The Repayment Assistance Plan (RAP): When Borrowers Might Consider This Student Loan Repayment Plan
- Nisha Mehta, MD
- 5 days ago
- 9 min read
The One Big Beautiful Bill introduced the Repayment Assistance Plan (RAP), a new income-driven repayment plan designed to replace the several repayment plans the OBBB effectively erased. The RAP is set to rollout in July 2026 and has some unique features compared to other repayment programs physicians may already be enrolled in. Below, we cover the core features of the Repayment Assistance Plan, including its tiered payment structure and potential benefits. We also walk through a detailed example of a potential payoff loophole physicians may be able to take advantage of with the Repayment Assistant Plan (RAP) that can allow borrowers in certain situations to optimize their finances, reduce their total loan burden, and build wealth simultaneously, potentially saving tens of thousands of dollars.
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Understanding the Repayment Assistance Plan (RAP) for student loans
The Repayment Assistance Plan is an income-driven repayment plan that will be available to federal borrowers starting July 1, 2026. Its primary goal is to align your monthly payments with your income, ensuring they remain affordable.
Key features of the RAP
The plan offers several advantages that may make it an attractive option for federal borrowers (but which may not necessarily be beneficial for doctors and other high income earners at first glance). These benefits are designed to provide financial relief and support while you work toward paying off your loans.
Tiered payment structure: Your payment is calculated as a percentage of your Adjusted Gross Income (AGI). The tiered system means that as your income grows, your payments adjust accordingly, but they never become unmanageable. If you make $100,000 or more in AGI, your annual required payment is 10% of AGI. If you make less than $100,000 AGI, then the % of AGI is adjusted according to ranges:
From | Below | Annual Payment |
$0 | $10,000 | $120 per year |
$10,000 | $20,000 | 1% of AGI |
$20,000 | $30,000 | 2% of AGI |
$30,000 | $40,000 | 3% of AGI |
$40,000 | $50,000 | 4% of AGI |
$50,000 | $60,000 | 5% of AGI |
$60,000 | $70,000 | 6% of AGI |
$70,000 | $80,000 | 7% of AGI |
$80,000 | $90,000 | 8% of AGI |
$90,000 | $100,000 | 9% of AGI |
Treatment of spousal income: If you file your taxes as "married filing separately," you can exclude your spouse's income from the payment calculation. This can dramatically lower your monthly obligation.
Principal reduction for dependents: Borrowers with dependents receive an additional benefit. For each dependent, the government makes a direct payment of $50 per month toward your principal balance. For a single individual, this equates to a $600 annual reduction of their loan principal if their payments aren't reaching principal.
Interest subsidy: If a borrower’s monthly payment does not cover the amount of current interest that accrued since the most recent billing cycle ended, the interest not covered by the borrower’s payment is subsidized (i.e., paid for).
Length of time: It is a 30-year repayment plan, but the potential loophole covered below considers earlier payoff potential.
Treatment of remaining balance: If a borrower goes all the way to the end of year 30 on this plan, the remaining balance is written off and added to their earned income for that tax year.
These features can combine to create a powerful tool for managing student debt. However, the true potential is unlocked when you pair the RAP plan with a disciplined investment strategy.
Why may RAP not be a good plan for physicians or other high income earners?
Basing payments on the Adjusted Gross Income, instead of the discretionary income like many of the other federal repayment plans, may make it even more difficult for making student loan payments over a 30 year period of time, or even the 10 year period when you’re doing PSLF. Since most doctors will make over $100,000, most will pay 10% of their AGI.
If you’re a very high income producing physician, it’s hard to make RAP make sense. For example, if your AGI is $800,000, $80,000 a year will mean huge monthly payments (~$6,700), and you will likely pay off your loan before being eligible for forgiveness options, but continue to pay a higher interest rate than you might have had you pursued student loan refinancing.
Explore student loan refinancing options and perks (including rate discounts) for physicians and get a free rate quote in just a few minutes.
Given that payoff for forgiveness in RAP is 30 years, most physicians will likely have paid off their loans before qualifying for forgiveness if not qualifying via PSLF in 10 years. On the off chance that any balance is forgiven through the RAP program (outside of PSLF), it is treated as income, which means you will owe taxes on the forgiven amount. At a physician’s tax bracket, this is another sizable number that needs to be considered.
However, if you’re more in line with the average physician income, and depending on your interest rate, it may be worth running the numbers on the strategy below.
The potential RAP loophole for doctors in action
The RAP payoff loophole is not about avoiding your obligations. Instead, it is a strategy that leverages the benefits of the RAP plan to build wealth while systematically preparing to pay off your student loan balance. It involves making the minimum required payments under the RAP and investing the difference between that payment and what you would have paid under a fixed repayment plan of similar length in time. Remember that investing always carries risk, and that historical returns assume a long term horizon in the market.
Let's explore this with a detailed example.
Dr. Smith's financial situation
Consider Dr. Smith has a MD/MBA and just accepted a private practice role with the following financial profile:
Student loan balance: $600,000
Interest rate: 6.50%
Adjusted gross income (AGI): $300,000
Tax filing status: Single
Income growth: 0%
Goal: Loan payoff in 10 years
Under a 10-year repayment plan, Dr. Smith's monthly payment would be approximately $6,813. Under the standard 25 year plan her payment would be $4,051 per month. On the RAP plan, her payment would be $2,500 per month, but keep reading to see how the math gets funky.
Every month, the current interest accrual on her loans is $3,250. This holds true across the board on day 1.
Calculating Dr. Smith's RAP payment
The RAP calculation for Dr. Smith would be $2,500 per month if $300,000 were used for income (10% of AGI). This is a substantial reduction from the $6,813 per month she would owe on a 10-year repayment plan.
Here’s how the RAP payoff loophole could work for her:
Reduced monthly payment: Dr. Smith pays the required $2,500 per month. Note: her first year of payments as an attending could be based on her final year of training’s income on her tax return.
Invest the difference: If Dr. Smith took the difference each month of $4,313 and put that in an investment account, then there is potential investment growth with those dollars.
Utilize RAP benefits: Along the way, her payments cover $2,500 of the $3,250 current interest, and the balance decreases slightly thanks to the $50 monthly principal reduction benefit for her dependent. The rest of the interest is subsidized. So her effective loan interest rate becomes $2,500 x 12 divided by $600,000 = 5.00%
The ten-year strategy
Let’s track Dr. Smith’s progress over the first 10 years of the RAP 30-year income-driven repayment plan.
Total RAP payments: Dr. Smith pays $2,500 per month for 10 years. In total, she’ll pay $300,000 in monthly payments.
Student loan balance: Her balance is projected to be $594,000 after receiving $6,000 in principal reduction over 10 years.
Investment account: Simultaneously, as Dr. Smith invests every month, assuming a 7% average annual return, her investment portfolio grows to approximately $715,000.
The financial impact of the RAP payoff loophole
If Dr. Smith had simply paid $6,813 every month for 10 years, she would have paid $817,560 in total to the lender.
By using the RAP payoff loophole, she could pay $300,000 along the way and then have a $715,000 investment account from which to pay the $594,000 and maybe have six figures leftover in the account!
Note: If Dr. Smith lived in a community property state and was married to a non-working or lower income-earning spouse, the figures would (in theory) provide an even better potential. For instance, if her AGI on the tax return was $150,000 because of equitable distribution of income on a tax return in a community property state, then her payments would be $1,250 per month and her effective interest rate would be 2.50% (hello early-2000s student loan interest rates!)
The primary benefit of this strategy is allowing your money to work for you. Instead of sending large payments to a lender, you could be building an asset that grows over time. The interest subsidy provided by the RAP plan makes this possible, effectively turning a 6.50% loan into a lower effective interest rate.
By leveraging the RAP plan, you could potentially transform a financial liability into a wealth-building opportunity. While this strategy requires discipline, the potential savings and long-term financial benefits can pay off.
For those with federal student loans, exploring the Repayment Assistance Plan is a critical step. It may offer more than just a lower monthly payment; it could provide a pathway to help physicians with their goals of financial independence. Knowing your options, understanding the rules, and running the math for your specific situation can help you take control of your student debt and build a stronger financial future.
What other options do I have if the RAP isn’t a good fit?
While the One Big Beautiful Plan massively overhauled student loan repayment plan options available to borrowers, the Repayment Assistance Plan isn’t the only option for physicians with student loans.
Factors such as your current student loan balance, employer, income, and interest rate(s) can determine what your monthly payment will be, as well as how much you might be able to save in interest, and potential eligibility for Public Student Loan Forgiveness (PSLF). We’ve covered options, including whether refinancing your federal student loans, might make sense in our guide to student loans and refinancing.
How can I get help evaluating RAP versus other IDR repayment options?
The student loan landscape has changed significantly (and multiple times) over the past several years, which can make options difficult to continually navigate. Physicians can follow news and updates on studentaid.gov and follow our PSG weekly newsletter for updates, but there is help available to craft a custom plan. Our partners at Grand Loan Advice™ offer a 1-hour consultation with a CSLP consultant, who will break down your options in detail, empowering you to make informed decisions about your debt. Whether you’re navigating changes brought by the One Big Beautiful Bill Act or exploring repayment strategies for the first time, Grad Loan Advice™ can help guide you. PSG members receive $50 off when you schedule your consultation today through our dedicated partner page.
If refinancing might be a good fit, we have resources that can help, and that provide you with a special rate discount or other perks as a PSG member.
Explore student loan refinancing options and perks for physicians and get a free rate quote in just a few minutes.
Conclusion
The Repayment Assistance Plan (RAP) is an income-driven repayment option introduced with the One Big Beautiful Bill that may provide physicians the ability to build wealth while systematically preparing to pay off your student loan balance. This potential loophole requires careful planning and discipline and only works if you invest the difference in what you would have made in additional monthly payments. This loophole may not work in all situations, as your RAP payment is dependent on your AGI and how much leverage you can potentially get depends on what your loan interest rates are and what your average invest returns are.
Additional student loan resources for physicians
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