Uncle Sam's Student Loan RAP Accounts May Save Borrowers’ Money, but With Strings Attached

Like many government programs, the ultimate benefits gained depend on a borrower's specific financial situation.

Published: 6/18/2026, 9:28:54 AM EDT

Uncle Sam's Student Loan RAP Accounts May Save Borrowers’ Money, but With Strings Attached — Students earning degrees at Pasadena City College participate in the graduation ceremony in Pasadena, Calif., on June 14, 2019. (Robyn Beck/AFP via Getty Images)

Changes are coming for federal government-backed student loans at a time when over 42 million Americans owe the federal government approximately $1.87 trillion in student loan debt.

Under new guidance introduced as part of President Donald Trump’s “Big, Beautiful, Bill” legislation passed in July, 2025, the old Department of Education’s student loan repayment plans and the Saving for a Valuable Education (SAVE) plan are shutting down on July 1, 2026.

Taking their place are multiple student loan servicing options, including the new Repayment Assistance Plan (RAP), which comes in tandem with the equally new Tiered Standard repayment plan. Starting on July 1, borrowers with new student loans will have immediate access to these new plans and select benefits, including a new matching principal payment and an interest waiver for qualified borrowers, which will lower their loan balances, the White House noted in a recent press statement.

The White House noted that over the last 20-30 years, repaying government-sponsored student loan debt has “become increasingly complex.” The report cited over 40 student loan repayment and discharge options available to loan consumers. The idea now is to consolidate those payment options so borrowers, 70 percent of whom are “overwhelmed” by their student loan debt management, can simplify the process.

4 Key Things to Know About the New RAP Plans

The Repayment Assistance Plan may wind up being particularly attractive to federal student loan borrowers.

With the RAP program, a student loan monthly payment will usually range from 1 to 10 percent of annual earnings, and the higher the income, the more cash a borrower is expected to pay. Under RAP, the federal government is mandating a minimum monthly payment of $10 for all borrowers.

Here’s how RAP Calculates Loan Repayments?

With RAP, monthly payments are determined by your adjusted gross income (AGI). “It could start as low as $10 per month for the lowest income earners and can go up to 10 percent of your annual AGI if you're making more than $100,000 per year,” Aron Boxer, founder and CEO of Diversified Education Services, told NTD News.

RAP also comes with two protective mechanisms. The first is the interest subsidy: if the payment doesn't cover the interest accrued since the last due date, it's waived. The second is the matching principal payment. Paying in full and on time reduces your principal.

“It's important to note that only two repayment plans will be available to borrowers after July 1,” Boxer noted. “If you're in older federal government loan repayment plans, you'll need to do your homework and decide whether to transition or remain on your current plan.”

RAP offers upsides for student loan consumers, and some risks, too

RAP should be beneficial for consumers because of its more affordable monthly payments, which are determined by income and the number of dependents.

For example, the program includes a subsidized interest rate. “If your payment is full and on time, there's an interest subsidy that ensures that if it doesn't cover the accrued interest, the department will waive it,” Boxer said. “Essentially, that means your balance should never exceed your debt at the time you entered RAP.”

Additionally, RAP also includes a matching principal payment feature, meaning it adds a matching contribution when your payment reduces the principal by less than $50, bringing the principal reduction to $50. “Basically, you’re rewarded for on-time payments,” Boxer noted. “If you're eligible for public student loan forgiveness, there are 120 payments required for loan forgiveness, and that forgiveness is not considered taxable income.”

One potential downside is that RAP doesn't include payment caps, so some payments could be higher than in previous plans.

“That also means you could wind up paying more in the long run,” Boxer noted. “Plus, forgiveness through RAP itself is taxable as income, unlike Public Service Loan Forgiveness.”

Don’t treat RAP like a credit card

Boxer advises student loan payers to stick to their minimum required payments.

“This is not like paying off your credit card,” he said. “If you pay more than the required amount, it can reduce or even eliminate the interest subsidy and the matching benefits, because the extra amounts go to accrued interest first rather than the principal.”

If you work in government or nonprofits, it’s also a good idea to target public student loan forgiveness plans. “That’s a no-brainer,” Boxer said. “Since it's an income-based plan, just make sure your income is accurately documented to minimize your monthly obligation.”

Student loan repayers also need to be aware of the extra time needed to pay off their government student loans. “While RAP may be less expensive than older income-based repayment, in the short term, it could be much more expensive in the long run because it requires five extra years of payments to get forgiveness,” Joshua Cohen, an attorney and student loan specialist at Cohen Consumer Law, told NTD.

RAP can benefit some borrowers, but not others

Like many government programs, the ultimate benefits gained depend on a borrower's specific financial situation. By and large, however, the loan repayment formula is generally easier to understand than the other income-driven repayment plans.

For instance, one key benefit is the excess interest waiver, where any interest accrual that exceeds the monthly payment will be waived. “That was a feature of the SAVE plan, but not of any other income-driven repayment plan,” Jack Wang, host at the Smart College Buyer Podcast, told NTD. “For people with large loan balances, but low income, this can be a valuable option.”

In contrast, high-income borrowers may not benefit as much, as RAP can lead to pricier payments. “Plus, waiting 30 years for time-based loan forgiveness isn't fun,” Wang noted.

Overall, Wang believes RAP is a good plan for the simple reasons that it is an easy formula to understand. “It may not be as generous as prior income-driven repayment plans, but there is value in simplicity,” he said. “Families can easily estimate their payment simply by looking at their adjusted gross income.”

The views and opinions expressed are those of the interviewees. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. NTD does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. NTD holds no liability for the accuracy or timeliness of the information provided.