On July 1, 2026, a borrower earning $50,000 a year with $35,000 in federal student loans will log into their servicer’s website and find that most of the repayment options they once had are gone. In their place: a single income-driven plan called the Repayment Assistance Plan, or RAP, which caps monthly payments at 10 percent of discretionary income and forgives whatever remains after 30 years.
RAP was written into federal law through H.R.1 of the 119th Congress, the budget reconciliation bill signed by President Trump. It replaces every existing income-driven repayment plan: Income-Based Repayment (IBR), Pay As You Earn (PAYE), Income-Contingent Repayment (ICR), and the SAVE plan that federal courts blocked before it could fully take effect. For the roughly 43 million Americans who hold federal student debt, according to Federal Student Aid portfolio data, the shift raises urgent questions about monthly costs, forgiveness timelines, and what happens to borrowers caught in the wreckage of the old system.
How RAP works
Starting July 1, the Department of Education will offer new borrowers only two repayment tracks: a standard plan with fixed monthly payments based on the loan balance, and RAP as the sole income-driven alternative.
RAP sets monthly payments at 10 percent of discretionary income. Under the statute, “discretionary income” is defined as the difference between a borrower’s adjusted gross income and 150 percent of the federal poverty guidelines for their household size, according to the Congressional Research Service’s analysis of the plan. For a single borrower in 2026, 150 percent of the poverty line is roughly $23,000. That means a borrower earning $50,000 would pay 10 percent of the $27,000 difference, or about $225 per month. Anyone earning below the protected threshold would owe $0.
Any remaining balance is forgiven after 30 years of qualifying payments. That is a significant change from the plans RAP replaces. Under old IBR and PAYE, undergraduate borrowers could receive forgiveness after 20 years. Graduate borrowers on IBR faced a 25-year timeline. The now-blocked SAVE plan had offered forgiveness in as few as 10 years for borrowers with small original balances. RAP extends the clock to 30 years for everyone, regardless of degree level or loan amount.
The law also imposes restrictions when borrowers take on additional federal loans after enrolling in RAP. The CRS analysis confirms these limitations, though the precise mechanics of how new borrowing resets or extends the forgiveness timeline have not been fully detailed in borrower-facing guidance as of June 2026.
What happened to SAVE and the old IDR plans
RAP arrives after more than a year of turmoil surrounding the SAVE plan. The Biden administration proposed SAVE in 2023 and finalized it in 2024 as the most generous income-driven option ever offered by the federal government. For undergraduate debt, SAVE set payments at just 5 percent of discretionary income (10 percent for graduate debt), used a higher income-protection threshold of 225 percent of the poverty line, and covered all unpaid interest so that balances would not grow even when monthly payments fell short.
Republican-led states challenged SAVE in court, and the 8th Circuit Court of Appeals blocked the plan in 2024. Roughly 8 million borrowers were placed into administrative forbearance, unable to make payments or accumulate credit toward forgiveness. The Department of Education under the Trump administration subsequently moved to wind down SAVE and has directed affected borrowers toward RAP as the replacement framework.
For anyone whose first federal loan originates on or after July 1, 2026, the old plans simply will not be available. IBR, PAYE, ICR, and SAVE are closed to new borrowers after that date. Borrowers who already hold federal loans taken out before the cutoff retain access to their current repayment plan, a point the CRS analysis confirms. But the practical question of whether those legacy borrowers can or should consolidate into RAP-eligible terms remains unresolved in public-facing guidance.
The gaps borrowers need to watch
Several critical details remain unresolved as of June 2026, and they matter enormously for anyone weighing graduate school, consolidation, or career changes.
The tax treatment of forgiven balances is a looming problem. Under a provision of the American Rescue Plan Act, student loan forgiveness was exempt from federal income tax through the end of 2025. That exemption has now expired. Unless Congress acts, any balance forgiven under RAP after 30 years will be treated as taxable income. A borrower who has $60,000 forgiven could face a federal tax bill of $10,000 or more in a single year, depending on their bracket. The statute creating RAP does not include a tax exemption, and no standalone legislation addressing the issue has advanced as of June 2026.
No official payment comparison tools exist yet. The Department of Education has not released calculators or modeling showing how RAP payments compare dollar-for-dollar with payments under the old plans at different income levels. Borrowers can use the existing Federal Student Aid Loan Simulator for a rough baseline, but it does not yet model RAP’s specific terms.
Interest subsidies appear to be gone. One of SAVE’s most popular features was its interest subsidy: if a borrower’s monthly payment did not cover accruing interest, the government paid the difference so the balance would not grow. The statutory text of RAP does not include an equivalent provision. That means borrowers on RAP could see their balances increase over time even while making every required payment, a phenomenon known as negative amortization that has long frustrated borrowers on older IDR plans.
Transition rules for SAVE borrowers are incomplete. The Department has referenced RAP as the replacement path for borrowers stranded by SAVE’s collapse, but specific transition mechanics have not been spelled out. It is not clear whether months spent in SAVE-related forbearance will count toward RAP’s 30-year forgiveness clock. Borrowers who were enrolled in SAVE for two or three years before the court injunction need to know whether that time is lost.
Parent PLUS borrowers face uncertainty. Under the old system, Parent PLUS loans were only eligible for income-driven repayment through ICR after consolidation into a Direct Consolidation Loan. With ICR closing to new borrowers, it is unclear whether Parent PLUS borrowers will have any income-driven path forward under RAP, or whether they will be limited to the standard repayment plan.
Public Service Loan Forgiveness still stands
One piece of the existing system that RAP does not replace: Public Service Loan Forgiveness. PSLF, which forgives remaining balances after 10 years of qualifying payments for borrowers working in government or nonprofit jobs, remains a separate program under existing law. Borrowers pursuing PSLF can enroll in RAP as their qualifying repayment plan, and the 10-year PSLF timeline would apply instead of RAP’s 30-year window. For public-sector workers, this distinction is critical and could make RAP a reasonable vehicle for reaching PSLF forgiveness.
What borrowers should do before July 1
Borrowers who already have federal loans and are satisfied with their current repayment plan do not need to take immediate action. The law preserves access to legacy IDR plans for loans originated before the cutoff date.
Borrowers considering new federal loans for graduate school, professional programs, or a return to undergraduate study should factor RAP’s 30-year timeline, 10 percent payment cap, and apparent lack of interest subsidies into their cost calculations. Without official payment estimators, running the numbers manually using the 150-percent-of-poverty threshold and current income is the best available approach.
Anyone currently in SAVE-related forbearance should monitor the Department of Education’s website and their loan servicer’s communications for transition guidance. The Department has indicated that more detailed instructions will follow, but no firm date for that guidance has been announced.
A simpler system with harder trade-offs
The case for RAP is straightforward: one plan is easier to understand and administer than four or five. Borrowers no longer need to compare IBR, PAYE, ICR, and SAVE to figure out which saves them the most money. Servicers no longer need to manage multiple sets of rules. The complexity that led to years of misapplied payments and lost forgiveness credit under the old system should, in theory, diminish.
But simplicity came with trade-offs. The forgiveness timeline is longer than what undergraduate borrowers had under IBR or PAYE. The interest subsidy that made SAVE transformative for low-income borrowers appears to be gone. And the expiration of the student loan tax exemption means that forgiveness after 30 years could come with a bill from the IRS that many borrowers will not be prepared to pay. The details that the Department of Education still needs to publish will determine whether RAP is a genuine improvement or a streamlined version of the same problems borrowers have faced for years.
