For millions of student loan borrowers, repayment options will look different soon. The U.S. Department of Education will phase out some Income-Driven Repayment (IDR) plans, eventually leaving just two options for those looking to reduce their payments: Income-Based Repayment (IBR) and the new Repayment Assistance Plan (RAP).
If you have outstanding federal loans or plan on taking out new loans in the future, here’s what you need to know about IBR vs. RAP.
IBR at a glance
Since 2009, eligible federal student loan borrowers have used IBR to lower their monthly payments. As of March 2026, 2.65 million students were enrolled in IBR, owing a combined $176.7 billion, according to the latest data from the Office of Federal Student Aid.
Who is eligible for IBR?
To qualify for IBR, you must have a qualifying federal student loan:
You must also have borrowed all of your loans before July 1, 2026. If you borrow any federal loans after that date, you won’t be eligible for IBR.
Important: Previously, Parent PLUS Loan borrowers weren’t eligible for IBR. But thanks to recent changes, parent borrowers who consolidate their loans with a Direct Consolidation Loan before July 1, 2026 (and who don’t take out additional loans), can enroll in IBR. Parent borrowers must consolidate their loans before July 1, 2026, and make at least one payment under Income-Contingent Repayment (ICR) before they can switch to IBR.
How does IBR calculate payments?
IBR bases your payments on a percentage of your discretionary income. IBR defines your discretionary income as the difference between 150% of the poverty guideline and your income. Under IBR, your payments will never exceed what you would’ve paid under a 10-year standard repayment plan.
What percentage of your discretionary income goes toward your loans depends on when you took out your debt:
Loans disbursed before July 1, 2014 | Loans disbursed on or after July 1, 2014 | |
|---|---|---|
How does IBR handle interest?
If you have Direct Subsidized Loans, the government covers the unpaid interest that accrues for up to three consecutive years after your loans enter repayment in IBR. With Unsubsidized Loans or PLUS loans, you’re responsible for all interest that accrues on the debt.
Under IBR, unpaid interest is capitalized, or added to the loan principal, if you no longer qualify for IBR or leave the IBR plan.
You must recertify your income each year under IBR to maintain an accurate record of your earnings. If you don’t recertify income by the deadline, any unpaid interest is capitalized and added to the principal balance. You’ll remain on the same plan, but the payment amount won’t be based on your income. Instead, the payment will be the same as that of a standard repayment plan.
How does loan forgiveness work with IBR?
There are two pathways to loan forgiveness with IBR:
Repayment term: If you have a remaining balance at the end of your IBR repayment term, the government will forgive that amount. However, the forgiven balance may be taxable as income.
Public Service Loan Forgiveness (PSLF): IBR is a qualifying payment plan under PSLF, so you can qualify for loan forgiveness if you work for an eligible nonprofit or government agency for 10 years and make 120 qualifying monthly payments.
Read more: Will I be taxed on student loan forgiveness?
RAP at a glance
The new Repayment Assistance Plan (RAP) will be available to borrowers beginning on July 1, 2026. These are the following details you need to know about RAP.
Who is eligible for RAP?
Most current and new federal student loan borrowers will be eligible for RAP. Qualifying borrowers include those with the following loan types:
Parent PLUS borrowers are not eligible for RAP, even if they consolidated their loans.
Related: Is your student loan repayment plan about to be eliminated? What to know before July 1.
How does the RAP calculate payments?
Rather than looking at discretionary income, the RAP determines borrowers’ payments based on a percentage of their adjusted gross income (AGI), with a minimum monthly payment of $10. For each dependent a borrower claims on their taxes, their monthly payment is reduced by $50. Payments must be made until the loan is paid off or you’ve made 360 qualifying monthly payments.
The chart below outlines the payment percentages for a student loan borrower without dependents:
AGI | Payment Percentage of AGI | Monthly Payment Amount |
|---|---|---|
Source: Federal Student Aid
How does RAP handle interest?
If your monthly loan payment is less than the amount of interest that accrued during the past month, RAP will waive the unpaid interest. This means that if you make all of your payments on time and don’t enter deferment or forbearance, your loan balance will never grow beyond your original principal.
How does loan forgiveness work under the RAP?
There are two paths to loan forgiveness:
Repayment term: If you have an unpaid loan balance at the end of your 30-year loan term, the government will forgive the remaining amount. However, the forgiven balance is taxable as income.
PSLF: Payments made under the RAP qualify for PSLF. If you work for an eligible nonprofit employer or government agency full-time for at least 10 years and make 120 payments under the RAP, you can qualify for tax-free loan forgiveness under PSLF.
IBR vs. RAP: Real-world examples
For most borrowers, the new RAP will result in a higher monthly payment than under IBR. We calculated the monthly payments for four different borrowers at different income levels and numbers of dependents:
Example 1: Single borrower who earns $30,000 per year and owes $30,000 in Direct Unsubsidized Loans
Example 2: Married borrower with two children, a household income of $65,000, and $30,000 in Direct Unsubsidized Loans.
Example 3: Single borrower who earns $55,000 per year and owes $30,000 in Direct Unsubsidized Loans
Example 4: Married borrower with one child, a household income of $75,000 per year, and $30,000 in Direct Unsubsidized Loans
The table below shows the estimated monthly payment amounts for these borrowers under IBR and RAP:
Payment under IBR | Payment under RAP | |
|---|---|---|
*Payment examples assume $30,000 in Direct Unsubsidized Loans with an average interest rate of 6%. IBR payments are assumed to stay the same for the duration of repayment
The only borrower who had a lower payment was the first example, who earned $30,000 per year. All the other borrowers would pay more under RAP and be in repayment longer.
Borrowers can use the federal loan payment simulator to estimate their loan payments under IBR. As of late May, it has not yet been updated to include the RAP. In the meantime, you can use the payment plan estimator from the Education Debt Consumer Assistance Program to compare your payments under IBR vs. the new RAP.
What to know when switching plans
For many borrowers, it likely doesn’t make financial sense to switch from IBR to RAP. Some people will pay more each month and be in debt longer under the RAP.
However, there are exceptions. Those on lower incomes with several dependents would likely benefit from RAP. And if you’re near the beginning of your repayment journey, RAP’s interest subsidy could also be useful — especially if your payment isn’t high enough to cover your accrued interest each month.
Notably, IBR has a maximum payment cap: Your monthly payment can never be more than what you would pay under the 10-year standard plan. The RAP has no such cap, so higher-income earners could have much larger payments in that case.
Take extra caution switching plans if you’re pursuing income-driven forgiveness. When you previously transferred your loans between income-driven plans, your payment counts would transfer, too. That’s still the case if you switch from IBR to RAP. But if you later switch out of RAP, the payments you made under RAP will not count toward income-driven forgiveness such as IBR. (RAP payments do still count toward PSLF.)
Is it worth it to switch? It depends, and it isn’t possible to move to RAP just yet. RAP won’t be open for enrollment until July 1, 2026.
