Borrowed Federal Loans Between July 2014 and July 2026?

If your first federal student loan was borrowed on or after July 1, 2014, and you did not borrow any new federal loans on or after July 1, 2026, you are in a somewhat unusual position.

You may have access to both New IBR and the new Repayment Assistance Plan, or RAP.

For many borrowers in this group, especially dentists and other professionals with large graduate school balances, deciding between those two plans may be one of the more important student loan decisions they make.

PAYE and ICR still exist temporarily for some borrowers, but both are scheduled to disappear no later than July 1, 2028. SAVE has already ended. So while those plans may matter to someone currently enrolled in them, I would not build a long-term student loan strategy around them.

For this group, the more important comparison is usually New IBR versus RAP.

Who Qualifies for New IBR?

The newer version of Income-Based Repayment generally applies if you are considered a "new borrower" for IBR purposes, including borrowers whose first federal student loan was made on or after July 1, 2014.

For these borrowers, New IBR generally provides:

• Monthly payments equal to 10% of discretionary income
• Forgiveness after 20 years of qualifying repayment
• A payment cap based on the 10-year Standard Plan amount
• Discretionary income calculated using AGI minus 150% of the applicable poverty guideline

The old requirement that borrowers demonstrate a "partial financial hardship" to enter IBR has also been removed.

That makes New IBR considerably more accessible than it used to be.

RAP Works Differently

RAP also bases your payment on income, but the calculation is different.

Instead of subtracting a poverty allowance from your income, RAP generally applies a percentage directly to your adjusted gross income.

The percentage ranges from 1% to 10%, with borrowers earning more than $100,000 generally paying 10% of AGI.

The payment is then reduced by $50 per month for each dependent claimed on your federal tax return, subject to a minimum payment of $10 per month.

For many dentists earning well over $100,000, the basic comparison looks something like this:

New IBR: 10% of income after subtracting 150% of the poverty guideline.

RAP: 10% of AGI, minus $50 per month for each qualifying dependent.

That difference can make New IBR's required payment meaningfully lower for some higher-income borrowers.

But RAP has some benefits New IBR does not have.

New IBR vs. RAP

| Feature | New IBR | RAP | |---|---|---| | Basic payment calculation | 10% of discretionary income | 1% to 10% of AGI | | Higher-income borrowers | 10% after subtracting 150% of poverty guideline | Generally 10% of AGI above $100,000 | | Dependents | Affect the poverty guideline used in the calculation | $50 monthly reduction per dependent | | Minimum payment | Can be very low depending on income | $10 | | Maximum payment | Capped at the 10-year Standard payment | No comparable Standard Plan cap | | Forgiveness period | 20 years | 30 years | | Unpaid interest | Can accumulate | Unpaid monthly interest is subsidized after a full, on-time payment | | Principal reduction | No guaranteed monthly principal reduction | Government assistance may provide up to $50 of monthly principal reduction | | PSLF eligible | Yes | Yes | | Prior IBR/PAYE/ICR credit toward RAP | Yes | Yes | | RAP credit toward New IBR if you switch back | Generally no | RAP months generally stay with RAP |

The 20-Year vs. 30-Year Difference Matters

This is probably the first major issue I would look at.

New IBR offers forgiveness after 20 years for eligible post-2014 borrowers.

RAP requires 30 years of qualifying payments.

Ten additional years is a long time.

For a dentist who begins repayment around age 27, that could mean forgiveness around age 47 under New IBR versus around age 57 under RAP.

That does not automatically make New IBR the better choice.

RAP may still produce better results in some situations because of its interest subsidy, principal assistance, dependent adjustment, or the borrower's income trajectory.

But you should not compare these plans based only on next month's payment.

You need to look at the entire repayment period.

RAP Has a Major Interest Benefit

One of the biggest weaknesses of traditional income-driven repayment has always been negative amortization.

Imagine you owe $450,000 at 7%.

That is roughly $31,500 of interest per year.

If your required payment is only $15,000, you have not even covered the interest.

Under New IBR, that unpaid interest can accumulate.

RAP handles this differently.

If you make your required full and on-time payment and it does not cover the monthly interest, the remaining unpaid interest for that month is subsidized.

That means your loan balance does not continue growing simply because your required payment was less than the interest due.

For someone with a large loan balance relative to income, that can be a very valuable feature.

RAP also includes a principal benefit. If your required payment does not reduce your principal by at least $50, the government may provide additional principal reduction up to the applicable limit.

New IBR does not provide those same protections.

But New IBR May Require a Lower Payment

For many professional borrowers, this is where the math gets interesting.

Suppose you are single, have no dependents, and have an AGI of $150,000.

Under RAP, because your income exceeds $100,000, your base annual payment would generally be 10% of AGI, or about $15,000 per year before any dependent adjustment.

New IBR also uses 10%.

But New IBR first subtracts 150% of the applicable poverty guideline from your income.

So even though both plans use the number 10%, they are not calculating 10% of the same number.

That can make New IBR payments lower, particularly for borrowers without several dependents.

RAP can become more attractive at lower income levels because its percentage begins below 10%.

This is one reason I would actually run the numbers rather than assume one plan is universally better.

New IBR Also Has a Payment Cap

New IBR has another feature that could become increasingly valuable later in someone's career.

Your required payment cannot exceed what you would have paid under the applicable 10-year Standard Repayment Plan.

RAP does not have the same type of payment cap.

For a dentist whose income grows substantially over time, that could matter.

Remember that we are not just planning around your income today.

A 30-year RAP strategy could follow you through practice ownership, partnership income, or some of the highest-earning years of your career.

The RAP Interest Subsidy Changes the Forgiveness Math

There is an important tradeoff here.

Under New IBR, your payment may be lower, but your outstanding balance can potentially grow because unpaid interest can accumulate.

Under RAP, your payment might be higher, but the interest subsidy prevents that same type of balance growth.

Why does that matter?

Because under current federal tax rules, IDR forgiveness may result in taxable income.

So if New IBR leaves you with a much larger balance at forgiveness, you could potentially have a larger tax problem at the end.

On the other hand, RAP can keep you in repayment for up to ten additional years.

You have to compare both sides.

Be Very Careful About Switching From New IBR to RAP

This may be the single most important planning issue for borrowers who have access to both plans.

Payments you have already made under IBR, PAYE, ICR, and certain other qualifying repayment arrangements can count toward RAP's 30-year forgiveness requirement.

But the credit does not generally work in reverse.

If you leave New IBR, spend several years in RAP, and later decide you want to return to New IBR, those RAP months generally do not count toward New IBR's 20-year forgiveness requirement.

For example, imagine you already have eight years of qualifying New IBR credit.

You switch to RAP for five years.

Then you decide New IBR would have been better and switch back.

You do not simply have 13 years toward New IBR forgiveness.

Generally, you still have your original eight years of New IBR credit. The five RAP years were building credit toward RAP's forgiveness schedule instead.

That makes moving from New IBR into RAP a much more consequential decision than simply trying another repayment plan for a few years.

What About PSLF?

The rules above apply to long-term IDR forgiveness.

Public Service Loan Forgiveness is different.

Both New IBR and RAP can generate qualifying PSLF payments as long as you satisfy the other PSLF requirements.

Switching repayment plans does not erase qualifying PSLF payments you already earned.

So if your strategy is clearly PSLF, the 20-year versus 30-year forgiveness issue becomes much less important because your target may instead be 120 qualifying PSLF payments.

The monthly payment calculation can still matter quite a bit.

Where PAYE and SAVE Fit

If you are currently in PAYE, there may not be an immediate reason to leave solely because the plan is eventually going away.

PAYE still has a 20-year forgiveness period and uses a 10% discretionary-income calculation, but the plan is scheduled to end.

SAVE is different. Borrowers affected by the end of SAVE need to choose another available repayment option.

I would treat both of these primarily as transition issues.

For post-2014 borrowers thinking about where they want to be for the next decade or two, the more important question is usually:

New IBR or RAP?

There Isn't One Right Answer

I can make a pretty good argument for either plan depending on the borrower.

New IBR gives you:

• A shorter 20-year forgiveness period
• A potentially lower payment because of the poverty guideline deduction
• A cap on how high your required payment can go

RAP gives you:

• Protection against unpaid interest growth
• Potential principal reduction
• Potentially lower payments at lower incomes
• A direct dependent adjustment
• A structure that may work well for borrowers expecting a very long forgiveness strategy

And then there is the biggest strategic issue:

Once you begin accumulating RAP months, those months generally cannot be brought back with you toward New IBR forgiveness if you later change your mind.

For borrowers who qualify for both plans, I would not make this decision based solely on which one produces the lowest payment today.

I would compare:

• Current income
• Expected future income
• Loan balance
• Interest rate
• Accrued interest
• Number of dependents
• Existing forgiveness credit
• Total projected payments
• Expected balance at forgiveness
• Potential tax liability at forgiveness
• Whether PSLF is part of the strategy

These borrowers actually have something future borrowers may not have: a choice.

Make sure you understand what that choice is worth before giving one of the options up.