Newer Student Loan Repayment Plan
My three had student loans. To help them get rid of them, I pitched in too. I knew it would take them too long to pay them off. I never told them I would help. All I told them was: decide where you want to go, what you want to major in, and get through the education phase of it as quickly as possible. I felt that if you concentrate on the basics initially, you also had a chance to explore some things which may interest them. I am sure others here may have a different opinion.
I do believe there must be some type of out for people having student loans. It should not be a lifetime ball and chain. If corporations can escape, then why not students?
Five Minute read . . .
What Trump’s new student loan repayment plan means for your wallet,
Millions of federal student loan borrowers are about to see a major change to how their monthly payments are calculated. The Trump administration’s “One Big Beautiful Bill Act” (OBBB) introduced the Repayment Assistance Plan, or RAP — a new income-driven repayment (IDR) option that replaces most of the existing plans federal student loan borrowers use.
However, financial aid experts caution that RAP will likely make many borrowers’ payments unaffordable due to how it calculates repayment. This could add even more strain to a system already under pressure.
As of the fourth quarter of 2025, 9.6% of all federal student loans were seriously delinquent (90 days or more late), according to the latest Household Credit and Debt Report from the Federal Reserve Bank of New York. The flow rate of accounts moving into that stage has accelerated over the past year, from just 0.70% at the end of 2024 to a high of 16.2% by the end of 2025, the report found.
Here’s a look at how the new plan works and what borrowers need to know before it goes into effect on July 1.
How RAP works
RAP’s payment formula is more straightforward than previous plans, said Jack Wang, a college financial aid advisor at Innovative Advisory Group and host of the Smart College Buyer podcast.
The new plan calculates payments as a percentage of a borrower’s adjusted gross income (AGI) on a sliding scale from 1% to 10% in increments of $10,000. The percentage is capped at 10% for AGIs above $100,000.
- Required minimum monthly payment of $10 for AGIs under $10,000 (even if you earn zero income)
- $50 per month deduction per dependent
- Loan term of 30 years (compared to 10 to 25 years for existing IDR plans)
- Longer repayment period means fewer borrowers will benefit from forgiveness
- Interest subsidy for unpaid monthly interest even if your loan is in negative amortization
- Any balance forgiven at the end of repayment will count as taxable income
- Applies only to Direct Student Loans (Parent PLUS loans are not eligible)
Current IDR plans — income-based repayment (IBR), income-contingent repayment (ICR), Pay As You Earn (PAYE) and Saving on a Valuable Education (SAVE) plan — protect a portion of borrowers’ income before calculating monthly payments. This reserves some earnings (tied to the federal poverty level) to cover basic needs like housing and food.
However, RAP doesn’t offer that safeguard. And although the formula is simpler, the new plan will likely hike student loan payments for millions of borrowers, said Michele Zampini, associate vice president of federal policy and advocacy at the Institute for College Access and Success (TICAS).
According to a TICAS analysis, a family of four with the median U.S. household income of $81,000 would see their monthly payment jump from $36 under SAVE to $440 with RAP. Because the formula uses $10,000 income brackets, earning even $1 above a threshold bumps you into a higher payment tier. A small cost-of-living raise could end up costing you more in your student loan payment than you received.
“It can basically erase that — or even make it worse for them than if they hadn’t received that raise,” Zampini said of pay bumps.
On the flip side, RAP’s interest waiver ensures your loan balance won’t balloon, Wang said, adding that this is an improvement over IBR, which allows interest to grow unchecked.
Who gets to keep their current plan?
RAP rolls out July 1, 2026, going into effect over the next two years. While the IBR plan will be preserved, ICR, PAYE and REPAYE will be phased out through July 2028.
The roughly 7 million borrowers in SAVE forbearance will be forced into the new plan, restarting their payments at much higher amounts.
“All of those borrowers don’t even have a payment right now,” Zampini said, “and they are all going to be forced into other plans that not only will their payment restart, it will also be much higher than it would have been under SAVE.”
Even so, Zampini doesn’t generally recommend federal borrowers move their loans to the private market. Federal loans come with safety nets you won’t find in the private system, such as forgiveness for severe disability or death, income-based payment options and access to Public Service Loan Forgiveness.
According to the Congressional Budget Office, the new plan will result in federal savings of $270.5 billion over the FY2025-FY2034 period with the projection that more borrowers will repay their loans under RAP compared to existing IDR plans.
More is at the Quartz Site. The above is the part I wanted to know.