What is the Repayment Assistance Plan

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 repayment (IDR) plans, except original Income-Based Repayment (IBR), for borrowers taking out new federal loans from July 1, 2026, onwards. RAP consolidates multiple existing plans (SAVE, PAYE, REPAYE) 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.

The Repayment Assistance Plan calculates your monthly payment as a clear percentage of your total Adjusted Gross Income (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.

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

Borrowers should be cautious about enrolling in RAP due to some 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.

Switching Plans Comes With Trade-offs

How easily you can leave RAP depends on when you first borrowed. Borrowers with federal loans from before July 1, 2026, generally keep the ability to move between RAP and a plan like IBR — there’s no one-way lock. For anyone who first borrows on or after July 1, 2026, the switch away from RAP is largely one-way.

Either way, weigh one trade-off: months paid under RAP don’t count toward IBR’s forgiveness timeline if you switch back — they credit only toward PSLF and RAP’s own 30-year forgiveness. Switching is permitted but hasn’t been widely tested in practice, so evaluate any move carefully against your long-term goals.

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.

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.