How The Republican Student Loan Plan Compares To SAVE And IBR

Forbes

29-04-2025

UNITED STATES - APRIL 29: Chairman Rep. Tim Walberg, R-Mich. gavels the House Educaiton Committee to ... More order for the markup of the Fiscal 2025 Budget Resolution on Tuesday, April 29, 2025. (Bill Clark/CQ-Roll Call, Inc via Getty Images)
Republican lawmakers have proposed a massive overhaul of the student loan system, both in how families will pay for college, and how borrowers will repay their student loans.
The key student loan repayment proposal involves reducing the number of repayment plan options to two: a standard fully-amortized plan and an income-based repayment plan dubbed the 'Repayment Assistance Plan' (RAP).
Designed with a flat income-percentage model and child-based deductions, RAP would replace existing income-driven repayment plans for new borrowers. The legislation also phases out forgiveness after 20 or 25 years for a 30-year timeline, with interest and principal subsidies to prevent runaway balances.
However, in side-by-side comparisons, RAP often leads to higher total payments, especially for low-income borrowers. While the SAVE plan is likely dead due to court injunctions, it would have offered lower monthly bills and faster forgiveness, particularly for those with smaller loans or incomes near the poverty line.
Even compared to the existing IBR Plan, the RAP is not a compelling alternative.
It's important note that the RAP Plan, and the new standard repayment plan, would only go into effect for loans originated after July 1, 2026. So existing borrowers would likely keep their plans, with the exception of those in SAVE - who will likely have to choose an eligible repayment plan when the forbearance is over.
It's also important to note that this is just the main proposal right now. This could change before it's signed into law.
Here's a look at how the RAP compares.
There are two new repayment plan options: the standard plan, and the RAP.
The standard plan would have equal monthly payments that would fully pay off your loan over a set period of time. That time period would be based on the loan amount:
In some cases, especially for higher income/high loan balance borrowers, this plan may be a better option that the RAP.
The RAP calculates your monthly student loan payment based on your Adjusted Gross Income, with a subtraction of $50 for each child you have. It has a minimum monthly payment of $10 per month.
Here's how your monthly payment is calculated, depending on your AGI. First, take a percentage of your annual AGI (with a flat $120 per year if your AGI is less than $10,000):
Then, you divide the applicable base payment by 12 (to convert it to a monthly amount). And if you have children. you can subtract $50 for each dependent child.
If the result of this calculation is less than $10, your minimum $10 payment applies.
However, there is no negative amortization with the RAP. So, if your payment doesn't fully cover the interest, it's waived each month.
Furthermore, there is a principal reduction feature to help borrowers make progress on their loans. If your payment reduces your principal balance by less than $50, the government adds an extra reduction to your principal, up to $50 or your payment amount (whichever is less). So, no matter what, your loan balance will not grow, and your principal balance will decrease by $50/mo.
To assess how RAP performs, four borrower scenarios illustrate the differences across monthly payments, forgiveness timelines, and total repayment. We included the SAVE plan in the comparison, because although it's unavailable, it was the Biden Administration's attempt at changing student loan repayment and so it's useful to see how it would have compared.
It's important to note that these estimates assume the same income over the repayment period. In reality, most borrowers will see their incomes increase over time, both increasing their potential loan payment, and increasing the likelihood of paying off the loan.
AGI: $25,000
Children: 2
Loan balance: $30,000
RAP: $10/month, $3,600 total over 30 years
IBR/SAVE: $0/month, $0 total over 20–25 years
Here, RAP imposes mandatory payments where IBR and SAVE do not. Despite RAP's interest and principal subsidies, the $10 floor multiplies over three decades.
Borrowers on SAVE not only avoid monthly payments, but also benefit from full interest subsidies and earlier forgiveness.
It's important to note that if this borrower was going for Public Service Loan Forgiveness (PSLF), all plans would have provided loan forgiveness after 10 years. But RAP would have still be the costliest due to the $10 minimum payment.
AGI: $60,000
Loan balance: $30,000
RAP: $250/month, paid off in 20 years, $60,000 total
IBR (new): $311.75/month, paid off in 13 years, $50,191 total
SAVE: $217.63/month, paid off in 27 years, $70,512 total
In this case, all plans eventually repay the loan.
SAVE would have offered the lowest monthly bill, but the longest repayment period.
IBR has the highest monthly burden but results in the lowest overall cost. RAP falls between the two.
Again, all of these plans are PSLF eligible, and for PSLF borrowers, the RAP would be the better choice since SAVE is no longer an option.
AGI: $80,000
Children: 2
Loan balance: $80,000
RAP: $366.67/month, $132,001 over 30 years
New Standard (20-Year): $527.52/mo, $126,604.80 over 20 years
IBR (new): $343.92/month, $82,541 over 20 years
SAVE: $182.54/month, $43,810 over 20 years
Here, RAP's flat-rate formula requires higher payments and a longer timeline, even as interest subsidies limit negative amortization. While the payment is close to the IBR payment, the amount paid over the life of the loan would have been significantly less due to the shorter time period.
The SAVE plan would have been the most affordable by a wide margin due to its generous income exemption and earlier forgiveness.
AGI: $180,000
Children: 1
Loan balance: $200,000
RAP: $1,450/month, paid off in 27 years, $469,800 total
New Standard (25-Year): $1,167.60/mo, $350,280 over 25 years
IBR (new): $1,244.50/month, $298,680 over 20 years (with forgiveness)
SAVE: $1,116.75/month, $268,020 over 20 years (with forgiveness)
While all plans prevent negative amortization, RAP stands out for its high total cost. Despite paying off the loan without forgiveness, RAP's extended timeline and high flat payment result in the largest overall burden.
In this case, the new standard plan has the lowest monthly payment (excluding SAVE). It's important to note that you would have paid less under IBR, even with a higher monthly payment, due to the longer repayment term of RAP.
However, since the standard plan is not an PSLF eligible plan, for borrowers pursuing PSLF would be stuck in the RAP at higher monthly payments, but a shorter 10 year loan timeframe.
RAP's 30-year forgiveness window is a key policy difference and a major source of higher total costs for borrowers. Unlike SAVE, which would have forgiven small balances in as little as 10 years, RAP stretches out payments even when the monthly amount is minimal.
In the first example, a borrower paying just $10 per month under RAP ends up contributing $3,600 over 30 years, despite never earning enough to pay more. Under SAVE or IBR, that same borrower would pay nothing.
In higher-income cases, such as the borrower earning $180,000, the forgiveness period may not matter. RAP's required payment is large enough to fully repay the debt within 27 years. Yet, even in these cases, the total repayment is higher than it would have been under SAVE or IBR due to the larger monthly obligation.
RAP's design abandons discretionary income formulas, replacing them with a flat percentage of AGI that rises with earnings. Child deductions lower payments, but don't eliminate them. While it may help for some borrowers, it's also more complex to calculate in many ways.
The plan's interest subsidies and principal payments help manage balances, but the extended term means borrowers will likely pay more over time unless their income is high enough to repay the debt before the 30-year mark.
Current borrowers should retain access to IBR, depending on legislative outcomes. But for new borrowers starting in the fall of 2026, RAP could become the default, along with the new standard plans.