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WalletPrep worksheet · Debt

Which student loan repayment plan should you choose?

Name ____________________ Date __________

Key ideas

  1. One new loan changes every loan's options. A loan first paid out on or after July 1, 2026, even a consolidation, limits all your Direct Loans to RAP or Tiered Standard.
  2. RAP is 1% to 10% of income. The yearly payment is a share of your AGI, divided by 12, minus $50 a month per dependent. Never below $10.
  3. Tiered Standard runs 10 to 25 years. Owe under $25,000 and it is 10 years. At $30,000, Sam's term is 15 years and his payment about $253.

Vocabulary

Repayment Assistance Plan
The newest federal income-driven student loan plan: 1% to 10% of your adjusted gross income, minus $50 a month per dependent, with a $10 minimum.
Tiered Standard Plan
A fixed-payment federal student loan plan whose length, 10 to 25 years, depends on how much you owe.
Direct Consolidation Loan
A federal loan that combines several federal student loans into one, at the weighted average of their rates rounded up to the nearest one-eighth of a percent.
Adjusted gross income
Your total income for the year minus a short list of adjustments, like deductible IRA contributions and student loan interest. Many tax rules and programs use it.
Principal
The amount you borrowed, or the part of your balance that is still owed, not counting interest.

Work it out

Sam owes $30,000 in Direct Loans, one first paid out after July 1, 2026, so only RAP and Tiered Standard are open. Assume a 6% rate. His AGI is $55,000, with no dependents.

  1. Sam's AGI
  2. RAP rate for $50,001 to $60,000
  3. Yearly RAP amount
  4. Tiered Standard, 15 years
  5. Minus RAP payment per month
  6. RAP is lower by, per month
  7. Interest, Tiered Standard
  8. Interest, RAP if income stays flat

Check yourself

  1. Under RAP, what is the monthly payment for an AGI of $45,000 with one dependent?

    • A. $100
    • B. $150
    • C. $200
    • D. $375

  2. You owe $42,000 and enter the Tiered Standard Plan. What is the longest repayment period?

    • A. 10 years
    • B. 20 years
    • C. 15 years
    • D. 25 years

  3. Which loan type can't be repaid under RAP?

    • A. A Direct Unsubsidized Loan
    • B. A Direct Subsidized Loan
    • C. A grad PLUS loan
    • D. A parent PLUS loan

Your turn

Log in at StudentAid.gov, write down each loan's type and first disbursement date, then run the Repayment Calculator with your latest tax return. Note the two plans with the lowest payment you can keep up and call your servicer to switch.

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Answer key

Which student loan repayment plan should you choose?

Work it out

  1. Sam's AGI$55,000
  2. RAP rate for $50,001 to $60,0005%
  3. Yearly RAP amount$2,750
  4. Tiered Standard, 15 years$253
  5. Minus RAP payment per month− $229
  6. RAP is lower by, per month= $24
  7. Interest, Tiered Standard$15,568
  8. Interest, RAP if income stays flat$18,837
  1. RAP: 5% × $55,000 = $2,750 a year, and $2,750 ÷ 12 = $229.17 a month. That covers his first month's interest of $150, so no subsidy applies.
  2. Tiered Standard: $30,000 falls in the 15-year tier. At 6%, 180 payments of $253.16 pay it off with $15,568 in interest.
  3. If his income never changed, $229.17 a month would take 214 months and $18,837 in interest. RAP payments rise as his income does.
  4. Sam picks RAP while his income is modest and pays extra when he can.

Check yourself

  1. A. $100 $45,000 is in the 4% band: 4% × $45,000 = $1,800 a year, or $150 a month. One dependent takes off $50, so $150 − $50 = $100.
  2. C. 15 years Balances of $25,000 to under $50,000 get 15 years under the Tiered Standard Plan.
  3. D. A parent PLUS loan Parent PLUS loans, and consolidation loans that repaid them, are limited to the Tiered Standard Plan under the new rules.