Late Payments on New RAP Student Loan Plan Could Strip Borrowers of Key Benefits

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The U.S. Department of Education’s new Repayment Assistance Plan (RAP) provides specific benefits to student loan borrowers, contingent on timely payment of their bills.

“A payment that is even a single day late under the RAP repayment plan can result in the loss of valuable, money‑saving benefits,” higher education expert Mark Kantrowitz warned.

RAP is the latest income‑driven repayment option, with monthly payments limited to a percentage of the borrower’s income — generally 1% to 10% of earnings based on income level. Launched on July 1, the plan provides loan forgiveness after 30 years.

According to Nicholas Kent, a senior official at the Department of Education, nearly 46,000 borrowers had applied for RAP by the beginning of the month.

Here are the key considerations for maintaining timely payments under RAP.

Benefits lost by late payments

Student loan balances can increase significantly due to accrued interest, according to Rich Williams, former deputy assistant secretary at the Education Department. RAP was created to protect borrowers from this issue.

“The two protections are tied to on‑time payments,” he explained.

The first benefit is an interest waiver: any interest accrued that exceeds the payment for the month is erased. The second benefit is a principal match — if the on‑time payment reduces the principal by less than $50, the department contributes up to $50, ensuring the principal declines each month, regardless of payment size,” Williams explained.

Missing a due date results in the loss of both benefits.

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A late payment does not count toward loan forgiveness under RAP or Public Service Loan Forgiveness; PSLF provides debt cancellation for qualifying public servants after 120 qualifying payments.

Kantrowitz noted that RAP imposes these consequences more quickly than other plans.

“Other plans provide a grace period before a payment is deemed late,” Kantrowitz said.

Even with a late payment, borrowers retain a $50 monthly discount for each dependent claimed on their federal tax return — typically children, but also parents or other qualifying individuals.

How to make sure you pay on time

The most reliable way to avoid missed due dates is to enroll in automatic payments, Williams advised. The Department offers a 1‑percentage‑point interest‑rate reduction through June 30, 2028, provided borrowers enroll in autopay with their loan servicer by the end of September.

Borrowers should monitor their accounts, as some servicers have mistakenly debited incorrect amounts when autopay is used.

If income declines, inform your loan servicer promptly so your payment can be adjusted to an affordable amount, avoiding missed payments,” Williams said.

Sending more than the required amount in a given month can place your account in a “pay‑ahead” status, which may eliminate eligibility for the interest waiver and the principal match, Williams warned.

“Paying exactly what you owe, on time, is typically the smartest approach,” he said.

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