RAP vs. SAVE vs. IBR: A Plain-English Repayment Comparison

Why OBBBA Replaced the Existing IDR Plans

By 2025, the federal student loan repayment landscape had become genuinely confusing. There were four separate income-driven repayment plans — IBR, PAYE, ICR, and SAVE/REPAYE — each with different payment percentages, different income thresholds, different forgiveness timelines, and different eligibility rules depending on when you borrowed and what type of degree you pursued. Borrowers routinely chose suboptimal plans simply because they could not compare them effectively.

OBBBA's stated goal was consolidation and simplification. For anyone who takes out a federal student loan on or after July 1, 2026, there is now exactly one income-driven option: the Repayment Assistance Plan (RAP). The four eliminated plans — IBR, PAYE, SAVE, and ICR — remain temporarily available to borrowers with pre-July-2026 loans until a transition deadline of July 1, 2028.

How RAP Works: Flat AGI-Based Percentage

RAP calculates your monthly payment as a flat percentage of your total Adjusted Gross Income (AGI) — not a percentage of discretionary income, and not relative to the Federal Poverty Level. The applicable rate is determined by which $10,000 AGI bracket you fall into, starting at 1% and increasing by one percentage point for every additional $10,000, capped at 10% for AGI above $100,000.

This is fundamentally different from legacy IDR plans like IBR and SAVE, which first subtract an FPL-based exemption before calculating your payment. Under RAP, your entire AGI is subject to the applicable rate — but the rate itself is lower for most income levels. Borrowers with AGI at or below $10,000 pay a statutory minimum of $10 per month.

Because the rate applies to your full AGI rather than a discretionary income remainder, RAP payments at mid-to-high income levels are substantially higher than legacy IDR plans. The tradeoff is the government's interest waiver and principal floor guarantee — features that legacy plans do not provide and that prevent your balance from growing during lower-earning years.

A Worked Example: Single Borrower, $40,000 AGI

Here is a side-by-side comparison for a single borrower (no dependents) with an AGI of $40,000. Under RAP, this borrower falls in the 3% bracket ($30,001–$40,000), so their payment is 3% × $40,000 ÷ 12. IBR and SAVE still exempt a portion of income based on the Federal Poverty Level (FPL = $15,060 for a family of one).

At $40,000 AGI, both IBR and SAVE produce significantly lower monthly payments than RAP. This is the core tradeoff: RAP's flat-rate formula generates higher payments at mid-range incomes than FPL-exempt legacy plans — but it comes with the interest waiver and $50 principal floor guarantee that IBR and SAVE do not provide. A borrower whose balance grows under IBR due to negative amortization may pay substantially more in total interest over 20 years than a RAP borrower paying more each month.

For borrowers with very low incomes (AGI at or below $10,000), RAP's $10/month statutory minimum is combined with the government's interest waiver — meaning their balance cannot grow despite the minimal payment. Legacy plans at the same income level would allow unpaid interest to capitalize, growing the principal over time.

Monthly Payment Comparison: Three Income Levels

The table below extends the worked example across three income levels — $30,000, $55,000, and $85,000 AGI — for a single borrower with no dependents. All five plans are shown. IBR and PAYE share the same payment formula (10% of discretionary income above 150% FPL), so they appear together. The lowest payment in each row is highlighted. Figures use 2026 HHS FPL for a family of one ($15,060).

★ Lowest non-zero monthly payment at this income level · † SAVE income threshold: 225% FPL = $33,885 — no payment required below this level · FPL (family of 1, 2026): $15,060 · Estimates only. Forgiveness timelines differ: IBR/PAYE 20 yr; ICR 25 yr; SAVE 20 yr; RAP 20 or 30 yr based on original balance.

Two patterns stand out. At $30,000 AGI, RAP produces the lowest monthly payment of any plan — the flat 2% rate yields $50/month, while IBR and PAYE require roughly $62 after their FPL exemption is applied. At $55,000 and $85,000 AGI, SAVE becomes the cheapest plan: its more generous 225% FPL threshold exempts more income before the percentage applies. The critical difference is that RAP includes the government interest waiver and $50/month principal guarantee — features that prevent balance growth even at lower payments, but which no legacy plan fully replicates.

RAP's Two Government Subsidy Features

RAP includes two explicit protections against balance growth that no legacy IDR plan fully replicates:

1. The Interest Waiver

Under every legacy IDR plan, if your monthly payment was less than the interest accruing on your loan, the unpaid interest would capitalize (be added to your principal), causing your balance to grow over time — even while making payments. SAVE introduced a partial fix, but RAP eliminates this problem entirely: the government waives any interest your payment does not cover. Your balance cannot grow due to interest while on RAP.

2. The $50 Principal Guarantee

If your computed monthly payment is so low that it would not reduce your principal by at least $50, the government contributes the difference. This ensures that even at very low income levels, your loan balance is actively shrinking — by at least $600 per year — rather than staying flat.

These two features combined mean that under RAP, a borrower's outstanding balance will always trend down over time, regardless of income. Legacy IDR plans offered no such guarantee for all borrowers.

What Happens to Existing SAVE, IBR, and ICR Borrowers?

If you borrowed before July 1, 2026 and are currently on a legacy IDR plan — SAVE, IBR, PAYE, or ICR — your plan does not disappear overnight. You can remain on your current plan temporarily. However, all legacy IDR plans have a transition deadline: borrowers who have not selected a plan by July 1, 2028 are automatically enrolled in RAP.

Between now and July 1, 2028, legacy borrowers have three options:

• 1. Stay on your current plan until the deadline, then evaluate
• 2. Proactively move to IBR (the most comparable income-driven plan that will persist)
• 3. Opt into RAP early to access the interest waiver and $50 principal guarantee

The right choice depends on your income trajectory, loan balance, and forgiveness timeline. If you are close to the 20- or 25-year forgiveness threshold on a legacy plan, switching to RAP resets that clock — a potentially costly mistake. Use the RAP vs. IDR Comparator to model your specific situation before making any changes.

RAP Forgiveness Timeline

RAP includes loan forgiveness after a set number of years of qualifying payments. The forgiveness timeline is tied to your original loan balance at the time of repayment:

Any remaining balance at the end of the forgiveness period is discharged. Note that forgiven amounts may be treated as taxable income depending on future IRS guidance — this was a significant policy question still open as of April 2026.