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By Suzanne Blake
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The Institute for College Access and Success (TICAS), a student loan borrower advocacy organization, is warning against a new repayment plan that the Trump administration is introducing within the next few months.
The Department of Education (ED), headed by Education Secretary Linda McMahon, has unveiled a new repayment plan option, called Repayment Assistance Plan (RAP), to replace older plans that allowed borrowers to repay based on their specific income and eventually gain student loan forgiveness.
Newsweek has reached out to TICAS and the ED for comment via email.
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Why It Matters
RAP was introduced under the "Big Beautiful Bill" that President Donald Trump signed into law last month.
Under the new regulations, three other income-driven repayment (IDR) plans: Income-Contingent Repayment (CIR), Pay As You Earn (PAYE), and Saving on a Valuable Education (SAVE) are being phased out by 2028. Enrolling in RAP will be a new option, but student loan borrower advocates warn there could be long term negative consequences to signing up for the plan.
What To Know
Beginning July 1, 2026, all borrowers who consolidate their student loans through the federal direct loan program will have to choose between RAP and the standard plan, which does not depend on a borrower's income.
Under RAP, your monthly payments for each year are determined based on your income, and after a fixed term, you would qualify for student loan forgiveness.
However, it differs from other IDR plans because it has higher monthly payments and uses a different formula where the percentage of income that is counted toward your monthly payment increases for every $10,000 in additional income earned by the borrower with a cap of $100,000. Other IDR plans use a fixed repayment formula and factor in inflation.
RAP plan enrollees will also be subject to a minimum required monthly payment even if they bring in no income, unlike ICR, PAYE, SAVE and Income-Based Repayment (IBR). Additionally, while the other options factored in all the other people the borrower lived with in their home, RAP only adjusts a $50 monthly payment reduction for a dependent child.
RAP also mandates a longer repayment period of 30 years before borrowers can qualify for student loan forgiveness, unlike older plans, which allowed for this after 20 or 25 years.
The Institute for College Access and Success warned that this new plan means many borrowers will likely find themselves in default on their loans compared to prior options.
"The plan departs radically from the core design tenets of all previous income-based repayment plans," TICAS wrote in a recent blog post. "One stark difference is that it removes the 'income protection' that all prior plans have, which is meant to 'protect' a certain amount of a borrower's income so they can stay current on their loan payment while still having enough funds to cover their basic needs."
It added: "RAP scraps this approach and instead bases a borrower's payment on their gross income, rather than their discretionary income. Unlike all existing income-based plans—which require monthly payments only once a borrower's income is a certain amount above the federal poverty threshold—RAP will require payments from even those earning far below the poverty level."
As the cost-of-living increases, TICAS said RAP will likely "push more borrowers than ever into the nightmarish world of loan default."
"All told, the RAP proposal is not much of a safety net," TICAS wrote. "When it's the only thing standing between borrowers and loan default, we can expect many more borrowers to enter the draconian student loan collections system, in which many will be trapped."
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What People Are Saying
Ellen Keast, deputy press secretary, told Newsweek: "The Biden Administration lied to student borrowers – there is no such thing as student loan forgiveness – and then weaponized the repayment system to score points with voters. The American taxpayer has no business underwriting broken programs or political schemes. President Trump's One Big Beautiful Bill Act works for the American taxpayer, creating a new income-driven Repayment Assistance Plan and ending the inflationary loan programs that have pushed students into insurmountable debt.
"The new plan authorized by Congress – not created by fiat as the SAVE Plan – will support struggling borrowers by removing negative amortization of interest where borrowers are trapped in debt and provide additional assistance toward their principal so borrowers will finally see their balances go down with on-time payment."
Education and Workforce Committee chairman Tim Walberg, a Michigan Republican, said in a previous statement: "The student loan repayment process has become bloated and too complex. The plan simplifies the loan repayment system to help troubled borrowers repay loans without saddling taxpayers with the burden of paying back the loans of wealthy borrowers."
Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek: "The warning is valid. The setup looks eerily similar to prior plans like IBR and PAYE, but with a few important twists. The structure feels familiar, yet as the saying goes, 'all that glitters isn't gold.'"
He continued: "Calling it a debt trap is putting it mildly. This design pushes people to stay in the workforce longer, keeping them tied to repayment well into their lives. From a business perspective, it's a tool to keep labor in the system. On the 'bright' side, more companies are offering loan repayment perks—but those are just retention levers to keep people tied to the company."
Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek: "While the new Repayment Assistance Plan beginning next year may appear similar to other recently introduced programs designed to lessen monthly payment amounts for some borrowers, the reality is there are some stark differences that could have negative effects on those carrying substantial student debt. The new plan will still require a monthly payment regardless of whether the borrower has a job or not, differing from plans like SAVE which could lower the amount to $0 if the loan holder is out of work."
What Happens Next?
Once ICR, PAYE and SAVE are phased out, borrowers will be forced to choose a different repayment plan by July 2028. RAP will likely be more affordable than IBR for many borrowers, despite TICAS's warnings of risks.
"These are the kinds of pro-business policies you get when the people crafting the legislation have a business mindset," Thompson said. "They see people as one thing and one thing only: inputs to the labor force."
Update 08/13/25 12:25 p.m. ET: This article has been updated with comment from Ellen Keast.
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