RAP $50 Principal Match and Interest Waiver Explained

Guides · Updated October 17, 2026 · 3 min read

Educational information only. Not financial, tax, or legal advice. We are not the U.S. Department of Education or a loan servicer. Help with federal loans is free at StudentAid.gov. Never pay a company to apply for a repayment plan. Last checked against the listed official sources: October 17, 2026. Examples use made-up numbers.

Short answer: If you make full, on-time RAP payments that do not cover the monthly interest, the unpaid interest is waived (not added to your balance). The government also reduces your principal by the lesser of $50 or your payment, minus the amount of your payment that already went to principal.

The official rules

• Interest subsidy. Federal Student Aid: borrowers who make full, on-time monthly payments on RAP get an interest subsidy if payments do not cover monthly accrued interest. The Education Department fact sheet says unpaid interest is fully waived.
• Matching principal. Under 34 CFR 685.209(o)(2): in a month you make an on-time payment and your principal falls by less than $50, the Secretary reduces principal by (the lesser of $50 or your payment) minus the amount of your payment applied to principal.
• Not during deferment or forbearance.
• "On time" means received on or before the current month's due date but after the previous month's due date.
• Overpaying can pause benefits. If you pay more than is due, your next due date may advance automatically; no match is provided for months without a due date. You can opt out of advancing (the eCFR text says you must opt out to receive the match; ask your servicer how).

Example A: payment below interest (made-up)

Balance $40,000 at 6% gives monthly interest of about $200. AGI $48,000 and 1 dependent gives a RAP payment of $110 (see RAP explained).

1. The $110 payment goes to interest; $90 of interest is unpaid and waived.
2. The principal portion is $0, so the match is the lesser of $50 or $110, minus $0, which is $50.
3. Balance: $40,000 to about $39,950, instead of growing.

Example B: payment above interest (made-up)

Balance $10,000 at 6% gives interest of $50. RAP payment $120.

1. $50 goes to interest and $70 goes to principal. Principal already falls by more than $50, so the match is $0.

Example C: small payment (made-up)

Balance $20,000 at 6% gives interest of $100. RAP payment $10 (the minimum).

1. $10 goes to interest and $90 is waived.
2. The match is the lesser of $50 or $10, minus $0, which is $10 of principal reduction.

These examples are our own application of the published formula. Confirm how your servicer applies payments. The rates here are not current federal rates. The payment comparator repeats this month-one arithmetic for figures you type, and labels it an estimate.

FAQ

Does this make the loan free?

No. You still pay the monthly amount, and the balance can remain for up to 30 years.

Does the match count as income?

We did not find an official statement on the tax treatment of the match. Ask a tax professional.

What we could not verify