On July 4th, President Donald Trump signed a comprehensive domestic policy law known as the 'Big Beautiful Bill.' This nearly thousand-page legislation aims to reshape federal student financial aid programs, with a focus on reducing taxpayer subsidies for college degrees. A significant change is the introduction of the Repayment Assistance Plan (RAP), which replaces previous income-driven repayment plans. While RAP is designed to streamline repayment options, it presents challenges for borrowers due to its reduced flexibility and potential cost implications.
Starting July 1, 2026, new federal loan borrowers will have only two repayment options: a Standard Plan or the RAP. Popular plans like SAVE, PAYE, and ICR will be phased out by July 1, 2028, leaving IBR and RAP as the sole income-driven options for certain borrowers. Notably, if a borrower takes a new loan after this date, all their loans become ineligible for IBR, further limiting repayment flexibility.
The RAP introduces several changes that make it less adaptable and potentially more burdensome: Payments are calculated as a fixed percentage of the borrower's Adjusted Gross Income (AGI), ranging from 1% to 10%. Unlike previous plans, RAP does not consider inflation, potentially making payments harder to manage over time. Additionally, RAP eliminates the option for $0 payments, setting a minimum payment of $10 per month, even for those with very low incomes.
Impact on Families and Loan Forgiveness
RAP's calculation only considers dependent children for payment reductions, offering a $50 deduction per child. This could result in higher payments for families without children but with other dependents. Furthermore, RAP extends the loan forgiveness period to 30 years, compared to the 20 or 25 years under previous plans. This longer repayment period can increase the total loan cost, despite potentially lower monthly payments for some borrowers.
An analysis by the Student Borrower Protection Center indicates that RAP is more expensive than the SAVE plan for all borrowers, regardless of income or family size. Only the existing ICR plan is consistently more costly than RAP. Additionally, Parent PLUS loans are ineligible for RAP. Parents must consolidate these loans before July 1, 2026, to access the IBR plan; otherwise, the Standard Plan remains their only option.
The reduced flexibility and increased burden of federal loans have raised concerns among experts. The stricter repayment options may make higher education less affordable, pushing students and families toward private student loans. These loans carry higher interest rates, fewer protections, and do not qualify for forgiveness programs like Public Service Loan Forgiveness (PSLF). This shift could deter individuals from pursuing advanced studies, exacerbating shortages in critical professions.
Advice for Existing Borrowers
Existing federal loan borrowers should assess their current situation. Those enrolled in SAVE, PAYE, or ICR will be automatically transferred to RAP by July 1, 2028, unless they take action. To avoid RAP, borrowers can switch to the IBR plan before this date, allowing them to remain in an income-driven plan with potentially more favorable terms than RAP. Proactive steps are essential to navigate these changes effectively.
