Why RAP Balances Go Down: The Interest Waiver and the $50 Principal Match

Here is the short version your clients need to hear. Under the Repayment Assistance Plan, a borrower who pays on time does not watch their balance grow. In most cases it falls every single month, even when the payment is small. Two features do this work: an unpaid-interest waiver and a $50 monthly principal match. Both are written into the plan, and both are worth walking a client through by hand.

This is a real change from the plans your clients grew up fearing.

The old problem: paying every month and owing more

For years, the complaint was the same. A borrower on an income-driven plan made every payment, on time, for years, and the balance went up anyway. When the monthly payment did not cover the interest that accrued, the unpaid interest piled on. On some plans it capitalized, so borrowers paid interest on their interest. That is negative amortization, and it is the single reason so many borrowers stopped believing repayment could ever end.

RAP removes both halves of that problem.

Feature one: the unpaid-interest waiver

Under RAP, when a borrower makes an on-time monthly payment and that payment is smaller than the interest that accrued, the remaining unpaid interest for that month is waived. It does not carry forward and it does not capitalize.

The U.S. Department of Education states it plainly: the plan “will waive remaining unpaid monthly interest when borrowers make on-time monthly payments,” ending the cycle where balances grew despite regular payments.

The practical result: interest can no longer push a RAP borrower’s balance higher. The most a low payment can do is fail to reduce the balance. It can never increase it.

Feature two: the $50 principal match

The waiver stops the balance from rising. The principal match makes it fall.

If a borrower’s on-time payment does not reduce principal by at least $50 in a given month, the Department of Education contributes a matching principal payment of up to $50. The match equals the lesser of $50 or the gap between $50 and the principal the borrower already paid that month. So the borrower’s principal always drops by at least $50 in any month they pay on time, even when the required payment is tiny and none of it would have touched principal on its own.

Put the two together and the arithmetic is clean. On-time payment, interest waived, principal down by at least $50. The balance goes one direction.

The Department of Education’s own example

The clearest illustration comes straight from the Department’s fact sheet. A borrower earning $45,000 with $35,000 in debt has a RAP payment of $150 a month. In that month, $40 of unpaid interest is waived and the borrower receives a $50 principal match. The balance falls, guaranteed, as long as the payment lands on time.

That $150 figure is not a guess. It is the plan’s formula.

Where the $150 comes from

RAP sets the monthly payment as a percentage of adjusted gross income, on a sliding scale, divided by twelve. The percentage climbs one point for every $10,000 of AGI.

Adjusted gross income	Share of AGI
$10,000 or less	$10 per month (flat minimum)
$10,001 to $20,000	1%
$20,001 to $30,000	2%
$30,001 to $40,000	3%
$40,001 to $50,000	4%
$50,001 to $60,000	5%
$60,001 to $70,000	6%
$70,001 to $80,000	7%
$80,001 to $90,000	8%
$90,001 to $100,000	9%
Over $100,000	10%

The result is then reduced by $50 a month for each dependent the borrower claims, and no payment falls below $10 a month.

Run the Department’s example through it: $45,000 sits in the 4% band, so $45,000 times 4% is $1,800 a year, or $150 a month. The formula and the fact sheet agree to the dollar. That is the point of getting the plan right. When the inputs are correct, the answer is not a range or an estimate. It is a number you can stand behind.

What this changes in the client conversation

For years the honest answer to “will my balance go down?” was “not for a while, maybe not ever on this plan.” Under RAP, for an on-time payer, the honest answer is “yes, every month.” That is a different conversation, and a better one.

Two things to keep straight when you have it:

First, the waiver and the match are tied to on-time payments. A missed or late month does not get them. On-time is the trigger, so the value of staying current is now concrete and easy to explain.

Second, RAP is the plan a borrower lands on, not automatically the cheapest path for every client. Forgiveness under RAP arrives after 360 on-time monthly payments, a full 30 years. For a client chasing Public Service Loan Forgiveness or one who will clear the balance well before then, the shrinking-balance guarantee is reassuring but not the deciding factor. The plan still has to be the right plan.

That is the work: model the borrower’s real AGI, real dependents, and real timeline, then show the balance curve that actually results. When the numbers are correct, the client trusts them, and the conversation moves from anxiety to a plan.

Finology Software runs that math the way the statute writes it, so the balance you show a client is the balance the servicer will produce. That is the difference between a projection a client hopes is right and one you can put your name on.

---

Sources: U.S. Department of Education, “Fact Sheet: The Trump Administration Is Simplifying Student Loan Repayment” (ed.gov). Congressional Research Service, “The Repayment Assistance Plan (RAP) in P.L. 119-21,” IF13075 (congress.gov). RAP takes effect July 1, 2026.