Student Loan Calculator 2026: RAP, Interest Subsidy & Tax Rules
Calculate student loan payments with 2026 rules. Compare Standard vs RAP plans, see interest subsidies, and estimate tax on forgiveness. Includes new borrowing caps and repayment assistance.
Featured Snippet: What are the new student loan rules for 2026?
2026 Student Loan Changes
- Two Repayment Plans:Standard (10-25 years) and Repayment Assistance Plan (RAP), an income-driven plan
- Grad PLUS Elimination:Grad PLUS loans are eliminated for new borrowers as of July 1, 2026
- Borrowing Caps:Graduate students: $20,500/year unsubsidized. Professional degrees: $50,000/year
- Taxable Forgiveness:Loan forgiveness after January 1, 2026, is considered taxable income at the federal level
- Interest Subsidy:Under RAP, unpaid monthly interest is waived if minimum payment is met, preventing balance growth
Starting July 1, 2026, the student loan landscape changed significantly:
These changes apply to new loans taken out after July 1, 2026. Existing borrowers may be grandfathered into previous plans.
Understanding the Repayment Assistance Plan (RAP)
RAP Payment Calculation
- Formula:Monthly Payment = (AGI ร Payment Rate / 12) - (Dependents ร $50)
- Payment Rate:Between 1% and 10% of Adjusted Gross Income (AGI)
- Dependent Deduction:$50 per dependent child, reducing your payment
- Minimum Payment:$10/month, even if the calculation results in a lower amount
- Example:AGI of $50,000, 5% rate, 2 dependents: ($50,000 ร 0.05 / 12) - (2 ร $50) = $108.33/month
The Repayment Assistance Plan (RAP) calculates monthly payments based on income and family size:
The $10 minimum ensures all borrowers make some progress, while the dependent deduction helps families with children.
Interest Subsidy and Balance Protection
- Interest Waiver:If your RAP payment is less than your monthly interest, the unpaid interest is waived
- Balance Protection:This prevents your loan balance from growing, unlike previous income-driven plans
- Example:If your payment is $10 but interest is $200, the government pays $190/month in interest subsidy
- Benefit:Your balance stays stable or decreases, even with low payments
One of the key features of RAP is the interest subsidy:
This interest subsidy is a significant improvement over previous income-driven plans where unpaid interest was capitalized, causing balances to balloon.
Standard Repayment Plan 2026
Standard Plan Terms and Calculation
- Term Length:10 to 25 years, depending on loan balance
- Extended Term:Loans over $25,000 can extend up to 25 years
- Payment Formula:Payment = P ร [r(1 + r)^n] / [(1 + r)^n - 1]where P = principal, r = monthly rate, n = number of payments
- Advantage:Fixed payments, predictable payoff date, no forgiveness tax
- Disadvantage:Higher monthly payments than income-driven plans
The Standard plan uses traditional amortization with fixed monthly payments:
The Standard plan is best for borrowers who can afford higher payments and want to pay off their loans faster without relying on forgiveness.
2026 Tax Treatment of Loan Forgiveness
Taxable Forgiveness Returns
- Taxable Date:Forgiveness granted after January 1, 2026, is taxable
- Tax Calculation:Tax Liability = Forgiven Amount ร Marginal Tax Rate
- Example:$50,000 forgiven at 22% tax rate = $11,000 in taxes
- Planning:Set aside funds for the tax bill, or consider paying off loans before forgiveness to avoid taxes
- Impact:The "tax bomb" significantly reduces the benefit of forgiveness for many borrowers
Effective January 1, 2026, loan forgiveness is once again considered taxable income:
This is a major change from the temporary tax-free forgiveness period. Plan ahead for the tax liability on any forgiven amount.
2026 Borrowing Limits and Grad PLUS Elimination
New Borrowing Caps
- Graduate Students:$20,500/year in unsubsidized Direct Loans (down from unlimited Grad PLUS)
- Professional Degrees:$50,000/year for medical, law, and other professional programs
- Undergraduate Rates:2025-2026 fixed rate: 6.39% for Direct Subsidized and Unsubsidized Loans
- Impact:Students may need to rely more on private loans or reduce borrowing
As of July 1, 2026, Grad PLUS loans are eliminated for new borrowers, with new caps in place:
These caps apply only to new loans taken out after July 1, 2026. Existing borrowers are not affected.
FAQ
? What are the new student loan rules for 2026?
Starting July 1, 2026, most new borrowers are limited to two plans: a Standard plan (10-25 years) and the Repayment Assistance Plan (RAP), an income-driven plan. Grad PLUS loans are eliminated for new students, with graduate students capped at $20,500/year in unsubsidized loans. Professional degree students are capped at $50,000/year. Loan forgiveness after January 1, 2026, is now considered taxable income at the federal level.
? How does the Repayment Assistance Plan (RAP) work?
RAP is the new income-driven repayment plan for 2026. Monthly payments are calculated as 1-10% of your Adjusted Gross Income (AGI), minus $50 per dependent child. The minimum payment is $10/month. If your payment is less than your monthly interest, the unpaid interest is waived (interest subsidy), preventing your balance from growing. Remaining balances are forgiven after 30 years of qualifying payments.
? What is the 2026 interest subsidy?
Under RAP, if your monthly payment ($10 minimum) is less than your monthly interest accrual, the government waives the difference. For example, if your payment is $10 but your interest is $200, the government pays $190/month in interest subsidy. This prevents your loan balance from ballooning, unlike previous income-driven plans where unpaid interest was capitalized.
? Is student loan forgiveness taxable in 2026?
Yes. Loan forgiveness granted after January 1, 2026, is considered taxable income at the federal level. This means if $50,000 is forgiven, you may owe taxes on that amount based on your marginal tax rate. For example, at a 22% tax rate, you would owe approximately $11,000 in taxes on the forgiven amount.
? What are the 2026 borrowing limits for graduate students?
As of July 1, 2026, Grad PLUS loans are eliminated for new borrowers. Graduate students are limited to $20,500/year in unsubsidized Direct Loans. Professional degree students (medical, law, etc.) are limited to $50,000/year. These caps apply to new loans taken out after July 1, 2026.
? How long does it take to pay off student loans under the Standard plan?
The Standard plan ranges from 10 to 25 years, depending on your loan balance. Loans over $25,000 can extend up to 25 years. The payment is calculated using standard amortization, ensuring your loan is paid off by the end of the term.