RAP Is Live: The One Move 7.5 Million SAVE Borrowers Need to Make This Week

Derek Wu: Welcome to Coin Flip. I'm Derek Wu. Today's episode is about something that affects 7.5 million Americans right now, and most of them have no idea a clock just started on them. The SAVE Student Loan Plan is done. As of March 10th, a federal court killed it, and according to the U.S. Department of Education, servicers started sending 90-day notices on July 1st. You get that notice, the countdown begins. Don't act, and you get dropped into a higher-cost Standard Plan with no forgiveness path. That's the default, and defaults are expensive. So today we're going to break down what your actual options are because there are three of them and they are not equal. RAP, IBR, Tiered Standard. We'll walk through what each one costs in real dollars, not theory. Then we get to the part that almost nobody is talking about. There's a forgiveness credit problem buried in how RAP handles your payment history. Prior payments you've made on other income driven plans? Those can count toward SAVE's forgiveness clock. But if you switch into SAVE and then try to switch back to IBR's forgiveness timeline, that's a one way door most servicers or emails will never mention. We'll explain exactly what that means and who it actually affects. And we're going to end with something concrete, a three-question framework. That's it, three questions and one action you can take this week that gives you a 1% interest rate reduction just for enrolling in auto pay by September 30th. To put this in perspective, the U.S. Department of Education's own fact sheet shows a borrower with $35,000 in debt earning $45,000 a year would pay $150 a month under SAVE compared to $176 under the old income-driven plans. That's a real difference, but the 30-year forgiveness timeline versus IBR's 20, also a real difference. Good enough beats perfect every time, but first you have to know what To know what good enough actually looks like for your situation, the boring answer is usually the right answer. Today, we're going to find yours. Let's start with what actually happened to SAVE and why the 90-day window matters more than the headlines are letting on. March 10th, that's the date a federal court formally ended the SAVE plan. Nearly three years of legal limbo finally closed. Seven-and-a-half million borrowers got a court ordered answer and the answer was you're out. Now, if you've been in SAVE for Barron since 2024, not making payments, watching this ping pong through the courts, I get it. The frustration is legitimate. You planned around a program that kept getting yanked around. That's real. But here's the situation right now. The Department of Education confirmed it. Starting July 1st, servicers are sending official 90-Day notices to all 7.5 million former SAVE... SAVE borrowers. Your 90-Day clock doesn't start from July 1st. It starts the day your servicer contacts you specifically, and notices are going out in tranches roughly two weeks apart through the rest of 2026, which means your deadline might be September, it might be October. You won't know until you check your servicer portal. That's not step 3. That's step 1. So what happens if you just... Don't. According to Eciks, the One Big Beautiful Bill eliminates multiple income-driven plans and consolidates everything into two new options. If you miss your window, services auto-enroll you in either the Standard or Tiered Standard plan, fixed payments based on your loan balance, not your income, no income adjustment, no forgiveness path. For a lot of people who are paying zero dollars a month under SAVE, Dave, that's not a small upgrade. That's a payment shock. The TICAS analysis from February put it plainly, income-based plans are the best tool we have to keep borrowers out of delinquency and default. The moment payments stop being affordable, borrowers fall behind, and the Standard plan makes no adjustment for your income. None. Let's think about this from a stake standpoint. Doing nothing here isn't a neutral choice, it's a choice that gets made for you. Buy your servicer in a plan almost certainly more expensive than anything you'd pick yourself. The boring answer, log into your servicer portal this week, update your contact info so the notice actually reaches you, then figure out which plan you're going to pick. So which plan should that be? You've got real options and the math on each one looks very different depending on your income and your timeline. Let's walk through what each actually cost you. So now you need to pick a plan. Let's think about this in plain terms. Three buckets and where you land matters. Start with RAP, the Repayment Assistance Plan. According to NerdWallet, your payment is 1 to 10% of your full adjusted gross income, not discretionary income, your full AGI. The percentage slides up by one point for every $10,000 you earn. So take a single borrower, $45,000 income. $35,000 in loans. Under RAP, you're in the 4% bracket. That's $150 a month. Pay on time and the government waives any remaining interest for that month. Miss it and the waiver goes away. There's also a $50 principal match. The government chips in $50 toward your principal every month you pay on time. The Department of Education built that in specifically so borrowers can actually see the balance go down. Forgiveness after 30 years, assuming you've got something left. Now IBR (Income-Based Repayment), still available if your loans were issued before July 1st of this year. The math is different. 10% of discretionary income, which means IBR subtracts 150% of the federal poverty line from your income first before calculating what you owe. That's a shield. For a single person in 2026, that threshold is roughly $23,940. Everything below that is off the table before IBR even starts. For that same 45k borrower, IBR works out to around $176 a month, slightly higher than RAP on paper. But, and the important thing to understand is this: IBR's forgiveness clock runs 20 years. Not 30 – that's a full decade faster than RAP! So RAP saves you $26 a month today – IBR saves you 10 years of payments down the road. Those are not the same trade. Now the third bucket – the Tiered Standard Plan. This is where you land if you do nothing – fixed payments over 10 to 25 years depending on your balance. The Department of Education set up the sliding scale – $30,000 in debt puts you on a 15-year term at $262. No income adjustment, no forgiveness path. Your payment doesn't care what you make. To put this in perspective, the tiered standard isn't evil. If you earn a lot and want to pay your loans off fast, fine. But for someone coming off SAVE who needed income-driven payments, landing here by accident is just expensive inertia. So here's the rough filter. Income under roughly $80,000 and need the lowest possible monthly, RAP probably wins on payment. Pre-July 2026 loans and chasing forgiveness. Forgiveness faster. IBR's 20-year clock is worth the slightly higher monthly cost. And the College Investor ran scenarios showing RAP typically costs less per month below that 80K mark. But once you cross about 90K, IBR's discretionary formula starts winning. The numbers alone should get most people to a short list of one or two options. But here's the thing the payment comparison doesn't show you. If you've already been in repayment for years, Those years have a value, and switching plans can either protect that value or quietly erase it. That's the piece we need to look at next. So here's what your servicer or email probably won't tell you. Credits flow into RAP just fine, but they don't necessarily flow back out. Let me be specific: If you're in SAVE, PAYE, or ICR right now, those qualifying payments carry over when you switch to RAP or IBR. Student Loan Planner confirmed this. Your account moves with you. You don't start from zero. That part is fine. The asymmetry runs the other direction. If you switch into RAP and later try to move back to IBR, it's not clear your RAP payments count toward IBR's forgiveness timeline. CNBC reported that several experts flagged this, and the Department of Education hasn't clarified it. RAP payments do count for PSLF. That part is settled, but for standard IDR forgiveness, still murky. Think of it like a one-way turnstile. You can bring your credit in, getting it back out is a different story. And then there's the clock itself. RAP extends the forgiveness finish line by five years. What was a twenty year IBR timeline becomes thirty under RAP. A twenty five year clock also becomes thirty. Savingforcollege.com laid this out clearly. So if you're within, say, three or four years of forgiveness on your current plan, stay put. Do not switch. The five-year extension alone costs you more than anything RAP saves you on interest. Now, if your balance is still growing despite making payments, interest outpacing your principal, that's a different picture. RAP's interest waiver stops the bleed. The $50 monthly principal match chips away at the balance. For someone years away from forgiveness with a climbing balance, that combination can matter. So the frame is simple. How close are you to the finish line? That one question does most of the work. And that's exactly where we're going next. Three questions, one concrete action, and you walk away knowing which plan to pick. Three questions. That's all you need to pick a plan. Let's run them fast. Question one: How close are you to forgiveness? If you're within five years on your current IDR plan, stay put. Do not switch to REPAYE. The math on that one-way credit problem we covered makes the answer obvious. Question two: Is your principal still climbing? If you're making payments and your balance keeps growing anyway, REPAYE addresses that directly. The interest waiver kicks in and there's a $50 government principal match on top of that. Question three, are you going for PSLF, REPAYE qualifies. Both plans count toward those 120 payments. So focus on whichever produces the lower number. Forgiveness erases what's left either way. Now, the action item. Go to studentaid.gov. Run the loan simulator. Compare your monthly payment under REPAYE versus IBR. Takes about 10 minutes. Give the IRS permission to share your tax data and it's even faster. One bonus while you're there. The U.S. Department of Education confirmed that borrowers who enroll in autopay by September 30th get a 1% interest rate reduction through June 2028. Stack that on top of whichever plan you pick. It's free money sitting there waiting. Most financial decisions are coin flips. They genuinely don't deserve the mental energy. This one does. Three questions, 10 minutes, one choice. Make the call. All right, let's land this plane. Here's the one thing I want you to walk away with today. The SAVE plan is gone, and the 90-day clock to pick a new repayment plan is personal. It starts when your servicer contacts you, not from some fixed date on the calendar. Miss it, and someone else makes the call for you. And that someone is not on your side. We walk through what each plan actually costs, RAP, IBR, Tiered Standard, using real numbers on a real borrower's situation. The math told a clear story: lower monthly payments today or fewer total payments down the road. Those are not the same trade, and only you know which one fits where you are right now. The moment that stuck with me, and I think it'll stick with you too, is the one-way turnstile problem with RAP. Your prior IDR payment history carries into RAP, but RAP payments may not carry back into IBR's forgiveness clock. Most servicer emails would never mention that. Now you know. Three questions. That's your decision framework. How close are you to the forgiveness finish line? Is your balance going up or down, and are you working towards PSLF? Answer those honestly, then log into StudentAid.gov, run the loan simulator, and enroll in autopay before September 30th. That's your 1% interest rate bonus on the table. Look, most of this stuff is genuinely boring. Repayment plans, IDR acronyms, poverty line calculations. I get it. But boring decisions made on time consistently beat perfectly optimized decisions made too late. So make the call—login this week, update your contact info so the servers will notice actually reaches you—that's the move. If today helped you get a little clearer, subscribe so you catch the next one. Got a money decision you're spinning on? Drop it in the reviews—I might just flip a coin on it next week. Week. Thanks for listening to Coin Flip. I'm Derek Wu. Go make the call.