Repayment Assistance Plan (RAP): Payments, Forgiveness, and Transition

The Repayment Assistance Plan, or RAP, is a new income-driven repayment option for federal student loans that becomes available on July 1, 2026. It sets your monthly payment as a sliding percentage of your total adjusted gross income, forgives any remaining balance after 30 years of qualifying payments, and gradually replaces most of the older income-driven plans. Created by the Working Families Tax Cuts Act, it will be the only income-driven option for anyone borrowing after July 1, 2026, and current borrowers can switch into it voluntarily.

Who Can Enroll in RAP

RAP is open to borrowers with eligible Direct Loans, including Direct Subsidized and Unsubsidized Loans and Direct PLUS Loans issued to graduate or professional students. Direct Consolidation Loans qualify too, with one carve-out: any consolidation loan that includes a Parent PLUS Loan is excluded.¹

That’s a real change. Under the older rules, Parent PLUS borrowers could consolidate and then use Income-Contingent Repayment. That door is closed for RAP. Parent PLUS borrowers who want a structured repayment option will need the new Tiered Standard Plan instead.²

Loans in default generally need to be rehabilitated or consolidated before you can enroll.

How Your Monthly Payment Is Calculated

RAP throws out the discretionary-income formula the older plans used. Instead, it applies a sliding percentage directly to your total AGI, rising by one point for every $10,000 of income and capping at 10%.¹ There is no $0 payment; the floor is $10 per month.

AGI of $10,000 or less: $10 per month
$10,001 to $20,000: 1% of AGI
$20,001 to $30,000: 2% of AGI
$30,001 to $40,000: 3% of AGI
$40,001 to $50,000: 4% of AGI
$50,001 to $60,000: 5% of AGI
$60,001 to $70,000: 6% of AGI
$70,001 to $80,000: 7% of AGI
$80,001 to $90,000: 8% of AGI
$90,001 to $100,000: 9% of AGI
Above $100,000: 10% of AGI

To get your monthly figure, take the applicable percentage of your AGI and divide by 12. A single borrower earning $45,000 falls in the 4% tier, which works out to $1,800 a year, or $150 a month. No slice of income is shielded by a poverty-guideline exemption before the percentage applies.

Filing Status and Married Borrowers

If you’re married and file jointly, both spouses’ incomes combine on the return, and the full household AGI feeds the sliding scale. Filing separately means only your individual income is counted.³

What Happens to Your Interest and Balance

RAP’s interest treatment is one of its most favorable features. If your monthly payment is smaller than the interest accruing that month, the government waives the difference rather than adding it to your balance. Owe $200 in monthly interest but pay only $10? The remaining $190 is canceled, not capitalized.⁴

On top of that, RAP applies a $50 monthly principal credit whenever your payment is less than the interest accrual. So your balance can actually go down each month even when your payment alone wouldn’t cover interest. For borrowers in medical residency or other low-earning stretches early in a career, this combination prevents the runaway balance growth that hit borrowers on older plans. The subsidy continues as long as you make your payments on time and stay enrolled.

Forgiveness After 30 Years

Any balance remaining after 360 qualifying monthly payments is forgiven. That’s a flat 30 years, and it applies the same way to undergraduate debt, graduate debt, and small balances alike.¹

That’s a real departure from the vacated SAVE plan, where undergraduate borrowers with balances under $12,000 could reach forgiveness in as few as 10 years, with time added for larger balances. RAP has one clock for everyone. A qualifying payment is one made in full and on time while enrolled, and the Department of Education tracks progress through a payment counter in your StudentAid.gov account.

Public Service Loan Forgiveness Still Applies

PSLF remains available under RAP. If you work full-time for a qualifying government or nonprofit employer, your balance is forgiven after 120 qualifying payments, which is 10 years.⁴ A public-sector worker earning $35,000 would pay roughly $87.50 a month under RAP’s 3% tier and reach full discharge in a decade instead of three.

The Tax Bill When Loans Are Forgiven

This is the part most borrowers overlook. Starting in 2026, student loan balances forgiven under income-driven repayment are treated as taxable income. The temporary federal exemption created by the American Rescue Plan Act expired on December 31, 2025, and any debt discharged after that date under RAP or another IDR plan triggers a tax bill.⁵

If $50,000 is forgiven at year 30, the IRS treats that $50,000 as income for the year of discharge. Your servicer will send a Form 1099-C in January or February of the following year, and your tax liability depends on your bracket that year.

Some discharges are still tax-free. PSLF forgiveness is not taxable. Neither are discharges due to death, total and permanent disability, or Teacher Loan Forgiveness.⁵

If your total debts exceed the fair market value of everything you own at the time of forgiveness, you may qualify for the insolvency exclusion, filed on Form 982. The excludable amount is capped at the amount by which you’re insolvent. If you owe $80,000 across all debts and hold $60,000 in assets, you’re insolvent by $20,000, so up to $20,000 of forgiven debt could be excluded. The IRS’s own free tax preparation programs consider this out of scope, so plan on getting professional help if you need to claim it.⁵

Enrolling and Recertifying Each Year

Applications open through StudentAid.gov on July 1, 2026. You’ll need your most recent federal tax return to identify your AGI, which sits on line 11 of Form 1040.⁶ You’ll also enter household size, Social Security numbers for family members, and your tax filing status. The system cross-checks against IRS records, so the figures need to match.

During the application you can consent to automatic IRS data retrieval. Granting consent lets the Department of Education pull your income from the IRS each year for recertification, so you don’t have to resubmit documentation manually. The consent stays active until you pay off the loan, leave the plan, or revoke it, and it also triggers automatic re-enrollment in an IDR plan if your account becomes more than 75 days delinquent.⁷

Paper applications are accepted and go to your loan servicer. After submission, you’ll get a confirmation number and email receipt, and your account may sit in administrative forbearance while the change processes.

If you didn’t consent to IRS data retrieval, you’re on the hook for submitting updated income documentation every year. Missing the recertification deadline can push your payment well above the tier amount or shift you off the plan entirely. Set a calendar reminder.

Transition Timeline for Current IDR Borrowers

If you’re already in an income-driven plan, the switch to RAP happens in stages:

July 1, 2026: RAP opens. New borrowers after this date have RAP as their only income-driven option. Existing borrowers can switch voluntarily or stay put.
July 1, 2027: No new enrollments in PAYE.
July 1, 2028: PAYE and ICR are eliminated. Borrowers still in those plans are moved to IBR or RAP.

IBR is the older plan that survives. If you’re in IBR and it’s working, no deadline forces you out, but run the numbers against RAP because the formulas are different.²

The SAVE plan no longer exists. A federal court vacated the SAVE Final Rule in March 2026, and the roughly 7.4 million borrowers who were in SAVE administrative forbearance need to move to a different plan. Every qualifying payment you made under SAVE still counts toward forgiveness in whatever plan you move to.

The Tiered Standard Plan Alternative

RAP is not the only new option. The Working Families Tax Cuts Act also created a Tiered Standard Plan with fixed monthly payments and repayment terms set by balance:²

Under $25,000: 10-year term
$25,000 to under $50,000: 15-year term
$50,000 to under $100,000: 20-year term
$100,000 or more: 25-year term

Payments are fixed rather than income-based, so it functions like a traditional installment loan. It’s the primary option for Parent PLUS borrowers, who can’t use RAP. Payments on the Tiered Standard Plan qualify for PSLF when you’re on the 10-year term. If your income is high enough that a RAP payment would exceed a standard payment, the Tiered Standard Plan usually costs less in total interest over the life of the loan.

1
Congressional Research Service. The Repayment Assistance Plan (RAP) in P.L. 119-21, the FY2025 Budget Reconciliation Act
2
U.S. Department of Education. U.S. Department of Education Announces Next Steps for Borrowers Enrolled in the Unlawful SAVE Plan
3
Federal Student Aid. 4 Things to Know About Marriage and Student Loan Debt
4
Fidelity. What is the Repayment Assistance Plan?
5
Taxpayer Advocate Service. What to Know about Student Loan Forgiveness and Your Taxes
6
Internal Revenue Service. Topic No. 456, Student Loan Interest Deduction
7
Federal Student Aid Partners. Guidance on Consent for FAFSA Data Sharing and Automatic IDR Certification