Repayment Assistance Plan (RAP) and SAVE: Complete Guide

Repayment Assistance Plan (RAP): The Current Income-Driven Option

The Repayment Assistance Plan (RAP) is the federal government's primary income-driven repayment option for borrowers with federal student loans.

How RAP Works

RAP calculates your monthly payment as a percentage of your adjusted gross income (AGI), ranging from 1% to 10% depending on your income band, with a $10 monthly minimum. For each eligible dependent you claim, your payment is reduced by $50.

Example: If your adjusted gross income is $65,000, you fall into the $60,001–$70,000 income band and pay 6% of your income.

Interest Subsidy and Principal Contribution

RAP includes two critical protections:

• Interest waiver: If your RAP payment doesn't cover the interest accruing on your loans, the unpaid interest is waived rather than added to your balance.
• Principal contribution: If your payment reduces your principal by less than $50, the government contributes up to $50 toward your principal balance.

These protections mean you are not penalized for having a low income; your balance can actually decrease even if your payment is small.

Forgiveness Timeline

RAP forgives any remaining loan balance after 360 qualifying payments (30 years). Any forgiven balance is taxable income, except under the Public Service Loan Forgiveness (PSLF) program, where forgiveness is tax-free.

If you work in public service, you may qualify for PSLF at 120 qualifying payments instead, which is significantly faster and always tax-free.

RAP Eligibility

RAP is available for:

• Direct Subsidized Loans
• Direct Unsubsidized Loans
• Direct PLUS Loans for graduate or professional students
• Direct Consolidation Loans that do not include a parent PLUS loan

Not eligible: Parent PLUS loans and Direct Consolidation Loans that contain a parent PLUS loan are not eligible for RAP.

Borrowers with Loans Before July 1, 2026

If your loans were taken out before July 1, 2026, you may still access Income-Based Repayment (IBR), which offers faster forgiveness timelines than RAP. IBR forgives after 20 or 25 years depending on when you first borrowed. For a detailed comparison of all eight federal repayment plans, see Federal Student Loan Repayment Plans Explained.

Transitioning from SAVE to RAP

Existing borrowers with RAP-eligible loans can enroll in RAP. Qualifying payments made under SAVE, IBR, PAYE, or ICR generally carry over toward RAP's 360-payment threshold. Borrowers should confirm their status with their servicer.

SAVE Plan: Historical Reference

The SAVE plan was introduced in 2023 as an income-driven repayment option. The following information is provided for historical context only.

How SAVE Worked

SAVE calculated your monthly payment as a percentage of your discretionary income (the difference between your adjusted gross income and 225% of the federal poverty line for your family size). The payment percentage was:

• 5% for undergraduate borrowers
• 10% for graduate or professional borrowers
• A weighted average between 5% and 10% for borrowers with both undergraduate and graduate debt, based on the proportion of each

SAVE included an interest subsidy: if your payment didn't cover accruing interest, the unpaid interest was waived rather than added to your balance.

SAVE Forgiveness Timeline

SAVE offered accelerated forgiveness:

• Borrowers with original balances of $12,000 or less: forgiveness after 10 years
• All other borrowers: forgiveness after 20 years (undergraduate) or 25 years (graduate/professional)

Any forgiven balance was subject to tax implications. See the Tax Implications section below for details.

Why SAVE No Longer Exists

SAVE was challenged in federal court and vacated by court order in March 2026. The Department of Education ceased enrolling new borrowers and began transitioning existing SAVE borrowers to other repayment options, primarily RAP.

Tax Implications

Non-PSLF income-driven repayment forgiveness is taxable income, because the American Rescue Plan Act exemption expired December 31, 2025. PSLF forgiveness remains tax-free.

Sources

• StudentAid.gov: Repayment Assistance Plan
• StudentAid.gov: SAVE Plan (Historical)
• StudentAid.gov: Public Service Loan Forgiveness