On July 1, 2026, the federal government will stop offering borrowers a choice among income-driven repayment plans. No more PAYE. No more REPAYE. No more Income-Based Repayment. Every person who takes out a new Direct Loan after that date will be placed into a single structure called the Repayment Assistance Plan, or RAP, which sets a $10 monthly payment floor, ties payments to discretionary income, and forgives any remaining balance after 30 years of qualifying payments.
That is a decade longer than the forgiveness timeline under the old REPAYE plan for undergraduate borrowers, and it eliminates the $0 payment months that millions of the lowest-income borrowers relied on to stay current. For some, RAP will simplify a system that was genuinely confusing. For others, it could mean paying thousands more in interest before forgiveness ever arrives.
How RAP became law
RAP was created by the One Big Beautiful Bill Act (H.R. 1, 119th Congress), signed into law on July 4, 2025. The legislation added a new section to the Higher Education Act that requires any borrower receiving a Direct Loan on or after July 1, 2026, to repay under RAP rather than selecting from the legacy menu of income-driven options.
The Department of Education confirmed the implementation timeline in a Dear Colleague Letter (GEN-25-04) sent to financial aid administrators in July 2025. That letter outlines which provisions took effect immediately, which require future rulemaking, and which hinge on the July 2026 launch date. The House committee report accompanying the Act provides section-by-section explanations of congressional intent, framing the consolidation as a deliberate effort to replace a patchwork system that confused borrowers and overwhelmed loan servicers.
The two structural changes that matter most
A $10 minimum monthly payment, with no exceptions. Under legacy IDR plans like REPAYE, a borrower earning below 150% of the federal poverty line, roughly $23,000 a year for a single person in the continental U.S., could qualify for a $0 monthly payment. That payment still counted toward forgiveness. RAP eliminates that option entirely. Every borrower owes at least $10 per month, regardless of income.
To put that in perspective: a single parent working part-time at $15 an hour and earning about $18,000 a year would have owed nothing under REPAYE. Under RAP, that borrower owes $120 a year, a small amount in isolation but a real cost for someone living below the poverty line, especially compounded over 30 years. And it is still unclear how the $10 floor interacts with hardship deferments, unemployment forbearances, or interest subsidies that previously shielded the most financially vulnerable borrowers.
Forgiveness after 30 years instead of 20. REPAYE offered forgiveness after 20 years (240 payments) for borrowers with only undergraduate debt and 25 years for those with graduate loans. RAP sets a single 30-year (360-payment) timeline for everyone. That extra decade is not just more time; it is more interest. A borrower with $35,000 in undergraduate loans at a 5% interest rate earning $40,000 a year could pay roughly $10,000 to $15,000 more in total interest over 30 years than they would have over 20, depending on the final payment formula the Department of Education adopts. The exact figures will not be known until regulations are published, but the direction is clear: longer repayment means more money paid before forgiveness kicks in.
What borrowers can check right now
The federal loan simulator on StudentAid.gov has begun incorporating RAP’s parameters, including the 30-year forgiveness timeline and the minimum payment requirement. Borrowers can enter hypothetical income and loan balance figures to get a preliminary estimate of monthly payments under the new plan.
Those estimates are directional, not binding. The simulator runs on user-supplied inputs and does not constitute regulatory guidance. But its inclusion of RAP signals that the Department is building the plan into its public-facing infrastructure even as some implementation details remain under development. Borrowers who want a rough sense of how their payments might shift should use the simulator as a starting point and revisit it as final regulations are published.
Five questions the law does not yet answer
1. What happens to borrowers already on legacy IDR plans? The statute requires new Direct Loan recipients after July 1, 2026, to use RAP. But the rules governing whether existing borrowers on PAYE, REPAYE, or IBR will be migrated, offered a choice, or grandfathered into their current plans have not been fully detailed in publicly available Department of Education guidance as of June 2026. The Dear Colleague Letter flags future regulatory actions but stops short of a complete transition roadmap for the millions of borrowers already enrolled in older repayment structures.
2. How does RAP interact with Public Service Loan Forgiveness? Borrowers in qualifying public service jobs currently receive forgiveness after 10 years (120 payments) under PSLF, regardless of which IDR plan they use. Neither the statute nor the committee materials clarify whether PSLF’s 10-year timeline remains intact under RAP or whether the program’s mechanics change. The Department of Education has reported approving over one million PSLF discharges, and many more borrowers are actively pursuing the program. For them, this is the single most consequential unanswered question.
3. Will forgiven balances be taxed? Under the American Rescue Plan Act, student loan forgiveness was excluded from federal taxable income through the end of 2025. That provision has expired. Unless Congress extends it or creates a new exclusion, any balance forgiven under RAP after 30 years could be treated as taxable income by the IRS. For a borrower whose $35,000 loan has grown to $50,000 or more through accrued interest, that could mean a five-figure tax bill arriving at the same moment they thought they were finally free of their debt. No official guidance has addressed this interaction.
4. How are married borrowers treated? Under some legacy IDR plans, borrowers who filed taxes separately could exclude a spouse’s income from the payment calculation. There is no definitive public guidance on whether RAP will allow the same treatment or whether joint household income will always be considered. For dual-income households, the answer could shift monthly payments by hundreds of dollars.
5. What about Parent PLUS loans? RAP applies to Direct Loans, but Parent PLUS borrowers, who took on debt to finance a child’s education, have historically been excluded from most income-driven repayment options unless they consolidated into a Direct Consolidation Loan. The statute and existing guidance have not clarified whether Parent PLUS borrowers will have access to RAP or remain locked out of income-driven repayment.
What to do before the July 1 deadline
RAP is a legally locked-in framework with a clear start date, a defined payment floor, and a 30-year forgiveness promise. But the operational details that will determine whether individual borrowers end up better or worse off than they would have been under legacy plans are still being written.
Borrowers who currently hold federal student loans should take three concrete steps before the transition date:
- Run the StudentAid.gov simulator with your current income and loan balance to get a baseline estimate of what RAP payments might look like compared to your existing plan.
- Document your current repayment plan and payment history. If transition rules allow grandfathering or credit for prior qualifying payments, having records will matter. Download your payment history from your servicer’s portal and save a copy of your most recent billing statement.
- Watch for Department of Education rulemaking. The Dear Colleague Letter indicated that further regulations and subregulatory guidance will be issued before July 2026. Those documents will answer many of the open questions above, and public comment periods may give borrowers and advocates a chance to weigh in.
For borrowers pursuing PSLF, the stakes are especially high. Until the Department clarifies how RAP and PSLF interact, anyone close to the 120-payment threshold should keep meticulous records and consider consulting a student loan-focused financial advisor or a legal aid organization that specializes in borrower rights.
Why the details still ahead will shape everything
Congress built RAP to replace a system that even financial aid professionals struggled to explain. On that front, one plan is simpler than five. But simplicity is not the same as generosity, and the borrowers who benefited most from the old system, those with the lowest incomes, the shortest forgiveness timelines, and the most to gain from $0 payment months, are the ones with the most to lose if the final regulations do not account for their circumstances. The law is signed. The date is set. The regulations that fill in the gaps will determine whether RAP is a genuine improvement or a decade-long extension of debt for the people who can least afford it.
