Student Loan Repayment in 2026: RAP, IBR, and What Changed

Federal student loan repayment changed more between July 2025 and July 2026 than in the previous decade. If you borrowed before July 1, 2026, you keep access to Income-Based Repayment and have until July 1, 2028 to move off the plans being retired. If your first loan was disbursed on or after July 1, 2026, you have exactly two choices: a tiered standard plan or the new Repayment Assistance Plan.

The practical upshot for most borrowers is a single comparison, between Income-Based Repayment and the Repayment Assistance Plan, and that comparison turns on something counter-intuitive. The new plan charges a percentage of your entire adjusted gross income rather than a percentage of income above a poverty threshold. That makes it cheaper for some borrowers and considerably more expensive for others, and it introduces a step structure with cliffs worth knowing about before you file a tax return.

What actually changed, and when

The relevant law is Public Law 119-21, enacted July 4, 2025 and commonly called the One, Big, Beautiful Bill. The Department of Education implemented the repayment provisions in a final rule, Reimagining and Improving Student Education, with an effective date of July 1, 2026.

Three changes matter to borrowers.

The Repayment Assistance Plan exists. The Department’s Dear Colleague Letter GEN-25-04, dated July 18, 2025, confirmed that the plan was created by the Act, to be effective no later than July 1, 2026, and that it counts toward Public Service Loan Forgiveness from launch.

Older income-driven plans are being retired. Under the final rule, Income-Contingent Repayment, Pay As You Earn and the Saving on a Valuable Education plan become unavailable after July 1, 2028. Borrowers on those plans need to move.

Income-Based Repayment got easier to enter. The same Dear Colleague Letter states that the partial financial hardship requirement was eliminated, so borrowers no longer have to demonstrate hardship to qualify. For loans made on or after July 1, 2014 and before July 1, 2026, IBR requires payments of 10 percent of discretionary income with cancellation of any remaining balance after 20 years. Borrowers whose loans predate July 1, 2014 remain on the older IBR terms, 15 percent of discretionary income with cancellation after 25 years.

Also relevant, and often missed: interest resumed accruing on loans sitting in the SAVE plan forbearance from August 1. The Department of Education stated that nearly 7.7 million borrowers were enrolled in SAVE and urged them to transition quickly to a legally compliant repayment plan. Anyone who stopped paying attention during the SAVE litigation has been accruing interest since then.

How the Repayment Assistance Plan calculates a payment

The plan’s mechanics, as published by the federal loan servicing system, are unusual and worth reading slowly.

• For adjusted gross income not exceeding 10,000 dollars, the annual payment is 120 dollars, which is 10 dollars a month.
• Above that, the payment is a percentage of adjusted gross income, rising one percentage point per 10,000 dollar band: 1 percent for 10,001 to 20,000 dollars, 2 percent for 20,001 to 30,000 dollars, and so on, reaching 10 percent for income above 100,000 dollars.
• The calculated amount is reduced by 50 dollars for each dependent claimed on your federal tax return.
• The minimum required payment after that reduction is 10 dollars a month.
• If the monthly payment is less than the monthly interest accrual, the unpaid interest for that month is subsidised rather than added to the balance.
• If a full, on-time payment does not reduce principal by at least 50 dollars, the Secretary of Education makes a matching principal payment so that principal falls by at least the amount paid, capped at 50 dollars.
• The remaining balance is forgiven after 30 years, or 360 months, of qualifying payments.

Two of those features are genuinely good and have no equivalent in older plans. The interest subsidy means a balance cannot grow while you are paying as agreed, which was the central complaint about income-driven repayment for twenty years. The principal match means small payments still reduce the debt rather than disappearing into interest.

The 30-year forgiveness horizon is the cost. IBR forgives at 20 years for post-2014 borrowers. Ten extra years of payments is a large concession for anyone whose balance will not be paid off on its own.

What you will actually pay under RAP

Because the formula is published and simple, the payment can be calculated exactly. The table below applies the published percentages, the 50 dollar per dependent reduction and the 10 dollar floor.

These are arithmetic applications of the published formula rather than quoted statistics, and they ignore any transitional rules a servicer may apply in the first year. Figures are rounded to the nearest dollar.

The band cliffs, which nobody is warning borrowers about

Because the rate applies to all of your adjusted gross income rather than the slice inside each band, crossing a band boundary raises the payment on every dollar, not just the last one. One additional dollar of income can therefore increase your annual payment substantially.

At the top of the schedule, one dollar of extra adjusted gross income raises the annual required payment by 1,000 dollars. That is a marginal rate of 100,000 percent on a single dollar, and it is an artefact of a step formula rather than anyone’s intention.

The practical response is straightforward and legal: anything that lowers adjusted gross income can move you down a band. Traditional 401(k) and traditional IRA contributions, health savings account contributions, and deductible self-employment expenses all reduce adjusted gross income. If your income lands within a few hundred dollars above a 10,000 dollar multiple, an additional pre-tax retirement contribution before year end may pay for itself several times over in reduced loan payments, on top of its own tax benefit. Capturing the full employer match on a 401(k) and funding a health savings account were already worth doing; under RAP they do double duty.

The same logic cuts the other way for married borrowers. RAP uses adjusted gross income, and filing jointly generally combines two incomes into one figure, which can push a household into a much higher band. Married borrowers should run the numbers both ways before choosing a filing status, remembering that filing separately has its own costs in lost credits and deductions. This is one of the narrow cases where the filing decision and the loan decision genuinely interact.

RAP or IBR: how to tell which is cheaper

The structural difference is the whole comparison. IBR charges 10 percent of discretionary income, which is income above a threshold tied to the federal poverty guideline for your family size. RAP charges a lower percentage, but of every dollar of adjusted gross income with no threshold subtracted.

That produces a predictable pattern:

• At low incomes, IBR is usually cheaper or zero. When income is near or below the IBR threshold, the IBR payment can be zero while RAP still charges a percentage of gross income, floored at 10 dollars a month.
• In the middle, it depends on family size. The IBR threshold rises with household size, while RAP gives a flat 50 dollars per dependent. Larger families tend to do better under IBR; single borrowers often do better under RAP.
• At higher incomes, RAP is often cheaper monthly. Ten percent of adjusted gross income is less than 10 percent of discretionary income only in edge cases, but RAP’s lower bands below 100,000 dollars frequently beat IBR for single borrowers.
• On total cost, IBR usually wins for anyone heading toward forgiveness. Twenty years of payments beats thirty, and that difference dominates any monthly saving.

So the decision rule splits on whether you expect to pay the loan off or have it forgiven.

1. If your balance is small relative to your income and you will clear it well before forgiveness, choose the lowest total interest. That usually means the standard plan or the largest payment you can sustain. Forgiveness timelines are irrelevant to you.
2. If you are pursuing Public Service Loan Forgiveness, the forgiveness horizon does not matter either. PSLF still forgives at 120 qualifying payments, and the Department has confirmed RAP payments count toward it from launch. Pick whichever plan gives the lowest monthly payment, because every dollar paid above the minimum is a dollar that will not be forgiven.
3. If you expect to reach the end of an income-driven term with a balance remaining, favour IBR while you still can. Twenty years against thirty is ten years of payments, and eligibility for the pre-July-2026 IBR terms depends on when your loans were made.
4. If all your loans were first disbursed on or after July 1, 2026, the comparison is only RAP against the tiered standard plan. Older income-driven plans are not available to you.
5. Run your own numbers in the Department’s Loan Simulator rather than trusting any table, including the one above. It uses your actual balances, interest rates and family size, which is what determines the answer.

The dates to put in a calendar

The 2028 date is the one that will catch people. Two years sounds comfortable, and it is, until the plan you are on stops existing and your loans default to something you did not choose. Borrowers on ICR, PAYE or SAVE should treat the move as a task with a deadline rather than something to deal with when a letter arrives.

What this means before you borrow

Public Law 119-21 also changed the borrowing side, eliminating Graduate PLUS loans for new borrowers from July 1, 2026 and imposing new annual and aggregate caps on graduate, professional and Parent PLUS borrowing. The current figures are published by Federal Student Aid and are worth checking directly, because they determine how much of a programme’s cost federal lending will cover and therefore how much falls to private loans, which have none of the protections described above.

That changes the arithmetic of graduate study specifically. A 30-year forgiveness horizon and a hard cap on federal borrowing mean the cost of a degree has to be justified by earnings over a longer and less forgiving period than it did two years ago. If you are weighing further study, the payback calculation on a master’s degree is the one to run first, and the answer for marginal programmes got worse. Cheaper credentials deserve a closer look than they used to.

The honest state of this

Nothing about this transition is finished. The final rule took effect in July 2026, servicers are implementing it now, and borrowers in the first cohort on a brand new plan will be the ones who discover the gaps between what the regulation says and what the servicing systems do. Expect billing errors, expect payment counts to be wrong, and keep your own records of every payment and every plan application, because reconstructing a payment history years later against a servicer’s figures is a documented and recurring problem.

It is also fair to say that RAP is a mixed deal rather than a bad one. The interest subsidy and the principal match fix real defects in older plans, and the elimination of the hardship test for IBR removed a genuine barrier. Against that, the forgiveness horizon moved from twenty years to thirty for new borrowers, the step formula creates cliffs that will cost some people hundreds of dollars for no reason, and the simplification came by removing options rather than by improving them.

The one thing within a borrower’s control is paying attention on a schedule: recertify income when asked, check which plan you are actually on, and do not let July 2028 arrive without having chosen. The plans that get assigned by default are never the ones you would have picked.

Where these figures come from

• Public Law 119-21, enacted July 4, 2025
• U.S. Department of Education, Dear Colleague Letter GEN-25-04, July 18, 2025
• U.S. Department of Education, Reimagining and Improving Student Education, Federal Student Loan Program final regulations, Federal Register, May 1, 2026
• Federal Student Aid, Repayment Assistance Plan information
• U.S. Department of Education press release on SAVE plan interest accrual

General information, current as of October 2026, and not personalised financial or tax advice. Repayment rules, thresholds and dates in this area are changing rapidly; verify everything against Federal Student Aid and your servicer before acting.