Income-driven student loan repayment plans got a major overhaul with the new tax act on July 4, 2025. This includes the introduction of the Repayment Assistance Plan, which will become available by July 1, 2026. Here's what it means for borrowers who are on income-driven plans, including how it could affect monthly payments.
What is the Repayment Assistance Plan?
The Repayment Assistance Plan, or RAP, is a new income-driven repayment (IDR) plan for federal student loans. Like other IDR plans, it allows borrowers to repay their student loans with monthly payments that are determined by a borrower's income and number of dependents. RAP will replace some existing IDR plans, like the Saving on a Valuable Education (SAVE) Plan, Income-Contingent Repayment (ICR) Plan, and the Pay As You Earn (PAYE) Plan.
How does the Repayment Assistance Plan work?
The Repayment Assistance Plan charges most student loan borrowers monthly payments as a percentage of their income. Like another IDR plan, SAVE, unpaid interest will be canceled each month if the borrower continues making their payments. That way, the balance doesn't grow.
Here's what that looks like: If you owe $200 a month in student loan interest but qualify for the minimum RAP payment of $10 a month, your $10 payment would go toward interest and the remaining $190 would be waived instead of added to your balance. This ensures your debt doesn't compound over time as it would with other loans if you don't cover your monthly interest payment.
Beyond that, if your monthly payment won't reduce your loan's principal value by at least $50, the Department of Education will contribute to ensure that it does. This guarantees you'll reduce the debt over time, even if you're only paying the minimum. Under RAP, it takes a maximum of 30 years for borrowers to pay off their debt. This is more than the 20-year maximum timeframe to pay off student loans taken out for undergrad via SAVE, or the 25-year maximum for graduate school loans.
How are Repayment Assistance Plan payments calculated?
RAP calculates monthly student loan payments based on a borrower's adjusted gross income (AGI), or the total amount you earned in a tax year minus certain adjustments, like contributions to a tax-deferred retirement plan or health savings account (HSA) outside of payroll, student loan interest, and health insurance premiums if you're self-employed.
RAP payments also consider the number of dependents a borrower has. For example, let's say your AGI is $101,000. As noted in the following income brackets, your annual RAP payment would equal 10% of your AGI—or about $842 per month—if you have no dependents.
Your monthly payment would be reduced by $50 for each dependent you claim on your tax return. So using the previous example, if you have 2 kids, you'd pay about $742 per month instead of $842. But regardless of your AGI or your dependents, RAP has a mandatory minimum payment of $10 per month.
Repayment Assistance Plan income brackets
| Adjusted gross income | Minimum annual payment or percent of AGI you must pay annually |
|---|---|
| $10,000 or less | $120 |
| More than $10,000 – $20,000 | 1% |
| More than $20,000 – $30,000 | 2% |
| More than $30,000 – $40,000 | 3% |
| More than $40,000 – $50,000 | 4% |
| More than $50,000 – $60,000 | 5% |
| More than $60,000 – $70,000 | 6% |
| More than $70,000 – $80,000 | 7% |
| More than $80,000 – $90,000 | 8% |
| More than $90,000 – $100,000 | 9% |
| More than $100,000 | 10% |
Who is eligible for the Repayment Assistance Plan?
Those with Direct Loans will be eligible for RAP once it's implemented, with the exception of those with Parent PLUS loans. Some borrowers may be able to consolidate their loans to a Direct Loan and become eligible for the RAP.
Repayment Assistance Plan vs. Standard Repayment Plan
Student loan borrowers who take out a loan after July 1, 2026 will only be eligible for either the Standard Repayment Plan or RAP. The Standard Repayment Plan offers fixed monthly payments over a set time period, regardless of income, similar to a mortgage or an auto loan. The amount you borrowed determines your repayment term on the Standard Repayment Plan.
Standard Repayment Plan repayment periods for loans taken out after July 1, 2026
| Total amount borrowed | Repayment term |
|---|---|
| Less than $25,000 | 10 years |
| $25,000 – less than $50,000 | 15 years |
| $50,000 – less than $100,000 | 20 years |
| $100,000 or more | 25 years |
Benefits of the Repayment Assistance Plan
Compared to the Standard Repayment Plan, RAP offers some advantages:
- Monthly payments are driven by your income: This aims to make payments more affordable for your personal financial situation.
- No debt compounding: If your payment amount is less than the interest owed, the difference is waived and not added back to the value of the loan. That means if you're on time with your payments, your loan won't increase in value.
- Discounts for dependents: RAP accounts for your financial responsibilities as a parent or guardian, giving you a $50 monthly discount per dependent you claim on your tax return.
Disadvantages of the Repayment Assistance Plan
Here are the potential drawbacks of RAP:
- It could take longer to repay your loans: RAP could stretch how long it takes to pay off your loans. That means you may have more years of making student loan payments.
- Parent PLUS loans are not eligible: Although they are considered Direct Loans, Parent PLUS loans are not eligible for RAP. If you borrow for a child's education, you may be left without an IDR plan to pay back that debt. Parent PLUS loans taken out after July 1, 2026 will only be eligible for the Standard Repayment Plan.
Repayment Assistance Plan FAQs
Here are some more details you may be wondering about with RAP:
When will the Repayment Assistance Plan be available?
Current law states that RAP should be available on July 1, 2026.
Which student loans are eligible for the Repayment Assistance Plan?
Only those with Direct Student Loans—meaning loans borrowed directly from the federal government—are eligible for RAP. Parent PLUS loans are not eligible. Although they are considered Direct Loans, Parent PLUS loans have not been eligible for most income-driven repayment plans, like RAP. A special kind of IDR, called the Income-Contingent Repayment Plan, was previously available to those who consolidated their Parent PLUS loans. Parent PLUS loans taken out after July 1, 2026, will only be eligible for the Standard Repayment Plan.
What's the minimum monthly payment with the Repayment Assistance Plan?
The minimum monthly payment is $10, regardless of your AGI or deductions for eligible dependents. Past income-driven repayment plans had minimum payments as low as $0, so this $10 minimum payment may be a change for some borrowers.
After how many years with the Repayment Assistance Plan are my loans forgiven?
Under RAP, it takes 30 years of payments for loans to be forgiven, regardless of whether those loans are for undergraduate or graduate education. Under previous IDR plans, undergraduate loans were forgiven after 20 years of payments, and graduate loans were forgiven after 25 years.
Public Service Loan Forgiveness, which is available to certain federal, state, local, tribal, and nonprofit workers with student loans, remains in place under RAP. Eligible loan holders can have their debts forgiven after 120 payments (or 10 years of consistent payments).
Key dates for the Repayment Assistance Plan
Here are some key dates to keep in mind around the new RAP:
- RAP will be available for Direct Student Loan borrowers on July 1, 2026.
- Loans taken out after July 1, 2026 are not eligible for some current IDR plans, such as the SAVE, ICR, or PAYE plan.
- Student loan borrowers who take out a loan after July 1, 2026, will only be eligible for either the Standard Repayment Plan or RAP.