Published by Finology Software · For financial advisors
On July 1, the Repayment Assistance Plan (RAP) became the default income-driven plan for federal student loans. Sit with that word for a second: default. When a plan is the default, your clients do not choose it. They land on it. And for your higher-earning clients, the plan they quietly land on is often the most expensive one available to them.
That is the setup for one of the cleaner wins you can hand a client this year. Here is why it happens, and what to do about it.
The old plans gave your client a cushion. RAP took it away.
The income-driven plans your clients have used for years, SAVE, PAYE, and IBR, all worked off discretionary income. They took the client’s income, subtracted a poverty-line cushion, and charged a percentage of what was left. The cushion mattered. It meant your client was never paying on their whole paycheck.
RAP does not work that way. It charges a percentage of the client’s entire adjusted gross income, with nothing carved out first. And the percentage climbs as income rises, reaching 10% of AGI once income passes roughly $100,000.
For a borrower earning $40,000, that math can be a good deal. For a borrower earning $180,000, it is 10% of a very large number, with no cushion in front of it.
There is no ceiling anymore
The older plans had one more protection that RAP dropped: a payment cap. Under IBR and PAYE, a client’s monthly payment could never climb above what they would have paid on the standard 10-year plan. That was a ceiling. No matter how high their income went, the income-driven payment stopped there.
RAP has no such ceiling. The payment is a straight percentage of AGI, and it keeps rising with income. For a high earner, that removes the exact protection that used to keep an income-driven plan from turning into the priciest option on the board.
The trap is that it happens automatically
Put those two changes together and the result is simple: higher-income borrowers pay more under RAP than they did on the plans they were on. RAP helps lower earners and costs higher earners more. Somewhere around $90,000 of income, the older IBR plan generally becomes the cheaper monthly payment.
Now the real problem. IBR does not happen on its own. RAP is the default, so a client who does nothing gets RAP. IBR is a plan the client has to actively elect. Left alone, the higher earner is defaulted onto the costlier plan and never sees the cheaper one they still qualify for.
No servicer is going to call your client and suggest a switch that saves them money. No chatbot is going to file the paperwork. This is a gap, and the gap is exactly the size of a financial advisor.
What it looks like in a client meeting
Take a client with a household income around $160,000 and a normal federal balance. On RAP, their payment is a slice of that full $160,000. Move the same client to IBR, where the payment is based on discretionary income and capped at the standard amount, and the monthly number can fall by hundreds of dollars.
That is a concrete, provable, “here is what I just did for you” moment. You are not selling them anything. You checked which plan they were defaulted onto, ran the alternative, and moved them to the one that costs less. It is the kind of small, sharp win that makes a client tell three friends about their advisor.
The honest part: you have to run it
This is not a blanket rule, and treating it like one would be the wrong way to use it. RAP is genuinely the better plan for some clients, especially lower earners and larger families. IBR carries its own tradeoffs on forgiveness timing and total interest paid. The right answer depends on the client’s income, family size, balance, filing status, and whether they are chasing forgiveness or a payoff date.
Which is the entire point. The default assumes none of that. You get to actually look. And for a higher-earning client, the odds that the default is the wrong plan are high enough that it is worth checking every one of them.
View in Finology Software
Finology Software models RAP against IBR and the other plans on a client’s actual loan data, side by side, on both the monthly payment and the lifetime cost. In about a minute you can see whether a client was defaulted onto the wrong plan, and exactly what switching would save them.
If you have higher-income clients with federal student debt, they were moved onto RAP on July 1. Check them before they feel it.
Start a free 7-day trial at finology.tech and run any client under RAP and IBR, side by side.
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Every number sourced, every path compared. Model RAP, the new Standard, IBR, PAYE, ICR and PSLF side by side.
