RAP versus refinancing
RAP works unlike any income-driven plan before it. This compares it against a refinance offer, including the two subsidies most models leave out.
Estimates, not financial advice. Check anything that matters with your loan servicer before you act.
What most RAP comparisons get wrong
RAP has three features that change the arithmetic substantially, and a comparison that omits any of them lands somewhere the full arithmetic does not.
The interest waiver
Under the older income-driven plans, a payment smaller than the accruing interest meant the balance grew. Under RAP it does not: uncovered interest is not charged at all. A model that carries unpaid interest forward on RAP will show a ballooning balance that will not happen, and will make refinancing look like a rescue.
The matching principal payment
Where an on-time payment reduces principal by less than fifty dollars, the Department adds the difference, capped at the lesser of fifty dollars and the payment itself. Combined with the waiver, this means the balance falls every single month for an on-time payer, even for a borrower paying ten dollars, whose match is at most another ten.
The tax on forgiveness
RAP forgiveness arrives after 360 payments and is federally taxable in the year it lands. A tool that treats it like PSLF overstates its value by roughly a quarter to two fifths depending on your bracket. This one applies the rate you supply and shows the tax as its own line.
Where RAP wins, and where it does not
Because RAP takes a percentage of your whole income with no poverty-guideline deduction, it is unusually sensitive to the ratio between income and balance.
- Large balance, modest income: RAP is usually far better than refinancing. Payments are small, interest does not accumulate, and a substantial balance is eventually cancelled.
- Small balance, decent income: RAP can be worse than a private loan. Ten percent of a $110,000 income is $917 a month regardless of whether you owe $30,000 or $300,000.
- Low earner with several children: RAP is often worse than IBR, because RAP gives a flat fifty dollars per dependent while IBR protects 150 percent of the poverty guideline scaled to family size. Compare all three, not just RAP against the offer.
Months paid under RAP do not count toward forgiveness under IBR, PAYE or ICR, but IBR months do count toward RAP. So moving from IBR to RAP preserves your credit, and moving from RAP to IBR does not. If income-driven forgiveness rather than PSLF is your endgame, that asymmetry is worth understanding before you elect RAP.
Months in RAP do count toward PSLF either way.
Watch the band edges
RAP applies its percentage to your entire adjusted gross income, so the band edges are hard cliffs rather than gradual steps. At $100,000 of AGI the payment is $750 a month. At $100,001 it is $833.34. One dollar of income costs a thousand dollars a year.
Because AGI is reducible through traditional retirement and HSA contributions, a borrower just above an edge has a real lever. Thefull cliff table is on the RAP page.
Related: how RAP works in full andwho ends up on RAP without choosing it.
Common questions
Is RAP better than refinancing?
It depends almost entirely on income relative to balance. RAP charges a percentage of your entire adjusted gross income regardless of what you owe, so a large balance with a modest income produces a small payment, an interest waiver, and eventual forgiveness. The same modest income with a small balance produces a payment that may well exceed what a private loan would cost. The tool computes both.
Does the RAP interest waiver mean my balance never grows?
For an on-time payer, yes. Accrued interest not covered by the payment is not charged under 34 CFR 685.209(h)(4)(i), and where the payment reduces principal by less than fifty dollars the Department adds a matching principal payment, capped at the lesser of fifty dollars and your monthly payment, so a ten dollar payer receives at most ten dollars. The Department states that balances decline each month for borrowers who pay on time. A single late payment forfeits both for that month.
Why does the calculator ask for dependents and family size separately?
Because RAP and IBR use different numbers. RAP reduces the payment by fifty dollars a month per dependent claimed on your federal return, and a spouse is not a dependent. IBR, PAYE and ICR use family size to set the poverty-guideline deduction. Any tool that collects only one of these gets one of the plans wrong.
Is RAP forgiveness taxed?
Yes, federally, in the year it is granted. The exclusion for discharged student debt expired on 31 December 2025 and was not extended. Over a thirty-year horizon that materially reduces what RAP forgiveness is worth, and this calculator applies the marginal rate you supply. PSLF forgiveness remains tax free.