Repayment Assistance Plan (RAP)

The Repayment Assistance Plan is a federal income-based student loan repayment plan established by 20 USC 1087e(q), which directs that "beginning on July 1, 2026, the Secretary shall carry out an income-based repayment plan (to be known as the 'Repayment Assistance Plan')." Its payment is calculated from an annual base payment tied to the borrower's adjusted gross income, divided by twelve and reduced by $50 for each dependent, with a floor of $10 a month. The regulation implementing it is at 34 CFR 685.209, which files RAP among the income-driven repayment plans even though the statute calls it income-based. Both usages are correct in their own document, and neither is a drafting error.

The design point that separates RAP from its predecessors is the base of the percentage. Income-Based Repayment and Pay As You Earn charge a percentage of the borrower's income above 150 percent of the federal poverty guideline, so income below that line is protected and never enters the calculation. RAP charges a percentage of adjusted gross income from the first dollar, on a sliding scale, with no protected floor. The protection RAP offers instead is a low percentage at low incomes, a $10 monthly minimum, and the two balance assistance features below.

That trade runs in different directions for different borrowers. A borrower with a low income and a large balance can pay less under RAP than under a poverty-threshold plan, because the percentage is small and the interest waiver stops the balance from growing. A borrower with a middle income and a modest balance may pay more, because there is no protected slice of income and the percentage applies to the whole of it. Which is true in a given case depends on income, family size, balance, and interest rate together, and the answer changes as any of them move.

The base payment schedule steps rather than slopes, and the steps are worth understanding before comparing plans. Each $10,000 band of adjusted gross income moves the rate up a full percentage point, applied to the entire income rather than to the amount inside that band. A dollar of extra income that crosses a band boundary therefore raises the payment by a step, not by a sliver. This is the opposite of how the income tax brackets work, where a higher rate applies only to the income above the threshold, and readers who reason by analogy from tax brackets will get RAP wrong.

None of RAP's dollar figures carry an inflation adjustment. The $120 annual base payment, the $10,000 income bands, the $50 per-dependent reduction and the $10 minimum are all written into 20 USC 1087e(q)(4)(B), and the $50 principal match into (q)(2)(B), with no indexing provision attached to any of them. Unless Congress amends the statute they will stay exactly where they are, which means their real value falls every year.

The monthly payment is a three-step calculation, and the first step is the one people get wrong.

Step one, the base payment, is an ANNUAL figure. 20 USC 1087e(q)(4)(B)(iv) sets it from adjusted gross income: not more than $10,000 gives a base payment of $120; more than $10,000 up to $20,000 gives 1 percent of adjusted gross income; and the rate rises one percentage point for each additional $10,000 band, reaching 10 percent for income above $100,000.

Step two divides by twelve and subtracts for dependents. The applicable monthly payment is the base payment divided by 12, minus $50 for each dependent as defined in IRC 152. A married borrower who files separately counts only the dependents claimed on that return, and that borrower's adjusted gross income excludes the spouse's.

Step three applies the floor and the ceiling. A result below $10 becomes $10. A final payment is capped at whatever balance remains.

A hypothetical, using only the statutory percentages. Two borrowers, neither with dependents. One has adjusted gross income of $20,000, which sits at the top of the 1 percent band, so the base payment is $200 and the monthly payment is $16.67. The other has adjusted gross income of $20,001, which falls into the 2 percent band, so the base payment is $400.02 and the monthly payment is $33.34. One dollar of income roughly doubles the payment. The same step appears at every $10,000 boundary, and it is a real feature of the schedule rather than an artifact of the example.

Two balance assistance features then run alongside the payment, and they do different things. The interest subsidy at 20 USC 1087e(q)(2)(A) provides that where an on-time payment is not enough to cover the month's accrued interest, the unpaid interest "shall not be charged to the borrower." The matching principal payment at (q)(2)(B) applies where an on-time payment reduces principal by less than $50. The Department reduces principal by the lesser of $50 or the total the borrower paid that month, minus whatever already went to principal. It tops the month's principal reduction up toward $50; it does not add $50 on top. Payments are applied in the order interest, then fees, then principal, and any principal left unpaid is deferred rather than capitalized.

Forgiveness comes after 360 qualifying monthly payments, and the definition of qualifying is broader than "months paid on RAP." Under 20 USC 1087e(q)(1)(F) it also reaches on-time payments under the new standard plan, payments under any other plan at least equal to a ten-year standard payment, payments under the statutory income-based plan including a $0 minimum, income-contingent payments made before July 1, 2028, months in an economic-hardship deferment, and months that ended before July 4, 2025 in the litigation-related forbearance. The borrower must have participated in RAP and their most recent payment must have been made under it.

One penalty is worth knowing about. A borrower who is asked for income information and does not supply it pays the ten-year standard amount until they do.

Pros

• The interest waiver means an on-time payer's balance cannot grow, which removes the feature borrowers found most demoralizing about earlier income-driven plans.
• The $10 monthly minimum and the principal match mean even a very small payment moves the balance down.
• The terms are statutory rather than regulatory, so they are harder to change than a plan built on agency rulemaking, and they have not been the subject of the litigation that stopped an earlier plan.
• Payment is set from income and family size, so it falls when income falls.

Cons

• The percentage applies to all adjusted gross income with no protected threshold, which can make RAP more expensive than a poverty-threshold plan for some middle incomes.
• The band structure creates steps, so a small raise across a $10,000 boundary can raise the payment by a full percentage point of total income.
• Thirty years is longer than the 20 or 25 years several of the plans it replaces offered, so a borrower who would have reached forgiveness earlier under an older plan may wait longer.
• None of the dollar figures are indexed, so the $50 per-dependent reduction and the $10 floor lose real value every year.
• Forgiveness at the end of RAP is not the same tax question as public service forgiveness. See the FAQ below.