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The Trump administration will be launching a new student loan repayment plan in the coming months. The new option is intended to replace several older programs that have allowed borrowers repay their student loans based on their income, with eventual student loan forgiveness after years in repayment. But one borrower advocacy organization is warning that the new plan is akin to a debt trap.
The Repayment Assistance Plan, or RAP, is being created under the "Big, Beautiful Bill" that President Donald Trump signed into law in July. Under the bill, the Department of Education will phase out three popular income-driven repayment plans (ICR, PAYE, and SAVE) by 2028. The Income-Based Repayment plan, or IBR, would be preserved for current borrowers. Current borrowers would also have the choice to enroll in RAP, once the plan becomes available. But anyone who consolidates their student loans through the federal Direct loan program on or after July 1, 2026, or takes out a new federal student loan on or after that date, would only be eligible for RAP or a Standard plan (which isn't based on a borrower's income).
Here's what student loan borrowers should know about RAP, and why one advocacy group is sounding the alarm.
RAP is an income-driven repayment plan that, at least at a very basic level, functions similarly to other existing income-driven plans like ICR, IBR, PAYE, and SAVE. RAP uses a formula applied to a borrower's income (typically their Adjusted Gross Income from their federal tax return), which calculates monthly payments for a 12-month period. Borrowers must then update their income information every year, which results in adjustments to their monthly payment amount for the next 12 months. After a fixed term, if the borrower hasn't paid off their loans in full, they would be entitled to student loan forgiveness for any remaining balance.
But that's roughly where the similarities end. RAP differs from other income-driven repayment plans in several key ways. First, in addition to having higher monthly payments than SAVE, RAP uses a complicated tiered repayment formula where the percentage of income that is counted toward a borrower's monthly payment increases for every $10,000 in additional income earned by the borrower, up to $100,000; the other existing IDR plans use a fixed repayment formula. In addition, the RAP formula is not indexed to inflation, unlike the current income-driven options which factor in an income exclusion amount tied to the federal poverty limit (which tends to increase as wages rise). RAP also has a minimum required monthly payment amount, even if a borrower has no income at all. In contrast, ICR, IBR, PAYE, and SAVE have a safe harbor that allows for monthly payments of $0 if a borrower has little or no income.
Moreover, RAP has a much more restrictive definition of family size as compared to the existing income-driven options. While ICR, IBR, PAYE, and SAVE factor in the borrower's spouse, children, and other family members who live with the borrower and receive at least half of their financial support from the borrower, resulting in lower payments, RAP only provides for a flat $50 monthly payment reduction for each dependent child. Borrowers can't reduce their payments further, even if they are full-time caretakers for other family members.
And finally, RAP has a longer repayment term before a borrower can qualify for student loan forgiveness compared to existing income-driven repayment plans. While the current IDR options all allow for student loan forgiveness after 20 or 25 years in repayment, RAP keeps borrowers in debt for 30 years before they can qualify for a discharge.
A major student loan borrower advocacy organization is warning that RAP's repayment formula and extended repayment term could push many borrowers into default, effectively trapping them in debt.
"The plan departs radically from the core design tenets of all previous income-based repayment plans," said The Institute For College Access and Success in a recent blog post. "One stark difference is that it removes the 'income protection' that all prior plans have, which is meant to 'protect' a certain amount of a borrower's income so they can stay current on their loan payment while still having enough funds to cover their basic needs. RAP scraps this approach and instead bases a borrower's payment on their gross income, rather than their discretionary income. Unlike all existing income-based plans -- which require monthly payments only once a borrower's income is a certain amount above the federal poverty threshold -- RAP will require payments from even those earning far below the poverty level."
Because the repayment formula for RAP is not tied to inflation, more student loan borrowers will be pushed into the more expensive repayment brackets under RAP as wages rise over time. This will also push more borrowers into default, warns TICAS.
"As living costs continue to rise and families struggle to keep up, making payments less affordable undermines the primary goal of income-based plans: to keep borrowers in good standing," said TICAS in its blog post. "However, it will likely do the opposite: push more borrowers than ever into the nightmarish world of loan default."
TICAS characterized RAP has taking "a never-before-seen approach to calculating a borrower's monthly income-based payment." The plan "will no longer set aside a certain percentage of a borrower's income" that won't be factored into their monthly repayment calculation. "Instead, it will base a borrower's payment on their full income (AGI), increase the size of the payment as their income increases," and then "then layer on a flat reduction of $50 a month per dependent child," which is far less generous than existing income-driven repayment plan options. TICAS also noted that the tiered repayment formula under RAP (which increases the percentage of income that must be dedicated toward a student loan payment for every additional $10,000 earned) will, in some cases, result in sharp increases in monthly payments following relatively small increases in earnings.
TICAS also warned that RAP's longer repayment term requiring 30 years of payments before a borrower can qualify for student loan forgiveness is problematic. The group noted that prior analysis has shown that the longer a borrower remains in a repayment system, the likelier it becomes that they will eventually fall out of that plan and wind up going into default. This could be because of unexpected changes to their life or financial circumstances, problems associated with loan servicing or transfers, and policy changes that occur as presidential administrations change.
"All told, the RAP proposal is not much of a safety net," said TICAS. "When it's the only thing standing between borrowers and loan default, we can expect many more borrowers to enter the draconian student loan collections system, in which many will be trapped."
Republican lawmakers who supported the legislation that created RAP have argued that the reforms will help student loan borrowers and American taxpayers.
"The student loan repayment process has become bloated and too complex," said Education and Workforce Committee Chairman Tim Walberg (R-MI) in a statement last month. "The plan simplifies the loan repayment system to help troubled borrowers repay loans without saddling taxpayers with the burden of paying back the loans of wealthy borrowers."
Ultimately, despite TICAS's warnings, many student loan borrowers will have no choice but to enroll in RAP in the coming months and years. Current borrowers enrolled in ICR, PAYE, and SAVE will need to select a different repayment plan once these programs are phased out by July 2028, and their only choices will be either IBR or RAP. In many cases, RAP will be more affordable than IBR, even as their payments will increase compared to PAYE or SAVE. Higher IBR payments will push many current borrowers to select RAP, particularly those who are on tight budgets or are pursuing student loan forgiveness programs such as Public Service Loan Forgiveness (RAP is a qualifying repayment plan for PSLF). And for PSLF borrowers, the longer repayment term associated with RAP may be less of a concern, given that PSLF allows for loan forgiveness in as little as 10 years.
Meanwhile, any borrower who consolidates their student loans on or after July 1, 2026, or takes out a new student loan on or after that date, will not be eligible for IBR. With ICR, PAYE, and SAVE subsequently phased out by 2028, these borrowers will have no choice but to select RAP if they cannot afford payments under a Standard repayment plan or are pursuing student loan forgiveness through PSLF. So one way or another, many borrowers are likely to enroll in RAP in the coming years.
RAP is not available yet to student loan borrowers, as the Department of Education must first draft regulations to implement the associated provisions of the Big, Beautiful Bill. Most observers expect RAP to formally launch no later than July 2026, given that new student loans disbursed during that month will only be eligible for RAP for borrowers who want to enroll in income-driven repayment or pursue student loan forgiveness.