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A student student sits in a lecture hall while class is being dismissed at the University of Texas at Austin on February 22, 2024 in Austin, Texas.
Brandon Bell | Getty Images
What are the new repayment plan’s terms?
RAP is what the Education Department calls an “income-driven repayment plan.” Congress created the first IDR plans back in the 1990s to make student loan borrowers’ bills more affordable. Historically, the plans cap people’s monthly payments at a share of their discretionary income and cancel any remaining debt after a certain period, typically 20 years or 25 years.
RAP is different in a few significant ways.
For one, it doesn’t shield a portion of a borrower’s income like other IDR plans do, but rather calculates their bill based on so-called adjusted gross income. (AGI is your total earnings before taxes, minus certain deductions.)
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The share of a borrower’s income that the plan requires also rises the more they earn. Under RAP, monthly payments will typically range from 1% to 10% of your earnings; the more you make, the bigger your required payment.
There will be a minimum monthly payment of $10 for all borrowers. (Under other IDR plans, certain low-income borrowers were entitled to a $0 monthly payment.)
RAP leads to student loan forgiveness after 30 years, compared with the typical 20-year or 25-year timeline on other IDR plans.
When will RAP be available?
RAP should be available by July 1, 2026, according to the Education Dept.
Borrowers with existing loans will maintain access to some existing repayment plans, including Income-Based Repayment, or IBR.
However, after July 1, 2026, new borrowers will have just two options. They can pick between RAP or a standard repayment plan, under which their debt is divided into fixed payments over a period ranging from 10 years to 25 years, depending on their balance.
An important point to keep in mind: Even borrowers with old loans who take out a new one after July 1, 2026 will lose the existing options for that loan, said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers. This will affect students partway through their degree, for example.
“If you borrow again, you will be in the world of two choices,” Buchanan said.
What benefits does RAP offer?
RAP comes with a few perks.
Federal student loan borrowers get $50 off their monthly bill per qualifying dependent, for example. Those who are keeping up with their bills but aren’t making progress paying down their principal will also get a small subsidy by the Education Dept.
Plus, payments made under RAP will give borrowers credit on the decade-long timeline to debt relief under the Public Service Loan Forgiveness program.
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