5 Facts About the New 2026 Student Loan Repayment Assistance Plan (RAP)

The 2026 Repayment Assistance Plan (RAP) is a new federal student loan repayment option designed to cap monthly payments between 1% and 10% of a borrower’s income while preventing unpaid interest from increasing the total loan balance.

Starting July 1, 2026, the RAP is expected to become a primary income-driven repayment option for federal student loan borrowers under proposed federal reforms, gradually replacing several older repayment programs.

Below are the five most important facts students and graduates should understand.

1. How Much Will You Actually Pay Each Month?

Unlike older repayment plans that excluded a large portion of income, the RAP calculates payments using your Adjusted Gross Income (AGI).

Your payment increases as your income rises:

• AGI of $10,000 or less:
  You pay a flat $120 per year ($10 per month).
• Higher incomes:
  Payments gradually increase.
• AGI above $100,000:
  Monthly payments are capped at 10% of income.

This structure ensures affordability at low income levels while maintaining proportional payments for higher earners.

2. The “No Compound Interest” Protection

One of the most significant features of the RAP is its interest subsidy.

If your required monthly payment does not fully cover the interest that accrues on your loan:

• The federal government waives the remaining unpaid interest
• Your loan balance does not grow over time

This prevents the common problem of borrowers owing more than they originally borrowed, even when making consistent payments.

3. RAP vs. SAVE: Key Differences Explained

While the RAP simplifies repayment, it changes how monthly obligations are calculated compared to the previous SAVE plan.

The RAP favors simplicity and predictability, though it may result in higher minimum payments for some borrowers.

4. Who Is Eligible for the RAP?

• Starting July 1, 2026:
  The RAP will be available to borrowers with Direct Federal Student Loans.
• By July 1, 2028:
  It is expected to become the standard income-driven option for new borrowers as programs such as PAYE and SAVE are gradually phased out.

Borrowers already enrolled in older plans may be given the option to transition voluntarily.

5. Verified Tax Benefits for 2026

For the 2026 tax year, the IRS allows borrowers to deduct up to $2,500 in student loan interest.

Key details:

• This is an above-the-line deduction, meaning you can claim it without itemizing.
• Eligibility depends on Modified Adjusted Gross Income (MAGI):

Income Phase-Out Limits

• Single filers:
  Phase-out begins at $85,000 and ends at $100,000
• Married filing jointly:
  Phase-out range is $175,000 to $205,000
• Restriction:
  This deduction is not allowed for those filing Married Filing Separately

Expert Note from Shahid | MPhil Accounting & Finance
While the $10 minimum payment under RAP may appear attractive, the forgiveness timeline can extend up to 30 years. Borrowers should carefully evaluate long-term interest savings versus repayment duration before committing to a lower monthly payment.