Published by Finology Software · For financial advisors and the borrowers they serve
On July 1, 2026, the federal student loan system changed more than it has in a decade. The Repayment Assistance Plan — RAP — became the new default income-driven repayment plan, and the plans many borrowers have relied on for years began winding down. If you advise clients with student debt, this is the moment they will come to you for answers. Here is what RAP actually is, who it affects, and what to do about it.
The short version
RAP is a new income-driven repayment (IDR) plan created by the 2025 reconciliation law (the One Big Beautiful Bill Act, P.L. 119-21). As of July 1, 2026, it replaces SAVE, PAYE, and ICR as the default path for federal student loan borrowers. Income-Based Repayment (IBR) remains available. SAVE, PAYE, and ICR are being phased out.
The headline difference: where the older IDR plans based payments on discretionary income (income above a multiple of the poverty line), RAP bases payments on a percentage of your entire adjusted gross income (AGI) — with no poverty-line offset.
How RAP payments are calculated
RAP uses a sliding scale tied to AGI:
- For AGI of $10,000 or less, the monthly payment is a flat $10.
- Above $10,000, the payment is a percentage of AGI, starting at 1% and rising one percentage point for each additional $10,000 of AGI.
- The percentage caps at 10% for borrowers with AGI above roughly $100,000.
- The monthly payment is then reduced by $50 for each dependent the borrower claims.
Because the payment is a slice of total AGI rather than discretionary income, the math behaves differently than borrowers expect from SAVE or PAYE — sometimes higher, sometimes lower, depending on income, family size, and filing status. That last point matters: for married borrowers, the choice between filing jointly and filing separately can materially change the RAP payment, because it changes the AGI the plan looks at.
Forgiveness and PSLF
RAP carries a maximum repayment period of 360 monthly payments (30 years), after which any remaining principal and interest is forgiven. And critically for public-service borrowers, on-time RAP payments count toward the 120 payments required for Public Service Loan Forgiveness (PSLF) — so RAP remains a viable path to PSLF.
What happens to SAVE, PAYE, and ICR
These plans are being wound down under the new law. SAVE is no longer accepting borrowers, and PAYE and ICR are sunsetting over the phase-out period. Borrowers on those plans will transition to RAP or IBR. The transition is not automatic in the sense that the right choice is obvious — each borrower’s lowest-cost path depends on their loans, income, family size, and goals. Defaulting blindly into a plan can cost a borrower thousands of dollars over the life of the loan.
Why this is an advisor’s moment
A recent post from financial-aid executive Keith Cobb captured the real story well: the One Big Beautiful Bill Act “is not only a policy change. It is an operational change.” Federal policy, he noted, “is only as effective as its implementation.”
For colleges, implementation happens in the aid office. For everyone else, implementation happens in the financial advisor’s office. Millions of borrowers are about to need clear, personalized guidance — and the advisor who can sit down, model the new rules against a client’s real numbers, and show them the lowest-cost path is the one who earns the relationship.
That is exactly what Finology Software was built to do. The platform imports a client’s full federal loan picture directly from NSLDS, models RAP alongside IBR and PSLF on both monthly payment and lifetime cost, handles whole households and filing-status decisions, and produces a branded, audit-ready report you can hand to the client. It is RAP-ready as of July 1, 2026, and maintained to stay current as the rules keep moving — so you never have to rebuild your own spreadsheet again.
If you advise anyone with federal student debt, now is the time to re-model their situation under RAP. You can run a real client case in minutes.
Start a free 7-day trial at finology.tech, or book 10 minutes and we’ll walk through a live scenario together.
This article is for educational purposes and is not legal, tax, or financial advice. Specific outcomes depend on each borrower’s circumstances.
Source: Congressional Research Service — The Repayment Assistance Plan (RAP) in P.L. 119-21.
