If you took out a federal student loan after July 1, 2026, or if you’re considering doing so, there’s a new reality you need to understand. The income-driven repayment landscape just fundamentally changed, and not everyone is talking about it yet.
The Repayment Assistance Plan (RAP) is the new income-driven repayment option introduced by the One Big Beautiful Bill Act (OBBBA), and it’s replacing most existing plans for new borrowers. But here’s the critical part: RAP is more expensive than what existed before, has a longer repayment timeline, and works in ways that might catch you off guard if you don’t understand the details.
I’m going to break down exactly what RAP is, how it works, and what it means for your wallet over the next 30 years.
1. What Happened to Income-Driven Repayment Plans?
Before July 1, 2026, student loan borrowers had multiple income-driven repayment options. You could choose from:
- Income-Based Repayment (IBR) — payments at 10-15% of discretionary income
- Pay As You Earn (PAYE) — payments at 10% of discretionary income
- Saving on a Valuable Education (SAVE) — the most affordable option, payments at 5-10% of discretionary income
- Income-Contingent Repayment (ICR) — payments at 20% of discretionary income
These plans had one thing in common: they calculated your monthly payment based on your discretionary income (your AGI minus a percentage of the federal poverty line for your area and family size). The more you protected from calculation, the lower your payment.
SAVE, introduced by the Biden administration, was the most borrower-friendly because it protected 225% of the poverty line—meaning much of your income was safe from the calculation.
But that’s changing. On July 1, 2026, the OBBBA introduces the Repayment Assistance Plan (RAP), and it works completely differently.
2. The Repayment Assistance Plan: How It Actually Works
RAP uses a fundamentally different approach to calculating your monthly payment. Instead of discretionary income, RAP uses your Adjusted Gross Income (AGI) directly, with almost no protection.
Here’s the tiered payment structure:
| Annual AGI | Monthly Payment |
| Less than $10,000 | $10 flat minimum |
| $10,001 – $20,000 | 1% of AGI ÷ 12 |
| $20,001 – $30,000 | 2% of AGI ÷ 12 |
| $30,001 – $40,000 | 3% of AGI ÷ 12 |
| $40,001 – $50,000 | 4% of AGI ÷ 12 |
| $50,001 – $60,000 | 5% of AGI ÷ 12 |
| $60,001 – $70,000 | 6% of AGI ÷ 12 |
| $70,001 – $80,000 | 7% of AGI ÷ 12 |
| $80,001 – $90,000 | 8% of AGI ÷ 12 |
| $90,001 – $100,000 | 9% of AGI ÷ 12 |
| $100,000+ | 10% of AGI ÷ 12 |
One major point: You get a $50 monthly deduction for each dependent claimed on your tax return. That’s it. There’s no protected percentage of income like SAVE or IBR offered.
3. Real Examples: What This Actually Costs You
Example 1: Nursing Graduate Making $50,000/Year
Under SAVE: You’d pay roughly 5-10% of discretionary income. With the poverty protection, your payment might be around $150-200/month.
Under RAP: You’re at the $50,001-$60,000 bracket, so you pay 5% of $50,000 = $2,500 per year ÷ 12 = $208/month.
Looks similar, right? But as your income grows, the gap widens dramatically.
Example 2: Physical Therapist Making $100,000/Year
Under SAVE: Payment would be roughly 10% of discretionary income (with heavy income protection), maybe $400-500/month.
Under RAP: You’re in the top bracket at 10% of AGI, so $100,000 × 10% = $10,000 per year ÷ 12 = $833/month.
That’s $4,000-5,000 more per year than SAVE.
Example 3: Engineer Making $120,000/Year with One Dependent
RAP calculation: $120,000 × 10% = $12,000 per year ÷ 12 = $1,000/month, minus $50 for the dependent = $950/month.
Compare that to SAVE, where the same person might pay $500-600/month. You’re looking at $400+ more monthly just because of how RAP calculates payments.
4. The Critical Difference: AGI vs. Discretionary Income
This is the most important distinction you need to understand because it fundamentally changes how much you pay.
Under old plans (SAVE, PAYE, IBR):
Your payment is based on discretionary income = (Your AGI) minus (a protected percentage of the federal poverty line for your location and family size).
For example, if you earn $60,000 and the poverty protection for your family is $35,000, your discretionary income is only $25,000. You pay a percentage of $25,000, not $60,000.
Under RAP:
Your payment is based on your full AGI with almost no protection. There’s only one protection: the $50/month per dependent deduction.
This is significantly more expensive for most borrowers, especially those earning between $40,000-$100,000.
Research from the Student Borrower Protection Center found that RAP will cost borrowers more than SAVE across virtually all income levels. Even borrowers who qualify for $0 payments on SAVE will pay the $10 minimum on RAP.
5. Key RAP Features You Need to Know
5.1 The $10 Monthly Minimum
Even if you’re earning nothing or very little, you must pay at least $10 per month. This is a hard floor. Under previous plans like SAVE, borrowers earning below the poverty line could qualify for $0 payments. Not anymore.
This is particularly harsh for borrowers facing temporary financial hardship, new graduates starting jobs, or those in economic downturn. You cannot pause payments to $0.
5.2 Interest Subsidy (The One Good Thing)
Here’s the only genuinely borrower-friendly feature RAP includes: the government will pay any unpaid interest that your monthly payment doesn’t cover.
Let me explain why this matters. On older plans, if your payment is too small to cover the interest your loan is accruing, that unpaid interest gets added to your principal (negative amortization). This means your loan balance actually grows even though you’re making payments.
On RAP, this doesn’t happen. The government covers it. So at minimum, your principal won’t grow if you’re making your full monthly payment—it will stay the same or decrease slightly.
Additionally, the government will reduce your principal by up to $50 per month if your payment doesn’t cover it. This is a modest principal reduction, but it’s something.
5.3 The 30-Year Repayment Timeline
Here’s where RAP becomes expensive for long-term borrowers: forgiveness comes after 30 years of payments, compared to 20-25 years under older plans.
Think about that. You’re committing to nearly a decade more of payments before your remaining balance is forgiven.
Unless you’re pursuing Public Service Loan Forgiveness (PSLF).
If you work for a government agency or qualifying nonprofit and are pursuing PSLF, forgiveness happens after just 120 qualifying monthly payments (10 years) on RAP, same as before. But if you’re counting on standard loan forgiveness after an income-driven plan (non-PSLF), you’re looking at 30 years instead of 20-25.
5.4 Tax Bomb Warning (Critical for Long-Term Forgiveness)
Here’s something most borrowers don’t think about until it’s too late.
When your remaining loan balance gets forgiven after 30 years on RAP, that forgiven amount is counted as taxable income in the year forgiveness happens. The American Rescue Plan provided a temporary exclusion making this tax-free through 2025, but that expires December 31, 2025.
So if you have $200,000 forgiven in 2030, you might owe federal income taxes on that $200,000—potentially triggering a $50,000+ tax bill in a single year.
This is a massive hidden cost that needs to factor into your decision about whether RAP is right for you.
6. Who Can Access RAP?
Eligible: All borrowers with federal Direct Loans or Direct GRAD PLUS loans starting July 1, 2026.
NOT Eligible: Parent PLUS loan borrowers. If you have Parent PLUS loans and want income-based repayment at any point, you must consolidate before July 1, 2026, and you must enroll in Income-Contingent Repayment (ICR) by July 1, 2028. After that, the window closes and you’re locked out of income-driven options.
7. What About Current Borrowers? (This is Complicated)
This is where the transition rules matter—a lot.
If you have loans from before July 1, 2026 and don’t take out any new loans after that date:
You can keep your current plan (SAVE, PAYE, IBR, or ICR) until June 30, 2028. That gives you time to decide.
But here’s the catch: If you take out even one new loan after July 1, 2026, all your loans—including old ones—become subject to RAP’s rules.
Let me repeat that because it’s critical: Taking out a single new loan after the deadline means your entire loan portfolio switches to RAP.
If you’re on ICR, PAYE, or SAVE: You must switch to either IBR or RAP by June 30, 2028. If you don’t make a choice, you’ll be automatically placed into RAP.
If you’re on IBR: You can stay there until forgiveness, but if you take out any new loan after July 1, 2026, you’ll be forced to RAP.
Many borrowers on SAVE are currently in a holding pattern because of court challenges. When things settle, you’ll likely get 2 years to transition—probably until June 30, 2028.
8. RAP vs. What Came Before
Let me give you the hard comparison:
| Feature | RAP | SAVE | IBR (New) |
| Payment calculation | % of AGI (no protection) | 5-10% of discretionary income (225% poverty protection) | 10% of discretionary income (150% poverty protection) |
| Monthly minimum | $10 | $0 for low earners | $0 for low earners |
| Repayment term | 30 years | 20-25 years | 20 years |
| Interest subsidy | Yes (government pays unpaid interest) | Partial | No |
| Principal subsidy | Up to $50/month | No | No |
| PSLF timeline | 10 years (120 payments) | 10 years (120 payments) | 10 years (120 payments) |
Bottom line: RAP is the most expensive option for virtually all income levels, has a longer repayment timeline, and offers no income protection. Its only advantage is the interest and modest principal subsidy.
9. Who Should Actually Use RAP?
“Given the payment structure differences, there are specific situations where RAP may be appropriate
9.1 Borrowers Pursuing PSLF with High Debt
If you have massive student loan debt relative to your income and you work for a government agency or nonprofit, RAP’s lower monthly payment compared to Standard Repayment might be worth it. You’ll hit PSLF forgiveness at 10 years regardless, so the extra cost is limited.
9.2 New Borrowers Taking Out Loans After July 1, 2026
You won’t have a choice. RAP is the only income-driven option available to you. You might as well understand it now.
9.3 Borrowers Who Won’t Qualify for IBR Anymore
Starting July 1, 2026, IBR doesn’t require demonstrating “partial financial hardship” anymore. But there are specific loan types and timelines that might make RAP necessary. Consult your loan servicer to understand your particular situation.
9.4 Borrowers Already on RAP Who Are Locked In
If you’re already on RAP because of when you took out loans, you’re committed. Focus on the interest subsidy to minimize growth and pay down principal when possible.
10. What You Should Do Before July 1, 2026
10.1 If You Have Existing Federal Loans
- Understand your current plan. Are you on SAVE, PAYE, IBR, or ICR? What’s your forgiveness timeline?
- Calculate your RAP payment. Use the RAP calculator (search “RAP student loan calculator”) and compare it to your current payment. Know the difference.
- Know the deadline. If you’re on SAVE, ICR, or PAYE, mark your calendar for June 30, 2028. You must switch to IBR or RAP by then or face automatic placement.
- Plan for the tax bomb. If you’re counting on forgiveness, consult a tax advisor about the potential taxable income event. Factor that into your long-term financial planning.
- Don’t take new loans without understanding the consequences. One new loan after July 1, 2026 switches your entire portfolio to RAP.
10.2 If You’re About to Start Graduate School or Take Out New Loans
- Know that RAP is your only income-driven option. There’s no choice among plans.
- Calculate carefully. Understand what your RAP payment will be versus Standard Repayment. Sometimes Standard Repayment is cheaper if you can afford it.
- Consider PSLF. If you work or plan to work in public service, PSLF at 10 years might be your best route, and RAP works with it.
- Plan for the tax implications if you’re counting on eventual forgiveness.
11. The Bigger Picture: What RAP Means for Your Financial Future
The shift from income-driven plans based on discretionary income to RAP based on full AGI represents a fundamental tightening of federal student loan policy. It’s less generous. It’s more expensive. It’s designed to get borrowers repaying closer to what they actually owe.
For low-income borrowers, this requires different financial planning. The $10 minimum payment means no true financial relief even in extreme hardship.
For middle-income borrowers making $50,000-$100,000, you’re looking at significantly higher payments than SAVE offered.
For high-earners, RAP calculates quickly to the 10% AGI cap, which is actually more transparent than the discretionary income calculations of the past.
The Department of Education is expected to release additional guidance (“Dear Colleague Letter”) before July 2026 that might clarify edge cases or provide relief provisions. Keep watching for that.
For now, understand RAP. Calculate what it means for your specific situation. And if you’re on an existing income-driven plan, don’t sleep on that June 30, 2028 deadline. Missing it could cost you thousands.
For more on how OBBBA is changing student loans, read our complete guide: “Department of Education Professional Degrees: What Changed and What You Need to Know.”
Sources: U.S. Department of Education, Federal Student Aid, George Mason University Financial Aid Office, Inside Higher Ed, Student Borrower Protection Center, Bankrate, Forbes, The Chronicle of Higher Education