | 10%-15% of discretionary income, depending on when you took out your loans. Discretionary income is the difference between your income and 150% of the federal poverty line for your family size. | 1%-10% of AGI, with payment amounts increasing as income does. |
Minimum monthly payment | Can be $0 for some borrowers | $10 |
Forgiveness timeline | 20-25 years of qualifying payments, depending on loan timing | 30 years of qualifying payments |
Interest | Unpaid interest on subsidized loans waived for the first three years; otherwise, unpaid interest accrues but generally doesn’t capitalize unless you exit the plan. | Unpaid interest is waived if not covered by monthly payment |
Principal reduction support | None | Up to $50 per month in some cases |
Dependent adjustment | Based on family size (baked in through the discretionary income calculation) | $50 reduction per dependent claimed on federal tax return |
Eligibility window | Available to student borrowers who enroll before the phase-out deadline of July 1, 2028. Not available to new borrowers after July 1, 2026. | Only income-driven option available to borrowers who take out loans after July 1 |
If you're unsure which option makes the most sense, the U.S. Department of Education's Loan Simulator can help estimate your monthly payments under different plans and compare long-term costs. RAP has not been integrated into the tool yet, but it's expected to be added as the rollout continues.
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