Starting July 1, 2026, the federal government will begin replacing every income-driven student loan repayment plan with a single new option. It is called the Repayment Assistance Plan, or RAP, and for the roughly 43 million Americans carrying federal student loan debt, it represents the most significant structural change to repayment in over a decade.
RAP caps monthly payments at 10 percent of discretionary income and forgives remaining balances after 30 years. It was written directly into law through the FY2025 budget reconciliation act (P.L. 119-21), which amends the Higher Education Act itself. That means RAP is not a regulation that a future administration can easily rewrite or rescind. It is statute.
For borrowers who spent 2024 and 2025 in limbo after courts blocked the SAVE plan, the launch of RAP may finally offer a stable path forward. But the new plan is not simply SAVE under a different name. In several important ways, it is less generous.
What the law changes and when
A nonpartisan Congressional Research Service analysis of the reconciliation law confirms that RAP is a statutory creation, not an executive branch regulation. The law also creates a companion option called the Tiered Standard Plan, which uses a graduated fixed-payment structure instead of income-based calculations. Both take effect July 1, 2026.
On the phase-out side, several legacy income-driven plans will close to new borrowers on July 1, 2028. That two-year overlap is meant to give current enrollees time to transition. But as of late May 2026, the Department of Education has not published a borrower-facing document clearly listing which plans close on that date and whether borrowers already enrolled in Income-Based Repayment (IBR), Pay As You Earn (PAYE), or Income-Contingent Repayment (ICR) can remain in those plans indefinitely or will eventually be moved to RAP.
How RAP compares to the plans it replaces
Under the current system, borrowers choose from several income-driven plans with different rules:
- IBR caps payments at 10 or 15 percent of discretionary income (depending on when you borrowed) and forgives balances after 20 or 25 years.
- PAYE caps payments at 10 percent with forgiveness after 20 years.
- SAVE (now blocked by court order) dropped payments to 5 percent for undergraduate borrowers and prevented unpaid interest from capitalizing on the balance.
RAP collapses all of that into one formula: 10 percent of discretionary income, 30 years to forgiveness. The payment percentage matches PAYE and newer IBR terms, but the forgiveness timeline is the longest of any income-driven plan the federal government has offered. Borrowers could make payments for up to a full decade longer before their remaining balance is wiped out.
Here is what that looks like in dollar terms. A single borrower earning $45,000 in 2026, with the federal poverty guideline for a one-person household at roughly $15,650, would have about $29,350 in discretionary income. Ten percent of that is approximately $245 per month under RAP. Under SAVE’s 5 percent rate for undergraduate loans, that same borrower would have owed closer to $122 per month. That $123 difference, compounded over years, is substantial for someone early in their career.
One critical detail the reconciliation law and available guidance have not yet clarified: whether RAP includes any protection against unpaid interest growth. SAVE’s most popular feature was its interest subsidy, which prevented balances from ballooning when monthly payments did not cover accruing interest. A focused CRS brief on the law’s student loan provisions describes RAP’s payment and forgiveness structure but does not detail interest treatment. If RAP lacks a similar subsidy, borrowers making minimum payments could see their balances grow even as they stay current.
Who is likely to pay more
Without official modeling from the Department of Education, the clearest risk group is borrowers earning between 150 and 250 percent of the federal poverty guideline. Under SAVE, many in that income range qualified for sharply reduced payments and interest protections. RAP’s flat 10 percent rate and longer forgiveness window will likely mean higher monthly bills and more total interest paid over the life of the loan.
The law also does not appear to distinguish between undergraduate and graduate borrowers the way SAVE did. SAVE charged undergraduates 5 percent of discretionary income and graduate borrowers 10 percent. If RAP applies a uniform 10 percent rate regardless of loan type, undergraduate borrowers stand to lose the most ground.
Borrowers pursuing Public Service Loan Forgiveness face a separate layer of uncertainty. PSLF requires 120 qualifying monthly payments, typically made under an income-driven plan. If RAP becomes the only income-driven option for new borrowers, it will reshape PSLF strategy. The Department has not yet explained how PSLF’s 10-year payment requirement interacts with RAP’s 30-year forgiveness schedule, or confirmed that borrowers can still receive PSLF discharge at the 120-payment mark while enrolled in RAP.
Borrowers with consolidated loans, Parent PLUS loans, or mixed portfolios may face additional eligibility complications that public-facing documents have not yet addressed.
The tax question no one is answering yet
There is another issue that will matter enormously to borrowers counting on forgiveness: taxes. Under the American Rescue Plan Act, federal student loan balances forgiven through the end of 2025 are excluded from taxable income. That provision is currently set to expire on December 31, 2025. RAP’s 30-year forgiveness timeline means the earliest any borrower could receive RAP-based forgiveness is 2056. Unless Congress extends or makes permanent the tax exclusion, borrowers who reach the 30-year mark could face a large tax bill on the forgiven amount, sometimes called a “tax bomb.”
Neither the reconciliation law nor available Department of Education guidance addresses this interaction. Borrowers planning around RAP forgiveness should factor in the possibility that forgiven debt will be treated as taxable income.
What SAVE borrowers need to know now
Millions of borrowers who enrolled in SAVE before courts blocked it in mid-2024 have spent nearly two years in administrative forbearance or cycling through temporary workarounds. The Department of Education has indicated that RAP is positioned as the primary replacement for SAVE enrollees, though detailed transition guidance has been slow to materialize.
Borrowers in this group should take two immediate steps. First, contact your loan servicer to confirm whether months spent in forbearance during the SAVE litigation will count toward any forgiveness timeline under RAP. Second, verify that your income documentation is current. Re-certification under a new plan will almost certainly require updated tax information, and delays in processing could result in temporarily higher payments.
What every borrower should do before July 1
The most important step any federal student loan borrower can take right now is to log into their Federal Student Aid account and check their current repayment plan status and loan type. The reconciliation law defines “Borrowers of New Loans” in specific terms, and whether your loans fall into that category or are grandfathered under older rules will determine whether RAP is mandatory, optional, or irrelevant to your situation.
Beyond that:
- Download your complete payment history. If legacy plans sunset in 2028, having documentation of past payments and qualifying months could matter for forgiveness tracking.
- Confirm your contact information with your servicer. Transition notices will go to the address and email on file.
- Watch for servicer communications explaining whether you can stay in your current plan, must switch to RAP, or will be automatically transferred when older plans close.
- Do not make major repayment decisions based on unofficial calculators or social media estimates. The Department has not yet updated the Federal Student Aid loan simulator or College Scorecard to model RAP-specific scenarios.
The guidance borrowers still need
For years, financial counselors and college aid officers built their advice around comparing multiple income-driven formulas with different payment percentages, interest subsidies, and forgiveness timelines. If RAP becomes the sole income-driven plan for most new borrowers, that entire framework collapses into a single set of terms. The counseling conversation shifts from “which plan is best for you” to “how does this one plan interact with your income trajectory, family size, career plans, and tax situation over three decades.”
That shift requires tools and examples the Department of Education has not yet provided. Until updated calculators, borrower-facing FAQs, and servicer training materials are released, millions of people will be making decisions about a plan they cannot fully model.
Federal student loan debt touches nearly every corner of the economy, from first-generation graduates managing entry-level salaries to mid-career professionals weighing whether to stay in public service. The borrowers who navigate RAP most effectively will be the ones who start preparing now, while the rules are still being translated from legislative text into monthly payment amounts.
