What is the Repayment Assistance Plan (RAP), and how do you prepare for it?

Written by Bobby Matson | 6/30/26 1:00 PM

The student loan landscape is about to change in a significant way. Recent federal legislation introduced a brand-new income-driven repayment option: the Repayment Assistance Plan, set to go live on July 1, 2026.

For organizations that serve student loan borrowers, this is a fundamental shift in how millions of Americans will manage their federal student debt.

We’ve compiled a short guide to ensure your organization is prepared and equipped to guide borrowers through the changes.

What is the Repayment Assistance Plan?

The Repayment Assistance Plan (RAP) is a new income-driven repayment (IDR) plan for federal Direct Loan borrowers. It was created as part of a sweeping overhaul of federal student loan repayment options.

RAP will replace several existing IDR plans – including the Saving on a Valuable Education (SAVE) Plan, the Pay As You Earn (PAYE) Plan, and the Income-Contingent Repayment (ICR) Plan – as the primary income-based option for new borrowers.

For loans taken out on or after July 1, 2026, RAP will be the only IDR plan available. Borrowers on existing plans who do not take out new loans may remain in their current plans for a transition period, but those on PAYE and ICR will need to switch to IBR or RAP by July 1, 2028.¹

Here’s the part that catches people off guard: Taking out any new federal loan on or after July 1, 2026, changes the rules for a borrower’s entire portfolio, not just the new loan. Because all of a borrower’s loans must sit on the same repayment plan, any new borrowing after that date limits every loan they hold to RAP, Tiered Standard, or the standard plan.

A borrower who is comfortable on IBR or PAYE today would lose access to those plans across their whole balance the moment they take out a new loan or consolidate. If a borrower is weighing more schooling or new borrowing, they must factor this in before enrolling in anything.

Taking out any new federal loan on or after July 1, 2026, changes the rules for a borrower’s entire portfolio, not just the new loan.

How RAP works

Like other IDR plans, RAP ties monthly payments to a borrower’s adjusted gross income (AGI), rather than their loan balance. This makes payments more manageable for borrowers in lower-earning periods of their careers.

Two notable features stand out:

Interest subsidy: If a borrower’s monthly payment is less than the interest accruing that month, the remaining interest is waived (rather than added to the loan balance). This means a borrower who keeps up with payments will not see their debt grow over time.
Principal reduction guarantee: As long as a borrower stays current and is in active repayment, if their payment wouldn’t reduce their principal by at least $50, the Department of Education covers the gap. This ensures every borrower who keeps up with payments is making real progress toward paying off their debt, even at minimum payment levels.

The maximum repayment term under RAP is 30 years, after which any remaining balance is forgiven. This is longer than the 20-year forgiveness timeline for undergraduate loans under SAVE or the 25-year timeline for graduate loans.

One caveat worth raising: Under current law, any balance forgiven at the end of the 30-year term is treated as taxable income, unlike forgiveness through PSLF, which stays tax-free. Borrowers should plan for a potential tax bill on a balance forgiven decades out.

Note that Public Service Loan Forgiveness (PSLF) remains intact under RAP for eligible federal, state, local, tribal, and nonprofit workers, with forgiveness available after 120 qualifying payments.

How payments are calculated

RAP payments are based on a sliding scale of AGI, with rates ranging from a flat $120 annual minimum for those earning $10,000 or less, up to 10% of AGI annually for those earning over $100,000.² The table below illustrates the full bracket structure:

Adjusted Gross Income	Annual Payment
$10,000 or less	$10,000 or less
$10,001 – $20,000	1% of AGI
$20,001 – $30,000	2% of AGI
$30,001 – $40,000	3% of AGI
$40,001 – $50,000	4% of AGI
$50,001 – $60,000	5% of AGI
$60,001 – $70,000	6% of AGI
$70,001 – $80,000	7% of AGI
$80,001 – $90,000	8% of AGI
$90,001 – $100,000	9% of AGI
Over $100,000	10% of AGI
Source: Fidelity Learning Center

Payments are reduced by $50 per month for each dependent a borrower claims on their federal tax return, and the absolute minimum payment is $10 per month.³

The Department of Education will obtain income and dependent information directly from the IRS, and payments are automatically recalculated each year based on updated tax data.

Questions to expect from borrowers

The transition to RAP introduces complexity for the borrowers your organization serves, and you’ll likely receive several questions:

“Should I enroll in RAP or stay on my current plan?” The answer depends on their loan type, income, number of dependents, and when they took out their loans. For some, RAP will offer meaningfully lower monthly payments. For others (especially those close to existing forgiveness timelines), switching could unfavorably reset the clock.
“How will my payment change?” Borrowers accustomed to older plans like SAVE (which could set payments as low as $0) may see their minimums increase under RAP’s $10 floor and income-based tiers. Helping borrowers model these scenarios is a critical service.
“What happens to my existing forgiveness progress?” Borrowers who made payments under ICR or PAYE will be entitled to credit toward forgiveness when they switch to IBR or RAP.
“Will my Parent PLUS Loans qualify?” No, but some borrowers may not realize this until they try to enroll, which can lead to confusion and frustration if organizations aren't ahead of the question.

Being well-versed in these nuances positions your team to provide the guidance that borrowers need as July 1 approaches.

How Student Loan Aid will accommodate RAP

A change of this magnitude requires Student Loan Aid to evolve alongside the policy landscape. Here is how we are preparing to better serve both organizations and borrowers:

RAP monthly payments: We calculate a borrower’s RAP payment from their AGI and dependents using the statutory brackets, then project it across the full 30-year term, including the interest waiver, the $50 monthly principal match, and the estimated tax on any forgiven balance.
No additional info needed: RAP eligibility runs from the borrower’s existing credit data, so they don’t have to dig up loan paperwork or manually link accounts to see the changes.
Side-by-side comparison: Borrowers see RAP next to their current plan and other options in one view, providing them clear visibility into whether they should switch.
Only eligible plans shown: We apply the loan-type rules and the new-borrowing reclassification rule, so a borrower only sees plans they can actually use.
Completed enrollment: Student Loan Aid generates the borrower’s RAP application and submits it to their servicer(s).

What is the Repayment Assistance Plan (RAP), and how do you prepare for it?

The student loan landscape is about to change in a significant way. Recent federal legislation introduced a brand-new income-driven repayment option: the Repayment Assistance Plan, set to go live on July 1, 2026.

For organizations that serve student loan borrowers, this is a fundamental shift in how millions of Americans will manage their federal student debt.

We’ve compiled a short guide to ensure your organization is prepared and equipped to guide borrowers through the changes.

What is the Repayment Assistance Plan?

The Repayment Assistance Plan (RAP) is a new income-driven repayment (IDR) plan for federal Direct Loan borrowers. It was created as part of a sweeping overhaul of federal student loan repayment options.

RAP will replace several existing IDR plans – including the Saving on a Valuable Education (SAVE) Plan, the Pay As You Earn (PAYE) Plan, and the Income-Contingent Repayment (ICR) Plan – as the primary income-based option for new borrowers.

For loans taken out on or after July 1, 2026, RAP will be the only IDR plan available. Borrowers on existing plans who do not take out new loans may remain in their current plans for a transition period, but those on PAYE and ICR will need to switch to IBR or RAP by July 1, 2028.1

A borrower who is comfortable on IBR or PAYE today would lose access to those plans across their whole balance the moment they take out a new loan or consolidate. If a borrower is weighing more schooling or new borrowing, they must factor this in before enrolling in anything.

Taking out any new federal loan on or after July 1, 2026, changes the rules for a borrower’s entire portfolio, not just the new loan.

How RAP works

Like other IDR plans, RAP ties monthly payments to a borrower’s adjusted gross income (AGI), rather than their loan balance. This makes payments more manageable for borrowers in lower-earning periods of their careers.

Two notable features stand out:

Interest subsidy: If a borrower’s monthly payment is less than the interest accruing that month, the remaining interest is waived (rather than added to the loan balance). This means a borrower who keeps up with payments will not see their debt grow over time.

The maximum repayment term under RAP is 30 years, after which any remaining balance is forgiven. This is longer than the 20-year forgiveness timeline for undergraduate loans under SAVE or the 25-year timeline for graduate loans.

One caveat worth raising: Under current law, any balance forgiven at the end of the 30-year term is treated as taxable income, unlike forgiveness through PSLF, which stays tax-free. Borrowers should plan for a potential tax bill on a balance forgiven decades out.

Note that Public Service Loan Forgiveness (PSLF) remains intact under RAP for eligible federal, state, local, tribal, and nonprofit workers, with forgiveness available after 120 qualifying payments.

How payments are calculated

RAP payments are based on a sliding scale of AGI, with rates ranging from a flat $120 annual minimum for those earning $10,000 or less, up to 10% of AGI annually for those earning over $100,000.2 The table below illustrates the full bracket structure:

Adjusted Gross Income

Annual Payment

$10,000 or less

$10,000 or less

$10,001 – $20,000

1% of AGI

$20,001 – $30,000

2% of AGI

$30,001 – $40,000

3% of AGI

$40,001 – $50,000

4% of AGI

$50,001 – $60,000

5% of AGI

$60,001 – $70,000

6% of AGI

$70,001 – $80,000

7% of AGI

$80,001 – $90,000

8% of AGI

$90,001 – $100,000

9% of AGI

Over $100,000

10% of AGI

Source: Fidelity Learning Center

Payments are reduced by $50 per month for each dependent a borrower claims on their federal tax return, and the absolute minimum payment is $10 per month.3

The Department of Education will obtain income and dependent information directly from the IRS, and payments are automatically recalculated each year based on updated tax data.

Questions to expect from borrowers

The transition to RAP introduces complexity for the borrowers your organization serves, and you’ll likely receive several questions:

“How will my payment change?” Borrowers accustomed to older plans like SAVE (which could set payments as low as $0) may see their minimums increase under RAP’s $10 floor and income-based tiers. Helping borrowers model these scenarios is a critical service.

“What happens to my existing forgiveness progress?” Borrowers who made payments under ICR or PAYE will be entitled to credit toward forgiveness when they switch to IBR or RAP.

“Will my Parent PLUS Loans qualify?” No, but some borrowers may not realize this until they try to enroll, which can lead to confusion and frustration if organizations aren't ahead of the question.

Being well-versed in these nuances positions your team to provide the guidance that borrowers need as July 1 approaches.

Being well-versed in these nuances positions your team to provide the guidance that borrowers need as July 1 approaches.

How Student Loan Aid will accommodate RAP

A change of this magnitude requires Student Loan Aid to evolve alongside the policy landscape. Here is how we are preparing to better serve both organizations and borrowers:

RAP monthly payments: We calculate a borrower’s RAP payment from their AGI and dependents using the statutory brackets, then project it across the full 30-year term, including the interest waiver, the $50 monthly principal match, and the estimated tax on any forgiven balance.

No additional info needed: RAP eligibility runs from the borrower’s existing credit data, so they don’t have to dig up loan paperwork or manually link accounts to see the changes.

Side-by-side comparison: Borrowers see RAP next to their current plan and other options in one view, providing them clear visibility into whether they should switch.

Only eligible plans shown: We apply the loan-type rules and the new-borrowing reclassification rule, so a borrower only sees plans they can actually use.

Completed enrollment: Student Loan Aid generates the borrower’s RAP application and submits it to their servicer(s).

We're here to help

The shift to RAP is one of the most significant changes to federal student loan repayment in years, navigating it can feel overwhelming for organizations and borrowers alike.

If you have questions about how RAP will affect your borrower population, how to update your processes ahead of the July 1 effective date, or how Student Loan Aid can support your team through the transition, please reach out. We’d be happy to help.

For loans taken out on or after July 1, 2026, RAP will be the only IDR plan available. Borrowers on existing plans who do not take out new loans may remain in their current plans for a transition period, but those on PAYE and ICR will need to switch to IBR or RAP by July 1, 2028.¹

RAP payments are based on a sliding scale of AGI, with rates ranging from a flat $120 annual minimum for those earning $10,000 or less, up to 10% of AGI annually for those earning over $100,000.² The table below illustrates the full bracket structure:

Payments are reduced by $50 per month for each dependent a borrower claims on their federal tax return, and the absolute minimum payment is $10 per month.³