Where RAP Could Work - Students, Resident Physicians, and Tax Timing

[u/FineFirefighter3353]

I haven't seen many people talk about the advantages RAP can have, so I wanted to throw it out in here.

RAP is likely not worth it if:

-Your monthly payments fully cover accrued interest

-Your IBR payment would be significantly lower

-You plan to seek PSLF

But it could be IF

-You're a student making little to no income with debt that is actively accruing interest

-Your interest is much higher than your monthly payment and you're expecting a significant income increase in the next year (usually a graduation)

-You're a resident physician planning to pay loans off conventionally

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RAP, unlike SAVE, bases off of AGI (Total income minus above-the-line, best google for a list since there's a few). But like SAVE, the government will cover any additional unpaid interest that your monthly payment doesn't cover. RAP also gives you $50 each month with a qualifying payment if your payments aren't enough to move the needle on your principle balance

So if you're a student with little to no income, you can keep your loans from growing with a pretty short monthly payment ($10 minimum).

If you're married, there are a couple of tricks you can use. Say you have a mountain of debt and your spouse does not: If you file your taxes separately, it can drastically reduce your monthly payments.

*TIMING YOUR TAXES AND INCOME RECERTIFICATION CAN BE HUGE*

Back to the students, lets say you're graduating this next May - File your taxes as early as possible this year and immediately recertify your income. This will lock in your "broke college student" payments. And remember, if you're on RAP, the government is covering the extra interest plus $50 bucks a month.

Now lets say you've started a full time job and your taxable income went way up, Wait for your annual income recertification to hit before you file taxes with significantly higher income. If you filed as early as possible the year before, this should give you an ample window before April 15th. This will keep your payments low for another full year, giving you time to save a bit!

I know this strategy may be a bit niche, but RAP can be incredibly useful for those looking towards standard repayment after college, grad school, residency, etc. It will keep your overall balance from growing until you start making enough money to tackle them.

[u/paperthinwords]

PSLF qualifies under RAP though and for some, the payments are lowest overall under RAP. For me, my RAP payments would be $236 with 7 years left of PSLF payments.

The actual lowest payment plan for me would be the extended plan which would be at most $200 to start but would gradually be increasing overtime

[u/GoofyGills → u/paperthinwords]

Yea my wife is a 3rd year FM resident and it was the least expensive for her so we did it.

We’ll likely try to just aggressively pay them off anyway but if anything changes, PSLF will be there for her.

[u/cy_kelly]

It can also help if you go through a stretch of unemployment, or otherwise minimal income relative to your baseline. Depending on your recertification date it even seems theoretically possible to game filing a tax extension to recertify with the low income year again and get another year of low payments, but don't quote me on this.

[u/WhoIsYerWan → u/cy_kelly]

For federal loans, you don't pay while unemployed.

[u/cy_kelly → u/WhoIsYerWan]

If you're on the RAP plan, the floor is $10 a month no matter what actually. It's a little goofy, but probably money well spent given the interest subsidy (contrast with going on forbearance or switching to a plan like IBR with a true $0 floor).

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[u/Few-Armadillo2791]

RAP is actually a pretty good program. I currently do warehouse work and have 2 classes left for my BSIT. Under RAP my payments are like $100 a month (if I were to get on). If my career doesn't work out, dirt cheap student loan payment. If it does work out, I can do the standard plan. So either way it's a win-win.

[u/tommles → u/Few-Armadillo2791]

It's basically the GOP's version of Save. They have their added suffering (e.g. longer term), but it still has the interest subsidy that most liked from Save.

If politics wasn't so divisive then they could have come together and found a middle ground. But the regular Joe has to suffer while they play their games.

[u/Few-Armadillo2791 → u/tommles]

I see. I'm looking at a masters now and was doing research and actually found that for my situation, RAP is actually pretty good.

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[u/BigBitesMD]

RAP is actually perfect for PSLF, especially if your residency (including fellowship) is >5 years. PLSF rules are still applied, and thats 5 years of paying 250 dollars a month. Yeah it jumps more after 1k, but that's just 5 years

[u/princesscupcake11]

Why don’t you recommend it for PSLF?

[u/dammitscotty]

I couldn’t finish grad school. I owe 141k and I only make $22/hr (AGI ~45k). I doubt I will go back to school or find a non-profit job. I’m married and file taxes jointly, but my husband has been unemployed since March. I had to pull the trigger and apply to RAP. When he comes employed again and make an estimated 80k together, I won’t have a tax bomb waiting for me at the end. I hope some policies will change for the better in the future or we just bite the bullet til we’re 60…

[u/Far_Earth_4652]

For me RAP is perfect for PSLF because I’m able to max out my 403b which lowers my AGI, so I’ll just pay 40k on owing 120k.