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The US Department of Education’s new Repayment Assistance Program, or RAP, offers some benefits to student loan borrowers — but only if their payments are made on time.
“Being late paying, even just one day under the RAP payment plan, will cost you,” said higher education expert Mark Kantrowitz. “You’re going to lose important benefits that save you money.”
RAP is the government’s latest income recovery program, which means your debts count as part of your income. Under the program, which became available on July 1, monthly payments will typically range from 1% to 10% of the borrower’s income; the more they make, the bigger their required payment. RAP ends with loan forgiveness after 30 years.
About 46,000 student borrowers have already applied for RAP registration, Nicholas Kent, a senior official at the Department of Education, wrote in X at the beginning of the month.
Here’s what you need to know about the importance of timely payments in RAP.
Benefits lost by late payment
Student loan borrowers often see their balances increase beyond the amount they originally took out, due to interest accrual, said Rich Williams, former deputy assistant secretary at the Department of Education. RAP is designed to protect borrowers from that problem, Williams said.
“That protection comes from two benefits, both related to timely payment,” he said.
The first benefit is an interest waiver, where the department will write off any accrued interest on your balance for the month your payment is unpaid. Second: If your on-time payments reduce your principal balance below $50, the department may contribute up to $50 to the match, “ensuring that your principal goes down every month, no matter how much you pay,” said Williams, who is also chief customer officer at Summer, a company that provides guidance to loan holders.
Both of those benefits are lost if you miss your deadline.
Late payments will not count towards loan forgiveness, either under RAP or Public Service Loan Forgiveness terms. PSLF leads to loan waiver for government employees after 120 payments.
RAP is unique in how these effects work quickly, Kantrowitz added.
“Some programs tolerate each other before late payment is taken,” he said.
Even if your payment is late, you’ll still have access to a $50 discount that depends on that month’s plan. Under the terms of the RAP, you get that reduction on your monthly bill for each dependent listed on your federal tax return, which is usually children but can include parents and others in certain cases.
How to make sure you pay on time
The best way to avoid missing your due date is to sign up for automatic payments, Williams says. The Department of Education added an incentive for borrowers to do just that: a 1-point interest rate reduction until June 30, 2028. But to take advantage, borrowers need to sign up for automatic payments with their student loan service by the end of September.
One caveat: Some loan holders have had the wrong amount taken from their accounts through default payments. Because of that, always check the monthly expenses.
If your income drops, you should let your loan servicer know, “so your payment can be changed to something you can afford, rather than risking a missed payment,” Williams says.
Your account may also switch to “prepaid” status if you send more than a month’s worth, which could make you ineligible for both the RAP interest deduction and the same principal payment, Williams said.
“Therefore, paying exactly what you owe, on time, is often the smartest move,” he said.
