RAP Payments by Income: The Full Table, and the Cliffs Your Clients Will Hit

Under the Repayment Assistance Plan, a client’s monthly payment comes down to one number: adjusted gross income. RAP applies a flat percentage to the client’s whole AGI, from 1 percent to 10 percent, then subtracts $50 for each dependent. There is no poverty-line deduction and no discretionary-income formula. That makes RAP easy to explain and easy to model. It also hides a trap the old income-driven plans did not have. Here is the full table, and the place where advisors earn their fee.

The RAP payment schedule

How the monthly number is built

1. Find the client’s AGI bracket and its percentage.
2. Multiply the full AGI by that percentage. That is the annual payment.
3. Divide by 12.
4. Subtract $50 for each dependent.
5. The payment is never less than $10 a month.

A client earning $60,000 with no dependents sits in the 5 percent bracket. That is $3,000 a year, or $250 a month. Give that same client two dependents and the payment drops to $150. A client at $45,000 with one dependent pays 4 percent of $45,000, which is $1,800 a year, or $150 a month, less $50, so $100.

The cliff most calculators miss

RAP does not price income at the margin. The percentage applies to the entire AGI, so crossing a bracket line re-prices every dollar. That creates cliffs.

A client at $50,000 pays 4 percent, about $167 a month. Earn one more dollar, cross into the 5 percent bracket, and the payment jumps to about $208 a month. One dollar of income adds roughly $500 a year to the payment. At the top the jump is bigger. A client at $100,000 pays 9 percent, about $750 a month. At $100,001 they pay 10 percent, about $833 a month. That is about $1,000 a year for a single dollar of AGI.

No client should pay more after a raise because they crossed a RAP line by a few dollars. But without a model that shows the bracket edges, that is exactly what can happen, and the client will not see it coming.

Why balances still fall

RAP pairs the payment schedule with two features that protect the balance. When a client makes the on-time payment, the government waives any unpaid interest for that month, so the balance does not grow from interest the payment did not cover. And if the payment does not reduce principal by at least $50, the government adds a match of up to $50 toward principal. A borrower in the low brackets can watch the balance fall while paying very little. We walk through that mechanic in Why RAP Balances Go Down.

The levers you actually control

Because the whole formula runs on AGI, every AGI lever is a payment lever. Pre-tax retirement contributions, HSA contributions, and other above-the-line items lower AGI and can move a client into a lower bracket or further from a cliff. Dependents cut the payment by $50 each. Filing status decides whose income counts, so a married couple’s choice between filing jointly and filing separately changes the AGI the payment is built on. Each of these is worth modeling before you recommend it, because the bracket structure means the payoff is not smooth.

Forgiveness comes after 360 on-time payments, which is 30 years, for undergraduate and graduate debt alike.

The advisor’s edge

The RAP table is simple enough to sketch on a napkin. The cliffs are not. An advisor who can show a client the exact payment at their income, the next bracket edge, and how a retirement contribution moves both is giving advice a free calculator cannot. Finology Software models the full RAP schedule, dependents, and filing status on a client’s real loan data, so the number you put in front of them is the number they will actually pay.