What is the Repayment Assistance Plan

What is the Repayment Assistance Plan (RAP)?

On July 4, 2025, President Trump signed the One Big Beautiful Bill Act, significantly changing federal student loan repayment. Central to these changes is the Repayment Assistance Plan (RAP), replacing all existing income-driven repaymentIncome-Driven Repayment (IDR)A category of federal student loan repayment plans that calculate monthly payments based on income and family size rather than loan balance. Any remaining balance can be forgiven after 20–25 years of qualifying payments. (IDR) plans, except original Income-Based RepaymentIncome-Based Repayment (IBR)A federal income-driven repayment plan that caps monthly payments at 10% or 15% of discretionary income, depending on when the loans were taken out. Remaining debt is forgiven after 20 or 25 years of qualifying payments. (IBR), for borrowers taking out new federal loans from July 1, 2026, onwards. RAP consolidates multiple existing plans (SAVE, PAYE, REPAYERevised Pay As You Earn (REPAYE)A former federal income-driven repayment plan that capped payments at 10% of discretionary income, with forgiveness after 20 or 25 years. REPAYE was replaced by the SAVE Plan in 2023.) into one streamlined option. This simplification aims to make repayment easier to understand, though borrowers must consider key differences that may impact their financial decisions.

How RAP Calculates Your Payments

The Repayment Assistance Plan calculates your monthly payment as a clear percentage of your total Adjusted Gross IncomeAdjusted Gross Income (AGI)A borrower's total taxable income minus specific deductions, as reported on a federal tax return. Federal income-driven repayment payments are generally calculated using AGI. (AGI), applying to all your income without exceptions. Here’s how payments scale with income:

• 1% for income between approximately $10,000 and $20,000
• 2% for income between $20,000 and $30,000
• Increasing by 1% for each additional $10,000 of income
• Maximum of 10% for incomes over $100,000

RAP mandates a minimum payment of $10 per month, ending $0 payments common in earlier plans. Like previous IDR plans, RAP waives any unpaid monthly interest to ensure balances don’t grow if payments are made on time. Loan forgiveness occurs after 30 years (360 payments), longer than many current options.

Additionally, RAP provides a monthly payment reduction of $50 per dependent child. Unlike previous plans that adjusted based on family size, RAP applies this fixed monthly deduction directly, slightly easing payment obligations for borrowers with children.

What’s Better, Worse, and Different?

Overall, RAP simplifies student loan repayments with clear rules but emphasizes borrower accountability, potentially increasing both monthly payments and total repayment costs compared to previous options.

What’s Better?

• Interest Subsidy: RAP waives unpaid monthly interest, ensuring your balance doesn’t increase when payments are made consistently.
• Principal-Matching Payments: RAP provides matching payments up to $50 per month toward your loan principal. Each extra dollar you pay above accrued interest reduces your balance faster, potentially shortening repayment.

What’s Different?

• Minimum Monthly Payment ($10): All borrowers must pay at least $10 monthly, eliminating the previous $0 payment option. This ensures regular loan engagement but may burden very low-income individuals.
• No Income Exclusions: Payments are calculated based on your total Adjusted Gross Income (AGI) without exceptions, so any income increases will immediately affect monthly payments.

What’s Worse?

• Extended Forgiveness Timeline (30 years): RAP extends loan forgiveness to 30 years (360 payments), longer than many existing IDR plans. This may significantly increase your overall repayment costs.
• Limited Deferment & Forbearance: RAP removes economic hardship and unemployment deferments entirely and restricts general forbearance periods to a maximum of 9 months within any 24-month period. Borrowers experiencing job loss or extended financial difficulty must still make monthly payments, reducing flexibility in financial crises.

Related: How Repayment Assistance Plan Loan Forgiveness Works

Potential Risks and Drawbacks of RAP

Borrowers should be cautious about enrolling in RAP due to several significant drawbacks that can result in increased financial burdens over time:

Inflation Could Increase Your Payments

RAP payment brackets do not adjust for inflation, leading to what’s known as bracket creep, a concept highlighted by the Urban Institute. This means borrowers gradually pay higher portions of their income, even if their real earnings remain constant. For instance, a borrower earning $50,000 in 2026 initially pays 5% of their income ($2,500 annually). However, assuming an average inflation rate of 3% per year, after 15 years, that borrower would effectively pay closer to 7%–8% of their real purchasing power—translating into hundreds of dollars more annually.

Marriage Penalty for Dual-Income Couples

Under RAP, your marital status and tax filing method significantly influence monthly payments. Generally, filing separately results in lower payments, particularly when there’s a large income disparity between spouses or if only one spouse has student loans. This is because payments are calculated based solely on the individual borrower’s income rather than combined household earnings.

Conversely, filing jointly combines incomes for RAP calculations, substantially increasing monthly obligations—especially if both spouses have student loans. Due to these significant financial implications, couples should carefully assess the trade-offs between potentially lower RAP payments and the loss of certain tax benefits associated with filing separately. For detailed scenarios and further guidance, see our full guide on RAP’s Marriage Penalty.

Limited Ability to Switch Plans

RAP enrollment limits borrowers’ ability to revert to potentially more favorable repayment plans later. This restriction means borrowers could be locked into RAP even if another plan becomes more financially advantageous, potentially causing long-term strain.

Before enrolling, carefully evaluate whether RAP aligns with your long-term financial goals and budget flexibility.

How Borrowers Can Prepare for RAP

Borrowers anticipating the transition to the Repayment Assistance Plan can proactively take several steps:

• Estimate Payments Early: Use your projected income to estimate monthly payments under RAP and plan your budget accordingly.
• Review Income Documentation: Keep income documentation updated, as accurate records will streamline annual payment recalculations.
• Plan for Minimum Payments: Set aside funds to cover the mandatory minimum $10 monthly payment, especially if previously accustomed to $0 payments.
• Evaluate Financial Flexibility: Due to reduced hardship protections, create an emergency savings buffer to manage periods of financial instability.
• Download your current payment history now to ensure accurate credit toward forgiveness.
• Consider reducing your Adjusted Gross Income (AGI) through pre-tax contributions to retirement accounts or health savings accounts (HSAs) to lower your RAP payments.
• Stay Informed: Regularly check for updates or changes in federal loan policies to avoid surprises and ensure smooth transitions.

RAP Eligibility and Enrollment Details

The Repayment Assistance Plan will apply automatically to federal student loans disbursed on or after July 1, 2026. Existing borrowers with loans predating this date can remain on their current repayment plans or choose to enroll in RAP voluntarily. Borrowers should review their current financial situations and future expectations to decide whether RAP aligns well with their repayment goals and budget capabilities. Enrollment and income recertification will likely mirror existing IDR plan processes, requiring annual submission of income and family size documentation to maintain accurate monthly payments.