Compare the NEW RAP Plan (launching July 2026) against IBR, PAYE, ICR & Standard Repayment. Find the plan that costs you the least.
Refinancing makes sense only if: you have a stable, high income; you do NOT need IDR protections or PSLF; and you can lock in a lower interest rate. Refinancing converts federal loans to private — you lose all federal benefits permanently.
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Check Your Rate →The Saving on a Valuable Education (SAVE) plan was introduced in 2023 as the most generous income-driven repayment plan ever offered to federal student loan borrowers. It promised payments at just 5% of discretionary income for undergraduate loans, an increased poverty-line exemption of 225% of the Federal Poverty Level, and an interest subsidy that prevented balances from growing when payments fell short of accrued interest.
However, multiple states challenged the plan in court, arguing that the Department of Education exceeded its statutory authority. In 2024, federal courts struck down key provisions of the SAVE plan and ultimately blocked the entire program. Borrowers who had enrolled were placed into administrative forbearance, meaning their payments were paused but no progress was being made toward forgiveness.
Over 7 million borrowers were affected by the court decisions. Those in SAVE were automatically placed in forbearance. While this forbearance pauses payments, the time does not count toward IDR forgiveness or PSLF unless borrowers take specific action to switch to another qualifying plan.
The Department of Education offered affected borrowers the option to switch to other existing IDR plans such as IBR, PAYE (for those already enrolled), or ICR. Many borrowers, however, chose to wait for the legislative replacement that had been discussed in Congress.
The One Big Beautiful Bill Act (OBBBA) established the Repayment Assistance Plan (RAP) as the successor to SAVE. Unlike SAVE, RAP was created through legislation rather than executive rulemaking, giving it a stronger legal foundation. RAP launches in July 2026 and will be the primary income-driven repayment option going forward.
If you are currently in SAVE forbearance, you should plan to either enroll in RAP when it becomes available or switch to IBR or ICR in the meantime to ensure your payments count toward forgiveness.
Visit StudLoans.com for the latest updates on RAP enrollment and timeline details.
The Repayment Assistance Plan (RAP) is the new income-driven repayment (IDR) plan established by the One Big Beautiful Bill Act. It replaces the defunct SAVE plan and becomes the primary IDR option for federal student loan borrowers starting July 2026.
RAP uses a graduated payment structure that is unique among IDR plans. Instead of a fixed percentage of discretionary income, payments start low and increase over time:
Discretionary income is calculated as your Adjusted Gross Income (AGI) minus 225% of the Federal Poverty Level for your family size. This threshold is more generous than IBR and PAYE, which use 150% of FPL.
Your monthly RAP payment can never exceed what you would pay on the Standard 10-year repayment plan. This cap protects higher-income borrowers from paying more than they would on a fixed plan.
If your monthly RAP payment is less than the interest accruing on your loans, the government covers the difference. This prevents the dreaded negative amortization where your balance grows even as you make payments.
Unlike the temporary tax-free forgiveness available through 2025, any balance forgiven through RAP after 2025 will be treated as taxable income. This means you need to plan for a potential tax bill in the year your loans are forgiven. Use this calculator to estimate your specific tax exposure.
With multiple income-driven repayment plans available, choosing the right one requires understanding the key differences. Here is how the plans compare across the most important factors.
RAP is generally the best choice for borrowers with lower incomes relative to their loan balances, especially in the early years of repayment. The graduated structure means very low payments initially, which is helpful if you are early in your career. However, if your income is already high and stable, the scaling payments mean RAP may not save you much compared to PAYE or even Standard repayment.
IBR remains a solid option for borrowers who want predictable payments from day one. If you are a post-2014 borrower paying 10% of discretionary income, IBR is comparable to PAYE. For pre-2014 borrowers at 15%, IBR may be more expensive than RAP in most scenarios.
If you are self-employed, your AGI calculation differs from W-2 employees. Business deductions can significantly reduce your AGI and therefore your IDR payments. Learn about W-2 vs 1099 considerations for student loan borrowers.
One of the most overlooked aspects of income-driven repayment is the tax consequence of loan forgiveness. When your remaining balance is forgiven after 20 or 25 years, the IRS treats that forgiven amount as taxable income for that year. This can result in a substantial and unexpected tax bill commonly known as the "tax bomb."
The size of your tax bomb depends on several factors: the amount forgiven, your income in the year of forgiveness, and your marginal tax rate. For example, if you have $80,000 forgiven and your marginal rate is 22%, you could owe approximately $17,600 in additional federal taxes that year, plus any applicable state income taxes.
The temporary tax exemption for forgiven student loans expired at the end of 2025. All IDR forgiveness events occurring in 2026 and beyond will be taxable. Visit ReturnMyTax.com for more on student loan tax planning.
Public Service Loan Forgiveness (PSLF) remains one of the most valuable programs available to federal student loan borrowers. If you work for a qualifying employer (government agencies, 501(c)(3) nonprofits, or certain other public service organizations), your remaining balance is forgiven after just 10 years (120 qualifying monthly payments) of repayment on an IDR plan. Unlike IDR forgiveness, PSLF forgiveness is tax-free.
RAP qualifies for PSLF. This is a particularly powerful combination because RAP payments start at just 1% of discretionary income. A PSLF-eligible borrower on RAP would make very low payments for the first several years, then have whatever remains forgiven tax-free after year 10.
PSLF covers a broader range of employers than many borrowers realize: federal, state, and local government; public schools and universities; 501(c)(3) nonprofit organizations; the military; public hospitals; law enforcement; and many more. Use the PSLF Help Tool on studentaid.gov to verify your employer.
The SAVE plan was struck down by federal courts in 2024 after several states challenged the Department of Education's authority to create the plan through rulemaking. Borrowers enrolled in SAVE were placed in administrative forbearance. The RAP plan, created through legislation via the One Big Beautiful Bill Act, launches July 2026 as the replacement.
RAP is the new income-driven repayment plan launching July 2026. It features graduated payments starting at 1% of discretionary income in year 1, increasing by 1% each year up to a maximum of 10%. It uses 225% of the Federal Poverty Level as the income threshold and includes an interest subsidy to prevent balance growth.
Yes. The temporary tax exemption for forgiven student loan debt expired at the end of 2025. Any balance forgiven through IDR plans (including RAP) in 2026 and beyond is treated as taxable income. PSLF forgiveness remains tax-free regardless of the year.
Yes. Public Service Loan Forgiveness still applies to all income-driven repayment plans, including RAP. After 120 qualifying monthly payments (10 years) while working for a qualifying employer, your remaining balance is forgiven completely tax-free.
Only consider refinancing if you have a stable high income, do not need IDR or PSLF benefits, and can secure a significantly lower interest rate. Refinancing converts your federal loans to private loans, permanently losing access to income-driven repayment, forgiveness programs, and federal forbearance protections.
Under RAP, discretionary income equals your Adjusted Gross Income (AGI) minus 225% of the Federal Poverty Level for your family size. For a single person in 2026, the FPL is approximately $15,650, so 225% would be about $35,213. Only income above that threshold counts toward your payment calculation.
IBR (Income-Based Repayment) remains open to all eligible borrowers with a partial financial hardship. PAYE (Pay As You Earn) was closed to new borrowers in 2024, meaning only borrowers who were already enrolled can continue on PAYE. ICR (Income Contingent Repayment) also remains available.
The tax bomb occurs when your remaining student loan balance is forgiven after 20 or 25 years on an IDR plan. The forgiven amount is added to your taxable income for that year, potentially creating a large unexpected tax bill. You can prepare by saving monthly in a dedicated account, exploring the insolvency exception, or consulting a tax professional well in advance.
If you are in SAVE forbearance, you have several options: wait for RAP enrollment to open in July 2026, switch to IBR or ICR in the meantime to resume qualifying payments, or if you are PSLF-eligible, switch immediately to ensure your payments count toward the 120 required. Time in forbearance does not count toward IDR or PSLF forgiveness.
If you file taxes jointly with your spouse (MFJ), both incomes are included in your AGI for IDR payment calculations. This can significantly increase your payment compared to filing separately. Some borrowers choose Married Filing Separately to lower their IDR payments, but this may increase their overall tax burden. Run both scenarios in the calculator above to compare.
The RAP plan launches July 2026. Get notified when enrollment opens, plus tips to minimize your total repayment cost.
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