How Income-Driven Repayment Plans Work in 2026: 5 Facts

Income-driven repayment ties your monthly student loan payment to your income and family size instead of your balance, and after the plan's repayment period any remaining balance may be forgiven. The complication in 2026 is which plans exist. The SAVE plan has ended, the Repayment Assistance Plan (RAP) is the newest option, and two older plans are scheduled to end. Here is how the current options work.

In this guide: - What income-driven repayment means in practice - The plans available now: RAP and IBR, compared - What happened to SAVE, and what ends next - A worked RAP payment example - A 3-step process to choose and apply

What income-driven repayment means

Under an income-driven plan, your monthly payment is calculated from your income and family size. Federal Student Aid says you are required to recertify your plan by updating your income and family size, or number of dependents, once per year. At the end of the repayment period, any balance left may be forgiven.

The trade-off is time. Payments spread over 20 to 30 years can mean paying more interest overall than a shorter plan would. Income-driven repayment is a cash-flow tool first and a forgiveness path second.

Federal Student Aid also notes that forgiven amounts may be taxable. Discharges on or after January 1, 2026 are treated as federal taxable income, and states may tax them as well. A tax professional or your state tax agency can explain how that applies to you.

The plans available now: RAP and IBR

The Repayment Assistance Plan (RAP) is the newest income-driven option. Federal Student Aid describes the payment this way: take the percentage of your adjusted gross income (AGI) for your bracket, divide by 12, then subtract 50 dollars for each dependent on your federal tax return. The total monthly payment may not be less than 10 dollars. Under RAP, your remaining balance is forgiven after 30 years, or 360 months, of qualifying payments.

The percentage rises with income in steps. It is 1% for AGI from 10,001 to 20,000 dollars, then one point higher for each additional 10,000 dollars of AGI, up to 10% for AGI over 100,000 dollars. For AGI up to 10,000 dollars, the page lists 120 dollars per year.

Income-Based Repayment (IBR) remains available. Your payments are either 10% or 15% of discretionary income, depending on when you received your first loans, and payments never exceed what you would pay on the 10-year Standard plan. The repayment term is 20 years for new borrowers on or after July 1, 2014, and 25 years for other borrowers.

Plan	Payment basis	Repayment term
Repayment Assistance Plan (RAP)	1% to 10% of AGI, divided by 12, minus 50 dollars per dependent	30 years
IBR (new borrower on or after July 1, 2014)	10% of discretionary income	20 years
IBR (other borrowers)	15% of discretionary income	25 years
PAYE	10% of discretionary income	20 years
ICR	20% of discretionary income	25 years

The table shows the October 2026 lineup. Two details stand out. RAP is the only income-driven plan available if you have at least one loan first disbursed on or after July 1, 2026. And PAYE and ICR are available only if all your loans were first disbursed before July 1, 2026, and both plans end no later than July 1, 2028. If you are on PAYE or ICR, consider planning your move well before that date.

RAP is available for Direct Loan borrowers. Eligible loans include Direct Subsidized and Unsubsidized Loans, Direct PLUS Loans for graduate or professional students, and Direct Consolidation Loans that do not include a Parent PLUS Loan. Eligibility differs by loan history, so confirm which plans your own loans qualify for on the official plan pages before applying.

What happened to SAVE

A court order ended the Saving on a Valuable Education (SAVE) plan in March 2026. Borrowers who were enrolled in SAVE, or who had a pending SAVE application, need to choose another plan they are eligible for.

Federal Student Aid says SAVE borrowers have 90 days from the date of their servicer's notice to choose another plan. For example, a notice dated July 1, 2026 set a deadline of September 29, 2026. After the 90 days, the servicer sends a final 30-day notice. If you still have not chosen, you are enrolled automatically in either the Standard Repayment Plan or the Tiered Standard Plan, depending on when your loans were first disbursed.

If you were on SAVE, check your servicer's message for your own deadline, and compare RAP and IBR with the Loan Simulator before a default plan is chosen for you.

A worked RAP example

Take a borrower with 60,000 dollars of AGI and no dependents. That income sits in the 50,001 to 60,000 dollar bracket, where the RAP percentage is 5%. The monthly payment is 60,000 times 0.05, divided by 12, which equals 250 dollars.

With two dependents, the 50 dollar reduction applies to each one after the division by 12: 250 dollars minus 100 dollars equals 150 dollars per month. Assumptions: AGI of 60,000 dollars, two dependents claimed on the federal tax return, and the bracket percentages listed by Federal Student Aid.

Compare that with IBR before deciding. IBR bases payments on discretionary income, while RAP works from adjusted gross income with the per-dependent reduction. The two formulas can produce different payments for the same household, so run both.

Choose and apply in 3 steps

Run your numbers through the Federal Student Aid Loan Simulator to see RAP and IBR payments side by side for your loans.
Compare the results against your loan dates. If you have a loan first disbursed on or after July 1, 2026, RAP is the income-driven option. Other borrowers can weigh IBR's term against RAP's dependent reduction.
Apply at studentaid.gov or through your loan servicer, then recertify your income and family size every year to keep the payment accurate. Federal Student Aid suggests starting about 90 days before your recertification date.

This article is for general information, not financial advice.