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A student student sits in a lecture hall while class is being dismissed at the University of Texas at Austin on February 22, 2024 in Austin, Texas.<\/p>\n
Brandon Bell | Getty Images<\/p>\n<\/div>\n<\/div>\n<\/div>\n
RAP is what the Education Department calls an \u201cincome-driven repayment plan.\u201d Congress created the first IDR plans back in the\u00a01990s<\/a>\u00a0to make student loan borrowers\u2019 bills more affordable. Historically, the plans cap people\u2019s monthly payments at a share of their discretionary income and cancel any remaining debt after a certain period, typically 20 years or 25 years.<\/p>\n RAP is different in a few significant ways.<\/p>\n For one, it doesn\u2019t shield a portion of a borrower\u2019s income like other IDR plans do, but rather calculates their bill based on so-called adjusted gross income<\/a>. (AGI is your total earnings before taxes, minus certain deductions.)<\/p>\n More from Personal Finance:<\/strong> The share of a borrower\u2019s income that the plan requires also rises the more they earn. Under RAP, monthly payments will typically range from 1% to 10% of your earnings; the more you make, the bigger your required payment.<\/p>\n There will be a minimum monthly payment of $10 for all borrowers. (Under other IDR plans, certain low-income borrowers were entitled to a $0 monthly payment.)<\/p>\n<\/div>\n RAP leads to student loan forgiveness after 30 years, compared with the typical 20-year or 25-year timeline on other IDR plans.<\/p>\n<\/div>\n RAP should be available by July 1, 2026, according<\/a> to the Education Dept.<\/p>\n Borrowers with existing loans will maintain access to some existing repayment plans<\/a>, including Income-Based Repayment<\/a>, or IBR.<\/p>\n However, after July 1, 2026, new borrowers will have just two options. They can pick between RAP or a standard repayment plan, under which their debt is divided into fixed payments over a period ranging from 10 years to 25 years<\/a>, depending on their balance.<\/p>\n<\/div>\n An important point to keep in mind: Even borrowers with old loans who take out a new one after July 1, 2026 will lose the existing options for that loan, said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers. This will affect students partway through their degree, for example.<\/p>\n \u201cIf you borrow again, you will be in the world of two choices,\u201d Buchanan said.<\/p>\n<\/div>\n RAP comes with a few perks.<\/p>\n Federal student loan borrowers get $50 off their monthly bill per qualifying dependent, for example. Those who are keeping up with their bills but aren\u2019t making progress paying down their principal will also get a small subsidy by the Education Dept.<\/p>\n
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