Federal student loan borrowers enrolled in the new Repayment Assistance Plan, or RAP, could lose several money-saving benefits if they miss a payment by even one day, according to a report published Sunday.
Late Payments Come at a Cost
Higher education expert Mark Kantrowitz told CNBC that borrowers who miss their due date by even a single day forfeit valuable benefits available under RAP.
RAP is the U.S. Department of Education’s newest income-driven repayment plan. Monthly payments generally range from 1% to 10% of a borrower’s income, with remaining balances eligible for forgiveness after 30 years. According to Education Department official Nicholas Kent, nearly 46,000 borrowers had already applied for the program earlier this month.
Those include the plan’s monthly interest waiver, which eliminates unpaid interest not covered by a borrower’s payment, and a principal reduction match of up to $50 if an on-time payment reduces the principal balance by less than that amount.
According to Rich Williams, former deputy assistant secretary at the U.S. Department of Education and now chief customer officer at Summer, those provisions were designed to prevent loan balances from growing because of unpaid interest.
A late payment also does not count toward loan forgiveness under RAP or the Public Service Loan Forgiveness program, which cancels eligible federal student debt after 120 qualifying monthly payments for public service workers. Unlike older repayment plans, RAP does not provide a grace period before a payment is considered late.
Borrowers who miss a payment still retain RAP’s $50 monthly discount for each qualifying dependent listed on their federal tax return.
Autopay Incentive Remains Available
The Department of Education recommends that borrowers enroll in automatic payments to avoid missing due dates. Eligible borrowers who sign up for autopay with their loan servicer by Sept. 30, 2026, can receive a temporary 1% interest-rate reduction through June 30, 2028, according to the department.
The late-payment guidance follows a broader federal student loan overhaul that took effect on July 1 under President Donald Trump’s One Big Beautiful Bill Act. The changes replaced several existing repayment programs for new borrowers with RAP and the Tiered Standard Repayment Plan while phasing out the Biden-era Saving on a Valuable Education, or SAVE, plan for millions of borrowers transitioning to new repayment options.
The Education Department announced the temporary 1% autopay incentive ahead of the overhaul to encourage timely repayment. The agency said the additional rate reduction supplements the existing autopay discount and is available to eligible Federal Direct Loan borrowers who enroll by the September deadline.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo courtesy: Shutterstock/ SkazovD
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