What To Know About the New Repayment Assistance Plan for Student Loans

Student loan debt is a major source of stress for millions, with 93% of private sector workers and 89% of public sector workers reporting their debt levels were problematic, according to a MissionSquare Research Institute survey.

Many students who were stressed about their debt reportedly missed payments and expected to take decades to become debt-free. Unfortunately, this is common, as student loans can be expensive and complicated to repay. Change is coming, though.

“The ‘One, Big, Beautiful Bill Act’ is addressing concerns of many students regarding their student loans,” says Steve Azoury, a chartered financial consultant (ChFC) and owner of Azoury Financial. “The idea is to have a simple repayment option based on primary income and employment in order to make life easier for those with student loan debt.”

To accomplish this goal for federal student loans, a new Repayment Assistance Plan is being put in place starting in 2026 to replace multiple existing plans. Here's what you need to know about RAP, along with how it compares with other repayment options.

Current student loan refinance rates

What is the Repayment Assistance Plan (RAP)?

Among other things, the “One, Big, Beautiful Bill Act” enacted in July 2025 establishes a new repayment system for federal student loans distributed on or after July 1, 2026. Azoury explains that the new plan will replace older, more complicated options, including the Saving on a Valuable Education Plan (SAVE), Pay As You Earn (PAYE), and Income-Contingent Repayment (ICR). 

While it shares its name and abbreviation with the Canadian Repayment Assistance Plan, the RAP program in the U.S. is a repayment option for federal student loans that’s administered by the U.S. Department of Education and federal loan servicers. 

RAP aims to make repayment simpler and more efficient, Azourney says. It will ensure affordability by basing payments on income and family size, while also protecting borrowers from their balance growing if payments are too low to cover interest costs or to make a meaningful impact on principal reduction.

When does the Repayment Assistance Plan take effect?

RAP will become available to new borrowers starting July 1, 2026. 

If you apply for student loans and borrow after that date, RAP will be one of only two repayment options available to you. They include:

• The Standard Repayment Plan
• RAP

For borrowers who already had student loans before that date, other repayment plans will remain available, including Income-Based Repayment. However, if you’re repaying your loans on the SAVE, PAYE, or ICR Plans, you’ll be moved to RAP by July 1, 2028. 

And, if you take out any new student loans after July 1, 2026, even if you have existing debt, all of your loans must be repaid under the same plan. This means you’ll have to transition over to RAP or the standard plan after getting your new loan. 

If you don't borrow again after July 1, 2026, and want to be grandfathered into IBR, you’ll need to enroll in that plan by June 30, 2028. Otherwise, you’ll lose access, and RAP will be your only income-driven repayment (IDR) option.

How RAP works

Here's how RAP works:

• Monthly payments: Monthly payments are between 1% and 10% of your adjusted gross income, with the percentage based on your earning level. If you earn $10,000 per year or less, you’ll have a $10 flat payment. 
• Dependents: If you have dependents, $50 per dependent will be deducted from your monthly payment.
• Interest subsidy: If your payment doesn't cover interest, the unpaid interest won’t be added to your loan balance. Note that RAP does not offer a lower interest rate; your rate is set based on when you borrowed and the type of loans you have. 
• Matching payments: If your monthly payment reduces your principal balance by less than $50, RAP makes a matching principal payment to ensure your balance declines by at least $50 per month
• Income verification and adjustments: Your income will be verified each year under RAP, and your monthly payment amount will change if your income changes significantly.
• Repayment term: Loan forgiveness will become available after 30 years of qualifying payments. 

The changes made in the “One, Big, Beautiful Bill Act” also affect hardship options for borrowers struggling with student loans. 

For Direct Loans made on or after July 1, 2027, it eliminates both economic hardship and unemployment student loan deferment. Discretionary student loan forbearance is also limited to no more than nine months during any 24-month period.

How RAP differs from previous income-driven repayment plans

RAP aims to simplify and streamline the repayment plans available to student loan borrowers, but it differs from those other plans in important ways. Here's how RAP compares with other programs. 

Repayment costs will differ under RAP compared with previous repayment programs. 

“Monthly payments under RAP are smaller than under IBR for borrowers with low and moderate income, generally less than $75,000 in income, but the total payments under RAP are higher than under IBR,” advises Mark Kantrowitz, a student aid expert and author of several books on college financing.

Who qualifies for RAP?

RAP will be available to new borrowers with federal Direct Loans disbursed after July 1, 2026. 

To qualify for RAP, you must have Direct Subsidized or Direct Unsubsidized Loans, grad PLUS loans, or a Direct Consolidation Loan that was not used to pay off parent PLUS loans. 

Pros and Cons of the new Repayment Assistance Plan 

There are both advantages and disadvantages of the new plan.

RAP benefits

• RAP simplifies the process of choosing a student loan repayment plan.
• Your balance won't grow under RAP while you’re making monthly payments.
• There is a matching principal payment to help ensure the amount you owe declines over time.

RAP drawbacks and limitations

• Borrowers will have fewer options to customize their repayment plan, and many will face higher monthly payments.
• The timeline to forgiveness is longer under RAP than other income-driven plans.
• The plan includes a $10 minimum payment, while previous income-driven plans allowed $0 monthly payments.

How to apply for RAP

RAP will be available as a repayment option after July 1, 2026. 

If you’re enrolled in SAVE, PAYE, or ICR and you do not sign up for Income-Based Repayment prior to July 1, 2028, you will automatically be enrolled in the RAP program. 

When you take out new student loans, you’ll need to select the RAP plan with your loan servicer to avoid being automatically enrolled in the Standard Repayment Plan. 

While the application for RAP is not yet available, the process for enrollment is expected to be similar to enrolling in current IDR plans. You’ll likely be asked to verify your income and specify your family size. You’ll also be required to recertify your income each year or confirm the process of allowing automatic verification with the IRS. 

RAP and loan forgiveness

Student loan forgiveness programs allow borrowers to eliminate some of their federal student loan debt. Borrowers repaying their loans under RAP will be eligible for forgiveness after 30 years. 

The “One, Big, Beautiful Bill Act” also preserves access to Public Service Loan Forgiveness, and payments made under the new RAP plan will be considered eligible payments. 

“Both IBR and RAP qualify for Public Service Loan Forgiveness (PSLF),” advises Kantrowitz. 

The timeline and rules for forgiveness remain mostly unchanged, and you can qualify for PSLF after 120 qualifying on-time payments on either the IBR or RAP Plan. 

The Department of Education has indicated that PSLF forgiveness could be denied for those who work for organizations participating in “unlawful activities,” which has resulted in some concern over what the definition of “unlawful” will be. 

What borrowers with existing loans should know

Borrowers will need to adjust to major changes to their federal student loan repayment options because of these changes. 

While you may remain in your current payment plan temporarily, legacy plans are being phased out between July 2026 and July 2028. 

You should take action before July 1, 2028, if you’re on an income-driven plan and want to enroll in Income-Based Repayment (IBR). Otherwise, you’ll be transitioned to RAP, with no option to change to IBR. 

You should carefully evaluate your payments under IBR and RAP to determine how each program affects monthly payments and total costs over time, and to ensure you select the right plan for you.