Millions of Borrowers Must Choose a New Repayment Plan — Here’s How to Pick

Millions of federal student loan borrowers are facing a deadline that will reshape their monthly payments for years to come. With the SAVE plan struck down in court and forbearance ending, borrowers must now pick between two income-driven repayment plans: the new Repayment Assistance Plan (RAP) and the existing Income-Based Repayment (IBR) plan. 

The choice between them can mean hundreds of dollars per month in difference — and for borrowers pursuing Public Service Loan Forgiveness (PSLF), it can affect how much they pay over the life of their loans.

Here’s a flowchart to help you decide which plan is right for you.

What Changed And Why You Need To Act

The SAVE plan, which has been in forbearance for the past year and a half, was finally ended by the courts. The Department of Education has told these borrowers to select a new repayment plan or be placed on the Standard repayment plan, which for many will mean significantly higher monthly payments.

Starting July 1, 2026, all new federal student loan borrowers will only have two choices: the tiered Standard plan or RAP. Existing borrowers currently on legacy plans like PAYE or ICR must transition to either RAP or IBR by June 30, 2028, though the likely timeline is likely late 2027 or early 2028.

For anyone coming off SAVE forbearance, the decision is more urgent: you need to pick a plan now to avoid being defaulted into the Standard plan and to ensure your monthly payments count toward forgiveness programs.

How Each Plan Calculates Your Payment

The biggest difference between RAP and IBR comes down to how they calculate your monthly payment.

RAP bases payments on a percentage of your total adjusted gross income (AGI). The rate starts at 1% for incomes between $10,001 and $20,000 and scales up to 10% for incomes above $100,000. There is a $10 per month minimum payment.

Borrowers also receive a $50 per month deduction for each dependent. The plan includes an interest subsidy: any unpaid interest is waived each month, so your balance never grows beyond what you originally entered the RAP plan with.

IBR bases payments on discretionary income, which is your AGI minus 150% of the federal poverty guideline for your family size and state. Depending on when you first borrowed, your payment is either 10% or 15% of that discretionary income figure. Payments can be as low as $0 per month.

IBR does not include an interest subsidy, meaning your balance can grow if your payments don’t cover the interest charges.

The Decision Tree: Which Plan Should You Choose?

To figure out which plan is best for you, work through these four questions in order.

Step 1: What type of loans do you have?

If you have Parent PLUS loans, the decision is already made. RAP is not available for Parent PLUS loan borrowers (even if consolidated). Your only income-driven option is IBR, and you must consolidate into a Direct Consolidation Loan by June 30, 2026.

If you miss that deadline, you’ll be on the Standard plan with no income-driven alternative.

If you have Direct Subsidized, Unsubsidized, or Grad PLUS loans, both plans are available to you.

Step 2: Are you pursuing PSLF?

If yes, the only thing that matters is which plan delivers the cheapest monthly payment. Your goal is to minimize what you pay over 120 qualifying payments before your balance is forgiven. And since PSLF is forgiven tax-free, your final loan balance is irrelevant.

Run the student loan calculators and select whichever plan (IBR or RAP) gives you the lowest number. If you’re not pursuing PSLF, move to the next question.

Step 3: What’s your income?

If your income is under $100,000, RAP’s payment structure is generally more favorable. The percentage-of-AGI calculation tends to produce lower payments at these income levels compared to IBR’s discretionary income formula. 

If your income is $100,000 or higher, IBR likely wins on payment amount alone.

That said, if you carry a high debt balance and aren’t pursuing PSLF, RAP’s interest subsidy is still worth considering. Under RAP, your loan balance won’t grow, even if your monthly payment doesn’t fully cover the interest. Under IBR, it can and will.

You can see some of the samples of the math here (but always, run your own numbers): RAP vs. IBR payments.

Step 4: Are you currently on PAYE or ICR?

If so, you must transition by June 30, 2028, though the realistic timeline is likely late 2027 or early 2028.

If you were on PAYE, IBR is likely the better choice. IBR preserves the 20-year forgiveness window for some borrowers (those post-2014), though others may see their timeline extended to 25 years (pre-2014). 

RAP’s forgiveness timeline is 30 years across the board, which is a downgrade from PAYE’s 20-year window.

Sadly, there is a sub-set of this group of PAYE borrowers (2011-2014) who will see their forgiveness timeline extended under all circumstances.

What This Means For Your Monthly Budget

The financial impact of choosing the wrong student loan repayment plan can be substantial.

Consider a borrower earning $60,000 per year with $50,000 in student debt. Under RAP, their payment might fall in the 5-7% of AGI range, producing a monthly payment of roughly $250 to $350. 

Under IBR, depending on family size and the poverty line calculation, the same borrower might pay more or less — the discretionary income formula can work either way depending on individual circumstances.

For borrowers coming off SAVE forbearance, the payment shock can be severe - especially if you were anchoring on a SAVE payment using your income from back in 2019, and fast forward today and you're earning significantly more money. 

Choosing the right income-driven repayment plan is essential, and you need to act before the forbearance period ends.

Don't Miss These Other Stories: