The student loan landscape has undergone significant changes with the introduction of the Repayment Assistance Plan (RAP) effective from July 1, 2026. This new income-based repayment option replaces older plans like IBR, PAYE, and ICR for new borrowers. Existing borrowers can also enroll in RAP, offering a more straightforward and potentially more beneficial repayment structure.
RAP calculates monthly payments based on adjusted gross income (AGI) using a tiered system that simplifies the repayment process. This approach aims to make student loan repayment more manageable for borrowers across different income levels. However, it’s essential to understand how RAP compares to other income-driven repayment (IDR) plans and what it means for your financial future.
How the RAP payment formula works
The RAP formula uses annual income brackets based on AGI to determine monthly payments. Here’s a breakdown of the payment percentages for different income ranges:
- AGI ≤ $10,000: Flat payment of $120/year ($10/month)
- $10,001–$20,000: 1%
- $20,001–$30,000: 2%
- $30,001–$40,000: 3%
- $40,001–$50,000: 4%
- $50,001–$60,000: 5%
- $60,001–$70,000: 6%
- $70,001–$80,000: 7%
- $80,001–$90,000: 8%
- $90,001–$100,000: 9%
- AGI > $100,000: 10% of AGI
To determine a borrower’s monthly payment, the base payment is divided by 12 and adjusted by subtracting $50 for each dependent claimed on the borrower’s tax return. If the calculation results in less than $10 per month, the borrower would pay a minimum of $10/month.
For married borrowers, the AGI will be based on the tax filing status. If filing jointly, it’s the combined AGI. If both spouses have loans, the payment is prorated based on each loan balance. Filing separately requires claiming dependents on the borrower’s tax return, but be aware of potential penalties.
Comparing RAP to current IDR plans
Unlike RAP, existing income-driven repayment plans such as IBR, PAYE, and ICR rely on a borrower’s discretionary income, calculated using federal poverty guidelines. For example, PAYE requires 10% of discretionary income over 150% of the poverty level. This method can produce lower monthly payments for low-income borrowers but can be confusing.
RAP simplifies the process with income tiers and automatic interest forgiveness for some borrowers. While it imposes a longer maximum repayment term of 30 years, it eliminates the risk of negative amortization by canceling unpaid interest each month. IBR and PAYE offer forgiveness after 20 or 25 years, depending on the borrower’s loan type and when they entered repayment. RAP standardizes forgiveness at 360 monthly payments, or 30 years, but offers a consistent structure across income levels.
From a monthly payment perspective, RAP benefits lower-income borrowers but may be more costly for higher-income earners. For example, a borrower with an AGI of $25,000 and two children would pay $10/month on RAP compared to $0/month on IBR. Conversely, a borrower with an AGI of $120,000 and one child would pay $950/month on RAP compared to $745/month on IBR.
Enrolling in RAP and what SAVE borrowers need to know
The best way to enroll in RAP is to apply online at StudentAid.gov. The Department of Education states that the application takes about 10 minutes, and you’ll authorize the IRS to share your tax data so your income is pulled automatically. If your income has dropped since your last return, you can submit alternative documentation instead.
Your servicer processes the switch, with some borrowers being processed in as quickly as two days, while the average takes 2 to 3 weeks. As of September 2026, the paper application option for RAP is still not available.
SAVE borrowers are being moved out in groups, with each borrower getting a 90-day clock once their servicer notifies them. Time already spent in IBR, ICR, or PAYE counts toward RAP’s 360-payment clock. However, if you switch back to IBR, your RAP months won’t count toward IBR forgiveness.
Under current law, forgiveness after 360 RAP payments may be taxable income in the year it’s discharged. It’s essential to use a Student Loan Tax Bomb Calculator to estimate the potential tax hit. Additionally, you must recertify your income every year, similar to the old IDR plans. Authorizing IRS data sharing when you apply keeps that process automatic.
