RAP's interest waiver: why your balance shouldn't grow

The rule

When your on-time RAP payment is less than the interest that built up that month, the unpaid interest is not charged to you. The law calls it an interest subsidy. StudentAid.gov says that if every payment is on time and in full and you take no breaks after entering RAP, your total balance will never go higher than it was when you entered the plan.

Conditions

• The payment must be on time and in full: the whole amount billed, by the due date.
• Only interest that builds up from due date to due date after you enter RAP is covered.
• Interest from before you entered RAP, or from deferment or forbearance, is not covered.
• It applies to subsidized and unsubsidized loans, for as long as you are on RAP. IBR’s interest help, by contrast, lasts three years and only on subsidized loans.

Paying more than the bill

Extra money goes to interest first, so paying more can shrink or cancel that month’s waiver. Paying ahead also normally moves your next due date forward, and months without a due date get no waiver or match. You can ask your servicer not to advance the due date. StudentAid.gov says more guidance on extra payments is coming.

Example

$30,000 at 6% builds about $150 of interest a month. With an AGI of $40,000 and no dependents, the RAP payment is $100. Paying $100 on time, the other $50 of interest is waived, and the principal match then cuts the balance by $50.

Not financial or legal advice. This page explains the published rules. It does not tell you which plan to choose. Your loan servicer and StudentAid.gov have the final word on your account.

Next guide: The RAP principal match: how the government helps cut your balance