RAP vs. IBR: What Student Loan Borrowers Need To Know

At first glance, the Trump administration’s push to privatize federal student loans might look like a political calculation. But the economics behind recent policy changes tell a subtler story.Under the One Big Beautiful Bill Act (OBBBA), the administration’s sweeping higher-education and tax package, the federal government is tightening who can borrow and how much through programs like Parent PLUS and Grad PLUS. These loans have long been among the government’s most profitable, often taken out by creditworthy parents in the middle or late stage of their careers, or graduate students pursuing high-paying careers like medicine and law.Now, new borrowing limits and the elimination of Grad PLUS for future students are changing that dynamic. Families and graduate borrowers who once relied on federal programs for large sums may soon find themselves turning to private lenders instead.It’s a structural shift that accomplishes, in practice, what privatization would have done politically: it moves the most lucrative borrowers (and the profits that come with them) into the private market, while leaving the federal government with the less profitable parts of the student loan portfolio.

The final version of the One Big Beautiful Bill is going to reshape the future of student loan repayment.Starting July 1, 2026, all new federal student loan borrowers will only have two options: the revised Standard Plan or the newly introduced Repayment Assistance Plan (RAP). For current borrowers, the transition comes between 2026 and 2028, when legacy plans like SAVE, PAYE, and ICR will be phased out and borrowers will be forced to move into either the RAP plan, or the IBR plan.The RAP plan calculates monthly payments on a sliding scale, ranging from 1% to 10% of adjusted gross income. A key feature is that unpaid interest is forgiven, and a $50 monthly principal match helps chip away at the balance. Loans are forgiven after 30 years of payments.IBR, the other remaining option for existing borrowers, retains most of the features of Old and New IBR, depending on loan origination date. Those with loans from before July 1, 2014, pay 15% of discretionary income and receive forgiveness after 25 years. Borrowers with loans after July 1, 2014 will pay 10% of discretionary income, with forgiveness at 20 years. Discretionary income is defined as earnings above 150% of the federal poverty level.

When debt is cancelled or forgiven, the general rule under IRS Topic 431 is that the cancelled amount counts as taxable income (unless an exception applies). For student loans:If you receive forgiveness of a federal student loan (or discharge) and no exception applies, the amount may be reported on a Form 1099-C and taxed.However, most forgiven student loans from 2021-2025 are excluded from federal income tax. After December 31, 2025, the exclusion will expire, and forgiven amounts may again be taxable. However, there are some programs that are always tax free federally. And when it comes to state taxes and student loan forgiveness, there are a whole lot of exceptions.

The American Federation of Teachers and the U.S. Department of Education have temporarily resolved key disputes in a major federal lawsuit challenging the handling of income-driven repayment and forgiveness programs.In a joint status report filed Friday (PDF File) in the U.S. District Court for the District of Columbia, both sides asked Judge Reggie B. Walton to deny, for now, the union’s motions for a preliminary injunction and class certification. Those motions sought immediate relief for borrowers who said they were wrongly denied or delayed in receiving debt cancellation.The agreement allows the Education Department to continue processing student loan forgiveness under the Income-Based Repayment (IBR), Income-Contingent Repayment (ICR), and Pay As You Earn (PAYE) programs while the lawsuit remains pending.The AFT had filed suit earlier this year, alleging that the Department was failing to provide legally required repayment plans and loan forgiveness. The lawsuit has a potential impact on millions of borrowers navigating overlapping repayment rules and deadlines.

Google AI overviews are misleading or inaccurate in 37% of finance-related searches, according to The College Investor's latest analysis. This is an improvement from last year, where 43% of AI Overviews were inaccurate - but a one-third error rate is troubling when it comes to personal finance.This is causing consumer confusion, and potentially harming Americans' finances. The overviews were especially bad when it comes to tax, insurance, and financial aid related queries.What's Happening: Over the last several years, Google has been rolling out AI-driven answers in search results. At the top of the search results they show AI Overviews, and they're now expanding the use of AI Mode. The problem is they are plagued with inaccurate answers. And experts say it's a serious issue.

The goal of test prep is to learn tips and tricks that help maximize your time and performance on a college admissions test. Students are taught best practices for creating a study schedule, pacing themselves during the test, and using process of elimination to narrow down the answers. While not required, test prep can certainly help put you at ease on test day – and it is commonly correlated with higher test scores.SAT test prep could be free through online quizzes and books from the library to thousands of dollars for one-on-one tutoring. 

U.S. citizens are eligible for U.S. federal student aid regardless of where they live. This means that expats can qualify for federal student loans. But there are a few complications and opportunities when borrowing and repaying federal student loans for expats. Here's what you need to know if you're a U.S. citizen living abroad and you're hoping to take out federal student loans for yourself or for your children.

You have graduated college and are getting ready to start paying off your student loans.You are getting the check ready to start the process of paying off your student debt when it hits you that you don’t actually know who owns your student loans or how much you owe exactly?What to do?The first step to becoming financially free is figuring out the exact amount of debt you are carrying so you can work towards paying it off.And since student loans are a debt that affect lives greatly, it is important to know who owns those loans and how much you owe.How you do that is the topic of this post.

You are ready to go back to school and so you go to apply for a student loan with the best rate.The problem?Someone already took out student loans in your name and now you, the real you, cannot take out any more money for school.Education is expensive enough when you take out loans on your own! And now you have to deal with a mess somebody made when you were not looking?Unfortunately, student loan identity theft is a real problem that happens and continues to happen. It's hard to prevent because so much personal information about you is already "out there".Let's talk about what you can do to prevent this from happening in the first place and what you can do if you find out someone took out student loans in your name.

If you've recently graduated college and started full-time employment, you will start entering the repayment phase of your student loans. Even though payments on many student loans were paused during the Covid-19 pandemic, it is wise to make sure that you are ready for when student loan payments unpause.Hopefully you were able to minimize your use of student loans for living expenses while you were in college. Now it's time to take a look at how to handle your living expenses as you start to repay your student loans.The good news is that there are plenty of options to fit your student loan payments into your ongoing budget. The important part is to make sure that you are proactive and reasonable about how you will handle your basic living expenses during your student loan repayment.