Smart tax moves can shrink payments under the new RAP plan

The new Repayment Assistance Plan (RAP) starts July 1 and bases monthly student-loan payments on 1%–10% of adjusted gross income with a $10 minimum. Because RAP uses AGI rather than protected expenses, borrowers can lower their payments by reducing AGI with pretax contributions to 401(k) or traditional IRA, HSAs/FSAs, self-employed deductions, and other above-the-line deductions like student loan interest, plus per-dependent savings of $50. A borrower with a $59,999 AGI could pay about $50/month less than someone at $60,000. However, RAP can lead to higher total costs over the life of the loan (forgiveness after 30 years vs 20–25 years on other plans). RAP will be the only IDR option for new loans after July 1; existing loans can still access IBR, ICR, PAYE until mid-2028. If RAP offers the lowest monthly payment, borrowers should compare it to other plans and consider timing, since switching later may affect forgiveness credits and overall cost.