Federal borrowers may resume temporarily suspending accrued interest on their student loans, but at an additional cost.
The Repayment Assistance Plan (RAP) is set to be introduced on July 1, 2026, replacing existing income-driven repayment plans such as SAVE, PAYE, REPAYE, and ICR. This new plan, enacted under President Trump's "Big, Beautiful Bill," aims to simplify the repayment process and provide more affordable options for student loan borrowers.
Key features of RAP include minimum monthly payments starting at $10, scaling from 1% to 10% of a borrower's adjusted gross income (AGI) based on income brackets. The plan also includes a dependent credit, offering a $50 monthly deduction for each dependent claimed on a tax return, which helps lower monthly payments.
One of the most significant improvements of RAP is its interest treatment. The plan includes subsidies such as unpaid interest forgiveness and a $50 monthly principal match, features that are improvements over some existing plans like Income-Based Repayment (IBR) which do not include such subsidies.
Another notable change is the forgiveness timeline. Loan forgiveness after 30 years of qualifying payments for non-PSLF borrowers is longer than previous plans, but for Public Service Loan Forgiveness (PSLF) participants, forgiveness occurs after 10 years.
RAP's repayment formula is not indexed to inflation, and voluntary payments can be made to reduce or pay off the accruing interest, but they will not count toward student loan forgiveness for income-driven repayment or Public Service Loan Forgiveness.
Eligible borrowers can apply for or recertify under the Income-Based Repayment (IBR), Income-Contingent Repayment (ICR), and Pay As You Earn (PAYE) Repayment Plans as an alternative. It's important to note that RAP will prevent runaway balance growth and mitigate interest accrual for borrowers with a high debt-to-income ratio.
However, the new repayment plan may come at a cost, and borrowers are not required to make payments as interest accrues, but their balances will increase. The Department of Education stated last month that the administration lacks the authority to put borrowers into a 0% interest rate status.
The Biden Administration was accused of forcing taxpayers to foot the bill and leaving borrowers without clear direction on how to legally repay their loans due to the 0% 'litigation forbearance.' A new repayment plan is expected to be launched in the coming months, which may offer some borrowers a way to pause interest accrual again.
In summary, RAP launches July 1, 2026, with a simplified income-driven repayment structure featuring low minimum payments, graduated income percent payments, dependent credits, interest subsidies, and extended forgiveness periods, replacing the current complex set of plans over a two-year transition period through 2028. Borrowers are encouraged to research their options and choose the repayment plan that best suits their financial situation.
A significant change in personal-finance with the introduction of RAP (Repayment Assistance Plan) is the inclusion of student loan forgiveness after 30 years of qualifying payments for non-PSLF (Public Service Loan Forgiveness) borrowers, whereas PSLF participants receive forgiveness after 10 years. Additionally, borrowers can save on their student loan payments with features like a $50 monthly principal match and a dependent credit offering a $50 monthly deduction per dependent. RAP's focus on affordability will provide more options for student loan borrowers, helping to ease the burden of finance.
