The new student loan rules: what RAP means for your wallet (and your mortgage)

The new student loan rules: what RAP means for your wallet (and your mortgage)
The Department of Education just finalized the biggest rewrite of the federal student loan system in over a decade. Most provisions go live July 1, 2026 — only weeks away. We read all 600+ pages so you don't have to.

Here's what actually changes, who wins, who loses, and what to do before the deadline.
The four changes that matter

1. Weighted-average credit for consolidations.
    If you consolidate your federal loans, you no longer lose your progress toward PSLF or IDR forgiveness. The Department uses a weighted-average calculation so that years of qualifying payments carry forward. This was a real risk going into the rulemaking — it survived, and it's a clear win for borrowers who've been afraid to consolidate.
2. A second loan rehabilitation.
    Starting July 1, 2027, borrowers who already used their one rehabilitation and re-defaulted can rehab a second time. The minimum monthly rehab payment also rises from $5 to $10 on Direct Loans (FFEL stays at $5). The Department is also building a streamlined application that lets defaulted borrowers apply for rehabilitation and income-driven repayment at the same time.
   
3. ICR, PAYE, and SAVE are being phased out. No new PAYE enrollments after July 1, 2026. All ICR-family plans fully sunset by July 1, 2028. The Department was explicit that they have no legal authority to grandfather anyone past these dates. If you're chasing PSLF on one of these plans, you need a transition plan now.
   
4. Parent PLUS borrowers lose all income-driven options. No RAP. No IBR. No path to income-driven forgiveness — ever. Even older consolidation loans that touched a Parent PLUS loan remain permanently ineligible. This is the most consequential change in the rule and the one fewest borrowers know about.
   What is the Repayment Assistance Plan?
   RAP is the new flagship income-driven plan. The math is simpler than IBR: take your AGI, multiply it by the percentage in your income bracket, divide by 12, and subtract $50 per dependent. The minimum payment is $10/month.

AGI bracket% of AGI$10,000 or less$10/month floor$10,001–$20,0001%$20,001–$30,0002%$30,001–$40,0003%$40,001–$50,0004%$50,001–$60,0005%$60,001–$70,0006%$70,001–$80,0007%$80,001–$90,0008%$90,001–$100,0009%Over $100,00010%

The problem RAP is built to solve
If you've been on an income-driven plan, you may have watched your balance grow even while making every payment on time. That's negative amortization — your monthly payment doesn't cover the interest that accrues, and the unpaid interest gets added to your balance.

A $200,000 federal student loan at 6% accrues about $1,000 a month in interest. If your old IBR payment is $300, the other $700 in unpaid interest gets added to your principal. After five years, you owe roughly $42,000 more than you started with.

RAP eliminates this. If your required payment doesn't cover the month's interest, the government waives the rest. It doesn't capitalize when you switch plans. It's gone. There's also a $50 principal match: if your payment doesn't reduce your principal by at least $50, the government adds up to $50.

RAP is the first federal repayment plan in history that guarantees your balance shrinks every on-time month.
Running the numbers: RAP vs. New IBR

New grad, $50,000 income, $80,000 in debt, single. 4% bracket. $50,000 × 4% = $2,000/year, or $167/month.

New IBR is $221/month. RAP saves $54/month, and unpaid interest gets waived.

Mid-career borrower, $75,000 income, $150,000 in debt, married with two kids. 7% bracket. $75,000 × 7% = $5,250/year, or $437.50/month before dependents. Subtract $100 (two kids × $50) → $337/month.

New IBR is $223/month. IBR is cheaper monthly here — but RAP eliminates the $812/month of unpaid interest that would otherwise pile onto a $150,000 balance. Over a 10-year PSLF run, RAP usually wins on total dollars paid.

Public service teacher, $45,000 income, $60,000 in debt, one dependent. 4% bracket. $45,000 × 4% = $1,800/year, or $150/month minus $50 → $100/month. New IBR is $179/month. RAP wins decisively here — lower payment, interest waived, and the principal match kicks in every month.

$300,000-earning surgeon, year 10 (not pursuing PSLF). RAP wants 10% of AGI — $5,000/month — with no payment cap. IBR caps her at the 10-year Standard payment of roughly $3,485/month. RAP costs $1,515/month more, or $18,180/year, with no upside.

The bottom line: who wins under RAP
RAP is genuinely better for low-to-moderate income borrowers with significant debt, public service workers chasing PSLF, and anyone who hates watching their balance grow. It's worse for high earners without PSLF (no payment cap) and borrowers close to forgiveness on the older 20-year IDR clocks. And it's not even an option for Parent PLUS borrowers.

If you have a mortgage in your future, the RAP payment math may also lower your DTI enough to qualify for more home — that's a story for a different post, but worth flagging.
What to do before July 1

Log in to studentaid.gov and confirm your repayment plan. If you're chasing PSLF on PAYE or REPAYE, map your transition before your current plan sunsets. If you're a Parent PLUS borrower, stop assuming IDR will be there for you in retirement. And if you've been on the fence about consolidating, the weighted-average credit preservation makes it safer than it was a year ago.

Not sure where you stand? Book a session with a LoanSense advisor — we'll walk through your specific numbers, model RAP against your current plan, and map out the exact next steps before July 1.

Educational information only. Not financial, legal, or tax advice. Every borrower's situation is different — consult a qualified professional.