New Repayment Plan Set To Transform Student Loans. Find Out If Your Costs Will Increase or Decrease

Student debt just got a major system update. A new repayment framework is rolling out, promising to recalibrate the financial burden for millions. The question on everyone's mind: will your monthly payment shrink or balloon?

Decoding the New Terms

Forget the old, rigid formulas. This plan introduces dynamic calculations tied more closely to income and family size. It's a shift from a one-size-fits-all model to a more responsive structure. The goal? To prevent payments from becoming a crushing, unsustainable weight.

The Bottom-Line Impact

Projections vary wildly. Some borrowers could see their obligations slashed, freeing up cash for life's other essentials—or, dare we say, investing. Others might face a gradual uptick, a sobering reminder that 'help' often comes with fine print. It's the financial equivalent of a software patch: fixes some bugs, might introduce others.

A Provocative Pivot in Personal Finance

This isn't just tinkering with interest rates. It's a fundamental rethinking of how educational debt is managed over a lifetime. The move signals a recognition that the old system is, frankly, legacy code—buggy, inefficient, and in desperate need of an overhaul. It's a band-aid on a bullet wound, but in the world of federal finance, that passes for innovation.

One thing's certain: in the grand tradition of financial 'solutions,' the devil will be in the implementation details—and your updated monthly statement.

KEY TAKEAWAYS

• The newly created Repayment Assistance Plan will be available in less than a year. For many student loan borrowers, monthly payments are expected to be more expensive than current plans.
• The average lower-income borrower will have to pay tens of thousands of dollars more over the life of their loan.
• For the average borrower with a typical salary, the payments under the RAP plan will be no higher than those under existing plans.

A new income-driven repayment plan is set to lower total costs for many student loan holders but raises monthly payments for low-income borrowers.

The "One Big, Beautiful Bill" Act introduced the new income-driven Repayment Assistance Plan, also known as RAP, which is expected to open for enrollment by July 1, 2026. The bill also eliminates all other existing income-driven plans for borrowers in three years. However, borrowers who take out loans before July 1, 2026, can still enroll in the existing Income-Based Repayment Plan.

Previous calculations by Investopedia have found that monthly payments under RAP could be much more expensive for borrowers, including those with families. That is especially true for some lower-income borrowers, who previously qualified for $0 monthly payments under IBR and now must pay at least $10 a month.

Why This Matters

Borrowers who budget expecting low or zero payments may need to reevaluate and prepare for higher monthly obligations when the payment plan is opened.

To illustrate exactly how the new plan will affect different types of borrowers, Investopedia laid out several examples using information and averages from the Department of Health and Human Services, Federal Student Aid, ZipRecruiter, and Indeed.

Each calculation assumes the following:

• The "average" borrower holds $39,123 in direct student loans, which is true as of the second quarter of 2025.
• The loans have a current interest rate of 6.39%.
• The borrower gets an annual raise of 3%.

Lower-Income Borrowers

The first example is a borrower with an annual income of $23,475 who never marries or has kids.

Under the existing IBR plan, they WOULD pay $4,512 over 20 years. That figure is so low because, onthe IBR plan, payments are $0 for single borrowers who make $23,475 or less and borrowers in a household of four people who make $48,225 or less. So this borrower's monthly payments would range from $0 to $43, and their remaining loan balance would be forgiven after 20 years.

On RAP, this same borrower would pay a total of $38,510 over the life of the loan. Their monthly payments would range from $39.13 to $230.50, and they would have to wait 30 years to receive loan forgiveness for their remaining balance.

Now, assume this same borrower is married and has two kids before starting repayment.

Since the borrowers' annual taxable income is low for a household of their size, their monthly payments would be zero for their whole repayment period. Then, their entire loan balance would be forgiven after 20 years.

On RAP, this same borrower would pay a total of $12,287 over the life of the loan.

Although the RAP plan does have provisions to lower payment amounts for borrowers with children, it still requires at least $10 a month. So this borrower's monthly payments would range from $10 to $130.50, and the remaining balance would be forgiven after 30 years.

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Additionally, the RAP plan has a new provision where the Department of Education will contribute up to $50 a month to lower the borrower's principal balance. However, for borrowers with low incomes and high loan amounts, this support is insufficient to reduce the amount of money or the number of years they must pay.

The average lower-income single borrower would pay 734% more on RAP than IBR. A lower-income borrower with a family would pay $12,287 on RAP compared to $0 on IBR.

Borrowers With An Average Income

Our second example is a borrower who begins repayment with an annual income of $68,400, which is what most recent graduates make on average. This borrower never marries or has kids.

This borrower would pay a total of $54,867 if they remained on IBR for the life of their loan. Their monthly payments would range from $374 to $442, and they would completely pay off their loan after 11 years.

If this borrower were on RAP, they would pay a total of $55,165 on their loan. Their monthly payments would range from $342 to $578, and they would finish their payments after 10 years.

Let's assume the same borrower is already married and has two kids when they begin repayment.

On the IBR plan, they would pay a total of $63,537, with monthly payments ranging from $168 to $384. They would also completely pay off their loan after 20 years.

Comparatively, on the RAP plan, they would pay $59,437 in total and have monthly payments from $242 to $528. They would finish paying off their loan after 12 years.

The average borrower won't have vastly different payments under IBR or RAP. Much depends on the borrowers' priorities and circumstances.

The Takeaway

It's clear that the changes to student loan programs in the "One Big, Beautiful Bill" will have an outsized impact on borrowers who earn less, thanks to the elimination of $0 monthly payments and an extended repayment period.