Repayment Assistance Plan (RAP): What Federal Student Loan Borrowers Need To Know

The Repayment Assistance Plan (RAP) became available on July 1, 2026, giving eligible federal student loan borrowers a new income-driven option for repaying their loans. Created under the Trump administration's One Big Beautiful Bill, RAP could change your monthly payment and the amount of assistance you receive for paying down your loan, and it might extend your repayment timeline.

What Is RAP?

RAP is an income-driven repayment plan that bases your payment amount on your adjusted gross income from your most recent tax return. Key features include:

• Tiered monthly payments of 1% to 10% of adjusted gross income (AGI), with a minimum payment of $10

• $50 monthly credit for each dependent claimed on your tax return

• Interest subsidy for accrued interest not covered by your payment

• Principal match to help pay down loan balance

• Loan discharge or forgiveness after 360 qualifying payments over at least 30 years

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How Do RAP Payments Work?

RAP repayment calculations are based on a simple formula: percentage of AGI minus $50 per dependent. 

AGI is your total income after certain adjustments, such as student loan interest or contributions to an individual retirement account (IRA). You'll find it on line 11 of your federal tax return. 

The following table shows the payment percentage for each AGI tier. 

Note that this tier structure can increase your payment by a full 1% with even a small increase in AGI — from $50,000 to $50,001, for example. But RAP credits you $50 for each dependent you claim on your federal tax return.

Here's how a RAP student loan repayment might work for someone with a $65,000 AGI and two dependents.

• A $65,000 AGI falls in the 6% tier. The annual base payment is $3,900 ($65,000 multiplied by 0.06).

• The monthly base payment is $325 ($3,900 divided by 12). 

• The final monthly payment after credit for two dependents is $225 ($325 minus $100).

How Do RAP's Interest Subsidy and Principal Match Work?

Other income-driven repayment plan payments sometimes fail to cover the full amount of interest due, which can cause the principal balances to increase over time. RAP prevents that by subsidizing your interest and matching your principal payment, if necessary, to make sure your balance decreases each time you make an on-time payment. 

The interest subsidy keeps accrued interest from snowballing or being tacked on to your principal. If your RAP payment won't cover the interest due, the government will cover it. 

The principal match is a little different. If you make a full, on-time monthly payment that reduces your principal by less than $50, the government may apply an additional amount to your principal to bring the reduction to $50. That match can be up to $50 per month.

Say your payment is $135, and $15 of it goes toward principal and the other $120 pays interest, but $150 in interest has accrued.

• The interest subsidy covers the other $30 in accrued interest.

• The principal match contributes $35 to reduce your principal by $50.

Be aware that paying more than the amount due on a payment can reduce or eliminate your interest subsidy, principal match or both, for that month. If you want to pay off student loans fast by making an early payment, ask your loan servicer not to advance your due date, and continue making on-time payments.

How Does RAP Compare With Other IDR Plans?

RAP differs from other income-driven repayment plans in that it bases payments on AGI and then credits $50 per dependent, whereas the Income-Based Repayment (IBR) and Pay-as-You-Earn (PAYE) plans base payments on discretionary income. For plans that use this calculation, the U.S. Department of Education (ED) generally calculates discretionary income by subtracting 150% of the federal poverty level for your family size and state from your AGI. 

Payments for borrowers with higher incomes, multiple dependents or both, might be higher with RAP compared to IBR and PAYE plans. You’ll make RAP payments for 30 years instead of 20 or 25 years under IBR or PAYE. However, PAYE is being phased out, and RAP is the only income-driven repayment plan you can request if all your direct loans were disbursed on or after July 1, 2026. Also, RAP payments count toward Public Service Loan Forgiveness.

A married borrower can keep their RAP payment lower by filing taxes separately from their spouse. Just be aware that filing separately disqualifies you for childcare and earned income tax credits and student loan interest deductions.

Who Can Benefit From RAP?

RAP might be the best choice for these borrowers:

• People with low or unpredictable income: The interest subsidy and principal match might keep your payments lower, without the risk of increased debt.

• New grads with little or no income last year: RAP payments are based on the prior year's AGI.

• IBR borrowers who received their first loans before July 1, 2014: These borrowers are paying 15% compared to 10% for more recent borrowers. 

• Borrowers who'll need to switch: When PAYE phases out in 2028, they may need to choose another repayment option.

Here’s a brief example of how RAP compares to PAYE for a borrower with $40,000 AGI and no dependents:

• RAP: $100 per month, calculated by multiplying $40,000 by 3%, then dividing by 12.

• PAYE: $133.83 per month, based on $15,960 poverty guideline. To calculate it, subtract 150% of $15,960 from $40,000. Multiply that result by 10%, then divide by 12.

Who Should Consider Other Options?

Compare income-driven repayment plans carefully to find the best compromise between payment affordability and payoff timeline. Switching to RAP might lower your payment, but it could also stretch repayment out to 30 years, even if previous payments count toward the 360 payments needed for RAP student loan forgiveness.  

Consider the following:

• If you have higher income or a large family, plans based on poverty guidelines often result in lower payments.

• A loan disbursement or student loan consolidation on or after July 1, 2026 can disqualify all of your loans from IBR, PAYE or Income-Contingent Repayment (ICR). ICR, like PAYE, is being phased out in 2028.

Who Isn't Eligible for RAP?

Parent PLUS loans are ineligible for RAP. Direct consolidation loans used to pay off a Parent PLUS loan are also ineligible, even if they paid off the PLUS loan indirectly. That might be the case if you took out a direct consolidation loan to pay off your PLUS loan and then repaid that with a subsequent direct consolidation loan. 

Is RAP Available?

Yes. As of July 1, 2026, RAP is available for direct federal student loans but not Parent PLUS. RAP is the only income-driven repayment option for direct loans taken out or consolidated on or after July 1. However, borrowers with earlier loans may continue using IBR, PAYE and ICR for as long as they remain available.

Should I Switch to RAP?

That's difficult to answer because no loan repayment plan meets the needs of every federal student loan borrower. Confirm your eligibility for RAP, then review this article's sections covering who benefits and who should consider other options. Next, compare plans side-by-side using the Federal Student Aid repayment calculator for your specific loan details and manage your student loan payments.

Key Terms

• Repayment Assistance Plan (RAP): The income-driven repayment plan for federal Direct Loans that launched July 1, 2026, basing payments on your adjusted gross income.

• Income-driven repayment (IDR): A category of federal student loan plans that set your monthly payment based on your income and family size rather than your balance.

• Adjusted gross income (AGI): Your total income after certain adjustments, reported on line 11 of your federal tax return.

• Interest subsidy: A RAP benefit in which the government covers monthly interest your payment doesn't, so unpaid interest isn't added to your balance.

• Principal match: A RAP benefit that puts up to $50 toward your principal when a full, on-time payment reduces it by less than $50.

• Public Service Loan Forgiveness (PSLF): A federal program that forgives your remaining Direct Loan balance after 120 qualifying payments while you work full time for a government or nonprofit employer.

• Discretionary income: The portion of your income above 150% of the federal poverty guideline for your family size, used to set payments on the older income-driven repayment plans.

Sources

• ED: Fact Sheet: The Trump Administration is Making Higher Education More Affordable, Expanding Opportunity, and Simplifying Student Loan Repayment

• Federal Student Aid (FSA): Top FAQs About Income-Driven Repayment Plans

• U.S. Department of Health and Human Services (HHS): Poverty Guidelines

• Internal Revenue Service (IRS): Adjusted gross income

Parts of this article were created with AI assistance. MoneyLion editors reviewed, fact-checked and edited the final version and are responsible for its accuracy.

Photo credit: Jacob Ammentorp Lund/Getty Images/iStockphoto