Repayment after the 2025 law · guide
The RAP interest waiver and matching principal payment
On the Repayment Assistance Plan, a balance cannot grow while you pay on time. Two rules guarantee it. First, interest your on-time payment does not cover is not charged: a borrower with $48,000 of loans at 6.52% accrues $261 of interest a month, pays $90 on an income of $36,000, and has the remaining $171 waived. Second, if the payment reduced principal by less than $50, the Department reduces principal by the difference, up to $50 or the amount paid if that is smaller; here the borrower's principal falls by $50 although the payment never reached it. Both rules come from section 455(q)(2) of the Higher Education Act, added by the 2025 law, and from 34 CFR 685.209 as published on May 1, 2026. They apply only to months with an on-time payment and only while you are not in deferment or forbearance. Paying ahead can cost you the match unless you tell the servicer not to advance the due date.
One month on RAP, split line by line
Balance falls this month by
$50
| Your on-time payment | $90 |
| Interest at 6.52% | $261 |
| Interest waived | $171 |
| Matching principal payment | $50 |
Two rules make the Repayment Assistance Plan different from every income-driven plan before it. Here is what they do in a real month.
Checked by Radif Partners · Editorial policy · How we calculate
Three borrowers, one month each
The interest waiver and the match interact with the size of the payment. The table follows one month for three single borrowers at the 2026-27 undergraduate rate of 6.52%.
| Borrower | Payment | Interest accrued | Interest waived | Principal paid | Match | Principal drop |
|---|---|---|---|---|---|---|
| $15,000 income, $30,000 owed | $13 | $163 | $151 | $0 | $13 | $13 |
| $36,000 income, $48,000 owed | $90 | $261 | $171 | $0 | $50 | $50 |
| $70,000 income, $30,000 owed | $350 | $163 | $0 | $187 | $0 | $187 |
The first borrower pays the minimum-level amount, all of it goes to interest, the rest of the interest is waived and the match equals the payment. The second pays more than $50 but still less than the interest, so the match is the full $50. The third pays well above the interest: principal falls by more than $50 on its own and no match is due.
Over the whole plan
For the second borrower the monthly effects add up. With income flat at $36,000, RAP would bring the balance down every month and leave $30,000 to forgive after 360 payments, with $43,933 of interest waived and $18,000 of matching payments along the way. On IBR the same borrower's unpaid interest would accumulate instead. The Department's own fact sheet gives a similar example: $35,000 of debt and $45,000 of income, $150 paid, about $40 of interest waived and a $50 match each month, with a balance that always goes down (Department of Education, June 9, 2026).
The order in which a payment is applied
The statute sets it: each payment goes first to interest due on each loan, then to fees, then to principal. Only after that does the waiver apply to the interest left over, and the match is measured against the part that reached principal. Because the match is computed on the total principal of all loans on RAP, a borrower with several loans receives one match per month, not one per loan. Principal not paid under the formula is deferred rather than due, which is the legal mechanism that keeps a RAP payment from creating arrears.
Paying ahead without losing the match
When you pay more than the amount due, the servicer normally advances your next due date, as on other plans. A month without a due date has no on-time payment, and therefore no match. The regulation addresses this directly: the borrower may opt out of advancing the due date, when making an electronic payment or by contacting the servicer, and the Department must disclose the consequences of each choice (34 CFR 685.209(o)(3)). With the opt-out, the extra money reduces principal and next month's payment is still due, so the match stays available. Borrowers who do let the due date advance keep credit for qualifying payments and PSLF for each month covered; they just forgo the match for those months.
What can interrupt the benefits
A late payment loses that month's waiver and match. A deferment or forbearance suspends the match, and interest during most forbearances accrues outside the RAP waiver. Failing to provide income information when asked moves your payment to the amount of a 10-year standard plan on the balance when your loans entered repayment, a much larger figure, until you comply. None of these erases benefits already received. Setting up auto pay, keeping consent for IRS data in place and answering recertification requests are the practical steps that protect the two rules month after month. The auto pay rate reduction adds a lower rate to that routine, and the RAP calculator shows your own monthly split.
A first year of repayment, month by month
Consider a new teacher with $48,000 of undergraduate loans at 6.52% and a first-year salary that puts her AGI at $36,000. Her RAP payment is $90 a month, below the $261 of monthly interest. In January she pays on time: the interest is covered up to her payment, the remaining $171 is waived and principal drops by the $50 match. February is identical, and so on through the year, each month lowering principal by $50 and lowering next month's interest a little with it. After twelve on-time months her principal is about $600 lower than at the start, and she has had roughly $2,050 of interest waived. On IBR, with the same income, her payment would be different and every dollar of unpaid interest would have stayed on the account.
Suppose instead she misses the due date in June by a week. That month the unpaid interest is charged and no match is applied. The next on-time month restores both rules, but June's interest remains owed. One late month does not undo the year, which is why the rules forgive occasional slips less than they reward consistency.
Joint returns and two borrowers
When a married borrower files jointly and the spouse also has loans eligible for RAP, the payment is the couple's RAP amount multiplied by the borrower's share of their combined balances, with the $10 minimum. The waiver and the match then work on each borrower's own loans and own payment. A couple where one spouse owes most of the debt sees most of the payment, and of the benefits, on that spouse's account. Married borrowers explains the split.
Why the rules matter more for some borrowers
The waiver helps most when the payment is far below the interest, which happens with a large balance and a modest income, typical of graduate borrowers early in their careers. The match helps most when payments are small, because it can double or even multiply the principal reduction a low payment would achieve. Borrowers with incomes high enough to cover interest and more see neither benefit, and for them RAP is simply an income-based payment, to compare with the Tiered Standard plan or IBR on cost. RAP vs IBR works through that comparison.