The federal student loan program is headed for one of the biggest changes in years — and for borrowers, that means big changes in 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 Program, or RAP.
RAP is designed to be an affordable option for new public 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 current plan or choose to switch to RAP.
The change brings new rules and a fair amount of confusion as borrowers adjust to a smaller set of payment options and a potentially longer path to forgiveness. For millions of borrowers, understanding how the RAP works — and how it compares to current programs — will be key in deciding their next move. Here’s what you need to know.
What is the Recovery Assistance Program?
RAP is a new federally run payment program that will be launched in July. It was built into the tax and spending bill Congress passed last summer. Like previous income-driven programs, it ties monthly payments to the borrower’s income and provides a path toward eventual loan forgiveness.
Under the RAP, borrowers will have to make qualifying payments for 30 years before any outstanding balance is canceled, which is longer than the periods offered under existing income-driven programs.
How does the Payment Assistance Program work?
While the philosophy of setting payments based on income is the same, the details of how RAP works are very different.
How monthly payments are calculated
Monthly payments under a RAP are based on the borrower’s adjusted gross income (AGI) – the average income reported on your tax return before certain deductions. Married borrowers who file taxes separately can have their payments based on their individual AGI.
Fees range from 1% to 10% of revenue, with a minimum of $10 per month. Payment rates increase gradually as income increases, marking one percent 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 around $30,000 will see payments based on 3% of AGI. Fees are 10% for those earning $100,000 or more. Those basic values can be adjusted based on household characteristics, including the number of people to support.
Interest and principal protection
Similar to the Savings for Education Value (SAVE) program, the RAP cancels any unpaid interest as long as the borrower continues to make payments. In other words, if your monthly payment is less than the amount of interest that accrues each month, your payment will go to interest and the remaining interest will be waived instead of added to your balance.
In addition, if your monthly payment is not enough to reduce your loan principal by at least $50, a subsidy will be used to make up the difference and ensure that the balance is reduced.
Maintenance of dependents
Payments are also reduced by $50 for each dependent on your income tax return. So, for example, a borrower with an AGI of $60,000 and no dependents would pay about $250 a month, while a borrower with the same AGI but one dependent would pay about $200 a month.
When will the RAP be launched?
Borrowers on existing payment plans can begin transitioning to RAP as soon as July 1.
Those who borrow after July 1 will generally be limited to the RAP or Revised Repayment Plan, which sets payments based on how much you borrow.
The transition from the current IDR arrangements is expected to take place gradually over several years, with some remaining options available to existing borrowers at least until 2028. (More on that below.) However, borrowers enrolled in SAVE will need to move to the new repayment option immediately after the plan is struck down in court. Starting July 1, they will have 90 days to choose a new plan or be automatically placed on a regular payment.
Who is eligible for RAP?
RAP is only available for Federal Direct Loans, which are loans made directly from the US Department of Education.
Parent PLUS loans are not eligible for RAP. Although Parent PLUS Loans fall under the Direct Loan category, they have historically been excluded from many of these income-driven options programs. In some cases, borrowers have been able to access income-driven repayment through the Income-Contingent Repayment (ICR) program when they first consolidate their Parent PLUS loan. But under the new rules, Parent PLUS loans issued on or after July 1 will no longer be eligible for any income-driven option and will be limited to the Standard Repayment Plan.
Advantages and Disadvantages of the Payment Assistance Program
Compared to current IDR systems, RAP has some distinct advantages. But many borrowers will face very high monthly payments and a long road to forgiveness. Here’s a closer look at the potential pros and cons:
Benefits
- Protection of interest: If the monthly payments do not cover all the accrued interest, the unpaid portion may be waived instead of added to the loan balance.
- Main support: Borrowers whose payments do not reduce the principal can receive a small monthly principal reduction subsidy (up to $50).
- Flexibility based on income: Payments are adjusted based on AGI and number of dependents.
- Separate file modification: Married borrowers who file taxes separately can include their spouse’s income in their payment calculations.
Evil
- The long road to forgiveness: Borrowers must make timely payments for 30 years before outstanding balances are forgiven. If you are already in the IDR program, your payment history must be transferred. You cannot start the 30-year countdown from zero.
- Higher base payments for some borrowers: Compared to SAVE, which was the most beneficial income program before it was eliminated, borrowers will see higher required monthly payments, especially low-income borrowers.
- Cash-based accounting limits: Using AGI (versus income) can make payments less responsive to cost-of-living pressures such as inflation.
- Reduced return flexibility: The shift leaves new borrowers with few choices, only a RAP or a fixed payment plan.
What are the other options besides the Recovery Assistance Program?
If you don’t like how your payments are structured under the RAP, your other options will depend on whether you complete the loan.
New borrowers
New borrowers who take out a loan after July 1 will have limited flexibility. If they want an income-driven payment option, RAP is the only option available.
Another is a revised standard payment plan. Unlike income-driven plans, a standard plan is not based on income. Instead, it breaks down your loan balance into fixed monthly payments between 10 and 25 years, depending on the principal amount of the loan.
Current borrowers
Borrowers who already have federal student loans will generally have more options, at least for now. Most can stay on their current payment plan, although those enrolled in the Savings Plan will have to switch to another option following their legal challenges.
Existing income-driven schemes such as ICR and the Pay As You Earn (PAYE) Scheme are expected to remain in place until at least July 2028. After that, the options will narrow further, leaving RAP and IBR as the main income-driven options.
Importantly, current borrowers generally won’t have to switch to a new regular payment plan. Borrowers with federal loans issued before July 1 are expected to retain access to existing repayment options, including the current 10-year standard and extended and completed repayment plans, unless they take out a new loan or consolidate after July 1.
RAP vs. Income Based Payment (IBR)
Both RAP and Income-based Repayment (IBR) are designed to make 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 take out your loan. Earned income is the difference between your income and 150% of the federal poverty line for your family size. |
1%-10% of AGI, payment rates increase with income. |
|
Low monthly payment |
It can be $0 for some borrowers |
$10 |
|
Forgiveness timeline |
20-25 years of qualifying payments, depending on the term of the loan |
30 years of reasonable payments |
|
Interest |
Unpaid interest on subsidized loans waived for the first three years; otherwise, unpaid interest accrues but is usually not costly unless you opt out of the program. |
Unpaid interest is waived if the monthly payment is not paid |
|
Key reduction support |
Nothing |
Up to $50 per month in some cases |
|
Dependent adjustment |
Based on family size (based on discretionary income) |
A $50 reduction for each dependent claimed on the federal tax return |
|
Eligibility window |
Available to student borrowers who enrolled before the closing deadline of July 1, 2028. Not available to new borrowers after July 1, 2026. |
The only income-driven option available to borrowers who take out a loan after July 1 |
If you’re not sure which option makes the most sense, the US Department of Education’s Loan Simulator can help estimate your monthly payments under different plans and compare long-term costs. RAP is not integrated into the tool yet, but is expected to be added as the release progresses.
More from Mali:
What happened to SAVE? 3 Updates for Student Loan Borrowers As Legal Limbo Continues
Student Loan Changes for 2026: New Repayment Options, Taxable Forgiveness and More on the Way
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