Repayment Assistance Plan (RAP): How Your Payment Is Set

If you spent the last two years parked in the SAVE plan’s interest-free limbo, the ground is about to shift under you. The plan that promised the lowest payments in the history of federal student loans is gone — struck down in court, its forbearance expired, interest quietly building again since August 2025. In its place, beginning July 1, 2026, comes the Repayment Assistance Plan, or RAP: the centerpiece of the student-loan overhaul written into the 2025 reconciliation law (P.L. 119-21). This guide is for the borrower refreshing their servicer’s website, trying to figure out what their bill will actually be — and whether RAP is a rescue or a tax.

The short answer: RAP sets your payment at a flat percentage of your total adjusted gross income — from 1% to 10% — divided by twelve, then reduced by $50 for each dependent, with a hard floor of $10 a month. In exchange, the government waives any unpaid interest each month and adds up to $50 toward your principal, so your balance cannot grow. Forgiveness arrives after 360 on-time payments — thirty years. For many lower earners it costs more per month than SAVE did; for almost everyone it ends the negative-amortization nightmare of older plans.

Why RAP exists, and why now

For two decades, federal repayment was a thicket of overlapping income-driven plans — IBR, PAYE, ICR, and finally SAVE — each with its own formula, its own poverty-line math, and its own forgiveness clock. The 2025 reconciliation law cut the thicket down. For any loan disbursed on or after July 1, 2026, the menu collapses to two choices: a fixed Tiered Standard plan, or the income-driven Repayment Assistance Plan. The U.S. Department of Education frames it, in its official fact sheet, as simplification — fewer plans, one income-driven track.

The practical reality is that RAP is now the only income-driven option for new borrowers, and the default destination for millions of existing ones. So the question is not whether to like it. The question is what it will cost you, and how to make the math work in your favor.

How your RAP payment is calculated

RAP throws out the concept that defined every plan before it — discretionary income — and replaces it with something blunter: your whole adjusted gross income. There is no poverty-line deduction, no protected floor of earnings. The plan simply looks at the AGI on your tax return and assigns a percentage based on which band it falls into.

Annual AGI	RAP payment (per year)
$0 – $10,000	$120 flat ($10/month)
$10,001 – $20,000	1% of AGI
$20,001 – $30,000	2% of AGI
$30,001 – $40,000	3% of AGI
$40,001 – $50,000	4% of AGI
$50,001 – $60,000	5% of AGI
$60,001 – $70,000	6% of AGI
$70,001 – $80,000	7% of AGI
$80,001 – $90,000	8% of AGI
$90,001 – $100,000	9% of AGI
$100,001 and up	10% of AGI

Take the annual figure, divide by twelve, and subtract $50 for every dependent you claim. The result is your monthly bill, and it can never drop below $10.

A worked example: a borrower with an AGI of $60,000 and one dependent lands in the 5% band. Five percent of $60,000 is $3,000 a year, or $250 a month; subtract $50 for the dependent and the bill is $200 a month. A borrower earning $35,000 with three children sits in the 3% band — $1,050 a year, about $87.50 a month — but three dependents subtract $150, which would push the payment below zero, so it snaps up to the $10 floor.

The two subsidies that keep your balance from growing

The reason RAP is not simply “SAVE but more expensive” lives in two provisions that attack the oldest failure of income-driven repayment: balances that swell for years because the required payment never covers the interest.

First, the interest waiver. When you make your scheduled RAP payment on time, the Department waives any remaining unpaid interest for that month. The interest that your payment did not cover is not capitalized, not deferred — it is canceled. Your balance does not grow from unpaid interest, ever, as long as you pay.

Second, the principal match. If your on-time payment does not reduce your principal by at least $50, the Department contributes a matching payment of up to $50 a month to make up the difference. So even the borrower paying the $10 floor watches their principal fall by at least $50 every month.

Put together, these two rules mean a RAP balance can only move in one direction: down. That is a genuine improvement over PAYE and ICR, where a low earner could pay for a decade and owe more than they started with.

What happens to your SAVE, PAYE, or ICR plan

This is the part that has borrowers anxious, and the timeline matters.

SAVE is finished. After the plan was blocked in court, its hallmark interest-free forbearance ended and interest resumed accruing on SAVE loans on August 1, 2025. Time spent in the SAVE forbearance does not count toward forgiveness. Every month you sit there, your balance grows and your forgiveness clock stands still.

PAYE and ICR are being phased out. Borrowers with loans made before July 1, 2026 keep access to Income-Based Repayment (IBR), which survives the overhaul, and have until July 1, 2028 to choose between RAP, the Tiered Standard plan, or IBR. After that window, the legacy income-driven plans close.

RAP versus IBR — which to choose

For borrowers who still have IBR on the menu, the decision comes down to a few axes.

Dimension	RAP	Income-Based Repayment (IBR)
Income measure	Flat % of total AGI	10–15% of discretionary income
Payment floor	$10/month minimum	Can reach $0 for very low income
Balance growth	Interest waived + $50 principal match	Interest can still capitalize
Forgiveness	360 payments (30 years)	20 or 25 years, depending on loan vintage
Availability	New and existing borrowers	Pre–July 1, 2026 loans only

Read plainly: IBR can produce a lower payment — even $0 — for the lowest earners, and forgives faster (20 or 25 years versus RAP’s 30). RAP wins on balance protection, thanks to the interest waiver and principal match, and it is the only door open to new borrowers. A borrower with very low income and an older loan may still be better off in IBR; a borrower who wants their balance to fall every month, guaranteed, may prefer RAP. Run both estimates against your actual AGI before deciding — and for the mechanics of the older income-driven plans, see our deep dive on IDR plans. If you are a new borrower instead, the real fork is RAP vs the Tiered Standard plan; and for anyone in government or nonprofit work, whether RAP counts toward PSLF is the question that decides everything.

How to enroll and what to do now

There is no separate calculation you can hide from: RAP reads the AGI straight off your federal tax return, so the lever you control is your AGI. Pretax contributions to a 401(k), a traditional IRA, or an HSA lower the AGI that RAP sees, which lowers the payment — the same maneuver that helps on the older plans, and one we cover in reading AGI on Form 1040. Married borrowers have one more lever: filing taxes separately keeps a spouse’s income out of the RAP formula, though it carries a tax cost worth weighing.

The steps themselves are straightforward. Log in at studentaid.gov and use the loan simulator to compare RAP and IBR against your numbers. File or recertify your income so the servicer has a current AGI. If you are leaving SAVE forbearance, submit the application to switch rather than letting the clock run — our step-by-step guide on how to switch from SAVE to RAP walks through the four moves and the 2028 deadline. And if your income has dropped since your last tax return, ask whether you can certify alternative documentation of current income instead of the older, higher figure.

The overhaul was sold as simplification, and in one narrow sense it is: two plans instead of five. But the borrower who treats RAP as a set-and-forget default will overpay. The borrower who manages their AGI, picks deliberately between RAP and IBR, and moves off the dead SAVE plan without delay is the one who comes out ahead. For the wider picture of who services these loans and what is changing in 2026, see our student-loan servicer landscape.