The Repayment Assistance Plan (RAP) will require borrowers to pay between 1% to 10% of their income, with a minimum payment of $10. This change comes as many borrowers must exit the Saving on a Valuable Education (SAVE) plan, which was deemed the most affordable option.
Financial experts like Landon Warmund emphasize the importance of lowering pretax income to reduce monthly payments, as even a small decrease in AGI can significantly impact payment amounts. For instance, a borrower with an AGI of $59,999 could pay $50 less monthly than someone with an AGI of $60,000.
Strategies to lower AGI include increasing contributions to pretax retirement accounts or health savings accounts. Additionally, borrowers can receive a $50 reduction in their monthly bill for each dependent claimed on their tax return. However, borrowers should be cautious, as RAP offers forgiveness only after 30 years, longer than other income-driven repayment plans.
Current borrowers can still access some existing plans until mid-2028, which may offer better long-term benefits. Therefore, it is crucial for borrowers to evaluate their options carefully to determine the most financially advantageous repayment strategy