Students taking out federal loans today are entering a repayment system that looks very different from the one their older siblings and friends used. Starting with loans first disbursed on or after July 1, 2026, borrowers have just two repayment choices, a new standard plan and the Repayment Assistance Plan, and understanding how RAP works before you borrow can help you decide how much to take on and how you will manage payments after graduation.

Why the Repayment System Changed

The federal budget legislation passed in 2025 overhauled student loan repayment in an effort to simplify a system that had grown to include many overlapping plans. Under the new rules, loans first disbursed on or after July 1, 2026 can only be repaid through a standard repayment plan or the Repayment Assistance Plan, known as RAP. Several existing income-driven plans, including SAVE, PAYE, and ICR, are being phased out, with borrowers in those plans required to move to another option by July 1, 2028. Borrowers with loans from before July 2026 generally have more choices during the transition, including access to RAP and a modified version of Income-Based Repayment. For new students, however, RAP is the only income-based option available, which makes it the plan to understand if you expect your early-career income to be modest relative to your debt.

How RAP Calculates Your Monthly Payment

RAP sets your monthly payment as a percentage of your adjusted gross income, the figure from your federal tax return. Instead of using a single flat percentage, the plan uses a sliding scale, with lower-income borrowers paying a small percentage and the percentage rising in steps as income increases, up to 10 percent of AGI for higher earners. Your annual payment is divided into monthly amounts, and every borrower makes at least a small minimum payment each month, even at very low income levels, rather than paying zero. The plan also reduces your monthly payment by a set amount for each dependent you support, which can make a meaningful difference for borrowers with children. Because payments are based on income rather than loan balance, RAP can keep payments manageable during early career years when salaries are lower, then rise as your earnings grow. Your income is recertified regularly, so payments adjust over time.

Interest Help and Principal Protection

One of the biggest frustrations borrowers faced under older income-driven plans was watching their balances grow even while making every payment, because their monthly payment did not cover all the interest. RAP is designed to address that problem. If your required payment does not cover the interest that accrues in a given month, the unpaid interest is waived rather than added to your balance, as long as you make your payment on time. RAP also includes a principal matching feature: if your payment reduces your principal by less than a set amount, the government contributes extra to help ensure your principal balance goes down each month you pay. In practical terms, this means that borrowers who stay current on RAP should see their loan balance decline over time instead of growing, which is a significant improvement over the experience many borrowers had in the past.

How Long Repayment Lasts and When Forgiveness Applies

Under RAP, any remaining balance can be forgiven after 30 years of qualifying payments, which is a longer timeline than some older income-driven plans offered. That long horizon is an important reason to borrow carefully, since relying on eventual forgiveness means three decades of payments. For many borrowers, steady income growth will mean their loans are paid off well before forgiveness would apply. Borrowers working in qualifying public service jobs, such as government or eligible nonprofit employment, may be able to combine RAP with Public Service Loan Forgiveness, which forgives remaining eligible balances after 10 years of qualifying payments while working full-time for a qualifying employer. If you are considering a career in public service, teaching, or nonprofit work, understanding how RAP and PSLF fit together can be one of the most valuable parts of your long-term financial plan.

RAP vs. the New Standard Plan

The other option available for new loans is the new standard repayment plan, which sets fixed monthly payments over a period that depends on how much you owe. Smaller balances are repaid over shorter terms, such as 10 years, while larger balances can be stretched over longer terms of up to 25 years. Fixed payments are predictable and can lead to paying less total interest if you can afford them, especially on a shorter term. RAP, by contrast, offers flexibility when income is lower or uncertain, with payments that rise and fall with your earnings. Borrowers expecting high starting salaries relative to their debt may prefer the standard plan, while those entering lower-paying fields, planning to pursue public service, or expecting irregular income may benefit more from RAP. You can generally switch between eligible plans, so your choice at graduation does not have to be permanent.

Who Cannot Use RAP

RAP is available for federal loans borrowed by students for their own education, including both undergraduate and graduate loans. It is not available for Parent PLUS loans. New Parent PLUS loans disbursed on or after July 1, 2026 are limited to the standard repayment plan, which means parents borrowing on behalf of a child do not have access to income-based payments for those new loans. That distinction makes it especially important for families to weigh carefully whether the student or the parent should be the one borrowing, and how much. Private student loans are also not eligible for RAP or any federal repayment plan, since they are governed by the lender’s own terms. Before accepting any loan, confirm which type it is and what repayment options will be available.

Making RAP Work for You

To get the most out of RAP, start by keeping your contact information up to date with your loan servicer and making sure you know who your servicer is before repayment begins. Recertify your income on time each year, since missing recertification can lead to higher payments. File your taxes carefully, because your adjusted gross income directly affects your payment, and contributions to pre-tax retirement accounts or health savings accounts can lower AGI and, in turn, your RAP payment. Make every payment on time to keep the interest waiver and principal matching benefits working in your favor. If your income increases significantly, compare RAP with the standard plan to see which costs less overall. Using the loan simulator on the Federal Student Aid website can help you estimate payments under different plans based on your expected salary and debt.

Borrowing With Repayment in Mind

The most important lesson of the new repayment system is that decisions about repayment begin before you sign your first loan. Estimate what your monthly payment would be under RAP and the standard plan based on realistic starting salaries in your field, and use those estimates to decide how much you can comfortably borrow. Prioritize scholarships, grants, work-study, and employer assistance to reduce the amount you need, and borrow federal loans before considering private loans, since federal loans come with RAP and other borrower protections. Understanding how RAP works now puts you in a far stronger position to graduate with debt you can manage and a repayment plan that fits the life and career you are building.