An analysis finds the GOP’s Repayment Assistance Plan would raise student loan repayment costs by … More
Getty ImagesWhat Is The GOP’s Repayment Assistance Plan And How Would It Change Student Loan Repayment Compared To SAVE?
House Republicans have introduced a sweeping student loan reform proposal that would eliminate the Biden administration’s SAVE plan and replace it with a single income-based repayment option called the Repayment Assistance Plan. This move comes as part of the GOP’s broader budget strategy to cut federal spending on education by an estimated $330 billion over the next decade, which is intended to offset extended tax cuts and other priorities. As the bill is titled, the Student Success and Taxpayer Savings Plan consolidates the current array of repayment programs down to just two: a standard fixed repayment plan and the new RAP income-driven plan.
The RAP plan sets monthly student loan payments as a direct percentage of a borrower’s adjusted gross income, extends the term before student loan forgiveness kicks into 30 years of qualifying payments, and eliminates negative amortization. For most borrowers, this approach would translate to significantly higher monthly bills in the short term and effectively shifts costs onto individuals to achieve budget savings for taxpayers, according to an analysis by the Student Borrower Protection Center.
Borrowers Would Pay $3,000 More Per Year Under GOP Student Repayment Plan Versus SAVE, Analysis Finds
The Student Borrower Protection Center, a nonprofit advocacy group, recently released a preliminary analysis finding that the typical borrower would see student loan payments spike by “hundreds of dollars per month, or thousands of dollars per year” under the GOP’s RAP proposal. In dollar terms, SBPC estimates that an average single borrower “with a bachelor’s degree [would pay]
almost $3,000 more per year” on the RAP plan compared to what they would pay under Biden’s SAVE plan. This figure underscores how much more expensive the Republican approach could be for millions of Americans carrying student debt.
To break down the numbers from SBPC’s analysis:
- Typical college graduate: About $2,928 more per year in payments under RAP vs. SAVE. This assumes a single borrower with a bachelor’s degree, a moderate student loan balance, and an income around the national median for college grads (approximately $80,000). They would owe roughly $244 extra per month under the GOP plan, nearly $3,000 more annually.
- Some college, but no degree: Roughly $1,761 more per year under RAP vs. SAVE. Borrowers who didn’t complete a degree typically earn less, so their payments wouldn’t rise as steeply – but they’d still pay about $147 more each month on average than they would with the SAVE plan’s terms.
- Families with student debt: Borrowers supporting dependents would be hit even harder. For instance, a family of four with a parent holding a bachelor’s degree would pay about $4,786 more each year under RAP compared to SAVE.
Mike Pierce, SBPC’s executive director, summed up the impact in his letter to Congress: “A typical borrower will see monthly student loan costs spike by hundreds of dollars per month, or thousands of dollars per year” if the Republican plan is enacted. In short, the RAP plan would be significantly more expensive for most borrowers than the current SAVE plan’s income-driven payments. The roughly $3,000 figure is an average increase. As the examples above illustrate, some individuals could see smaller increases, while others, such as those with larger families or moderate incomes and balances, could face even steeper payment hikes. It starkly contrasts the SAVE program, which the Biden administration touted as the most affordable student loan plan ever for borrowers.
Another Analysis Echoes Finding Of Student Repayment Plan Increases
A study by The Institute For College Access & Success cleverly titled, “A Bad ‘RAP’: Everything Wrong with House Republicans’ Poorly Designed “Repayment Assistance Plan,” echoes the SBPC’s findings. TICAS modeled out six borrower examples to show how RAP would increase student loan borrowers payments compared to SAVE. Their analysis showed that a borrower earning the median U.S. AGI of $81,000 with four people the family, including 2 dependent children would see payments increase by close to $5,000 a year.
Is Anyone Better Off Under RAP Than SAVE? These Borrowers Might Be
It’s also true that not everyone would be worse off under the RAP plan. The $3,000 higher annual payment is an average impact. Some borrowers would see a minor increase, and a select few could pay about the same or even less in specific scenarios.
Borrowers with high incomes or rapidly rising earnings, for example, are less likely to feel pain under RAP. For someone already earning a six-figure salary, their payment under the SAVE plan would be relatively high as well, and they might be on track to pay off their loans in full before any student loan forgiveness kicks in. If you have the means and intention to repay your student loans aggressively, the RAP plan’s lack of generosity won’t change your end game, as you’ll be wiping out the debt either way and potentially a bit sooner.
Similarly, borrowers with small loan balances of a few thousand dollars might not see a massive difference under RAP. Their repayment timeline is short regardless, and the additional amount they’d pay in a year under RAP could be relatively modest in absolute terms. For example, a borrower earning $20,000 a year would pay about 2% of their income under RAP, whereas under SAVE, they might have paid $0 if their income was low enough. A few hundred dollars more yearly is still significant for a low-income individual. Still, the RAP versus SAVE gap is nowhere near the $3,000 average hit that a middle-income borrower might experience.
Another subset that could fare better is those who expect their income to surge shortly. Imagine a medical resident or a recent grad in a high-growth field: their income might be low today (thus, they’d benefit from SAVE’s low payments in the short term), but in a few years, they’ll be earning much more. Under the SAVE plan, they could enjoy extremely low payments now, and interest on their loans wouldn’t be capitalized due to the interest subsidy. But once their salary jumps, they’d start facing higher payments, and potentially, they’d still have a large remaining balance to tackle since they weren’t chipping away much at the principal during the low-earning years, relying on eventual forgiveness.
Under RAP, by contrast, they’d be required to pay a bit more in their lean years (ensuring they at least cover interest), and when their income increases, they’ll be paying a substantial amount. The benefit for this kind of borrower is that they could knock out their debt faster and incur less total interest over time by making larger payments earlier and continuously. Essentially, RAP forces a faster repayment trajectory, which can reduce the long-term cost of the loan for those who don’t intend to seek forgiveness. A borrower with high-income growth might end up paying off their loan well before 30 years under RAP and perhaps even earlier than they would have under SAVE, simply because SAVE would have allowed them to stretch payments out longer.
It’s also worth noting that borrowers who prefer a simple, predictable plan might appreciate the two-option system the GOP proposal offers. The current landscape of multiple IDR plans can be confusing. In theory, RAP streamlines that: you either pay a fixed amount for a set term or a percentage of income for 30 years.
Repayment Assistance Plan Versus SAVE: What It Means For Student Loan Repayment And Forgiveness
The data indicate that the RAP plan would demand higher monthly payments and offer less forgiveness than the status quo for most student loan borrowers. Those borrowers will lose the most if the House GOP’s plan replaces existing repayment options, $3,000 a year on average.
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