How the RAP Interest Subsidy Works for Physicians (2026)

The Repayment Assistance Plan looks almost like free money. Government pays off any unpaid interest so your debt doesn't grow if you have low income. That is very attractive for people making $65, 000 to $85, 000 who owe $250, 000. But the value of this subsidy really depends on your situation. Generally, Income Based Repayment (IBR) is much better than RAP for most doctors; that's bottom line. What Is the RAP Interest Subsidy? The new big beautiful bill act created the Repayment Assistance Plan (RAP) which begins July 1, 2026. This plan includes subsidies for interest payments. If monthly payments under RAP are less than accrued loan interest, the government makes up the difference. That means debt does not grow. This new plan is better than IBR which subsidized only subsidized loans for first three years. But that plan Save was much better with an unlimited subsidy of interest. That's why failure of Save is so important. Under Save if someone paying $400 per month on $2000 monthly interest saw no growth of debt, growth happens under RAP. Growth of interest occurs for unsubsidized loans under IBR. RAP subsidy rule: Under subsidy rules the government fully covers unpaid interest on all types of loans. Balance does not increase as long as RAP payments are lower than interest due. Critical limitation: But a big limitation is eligibility for RAP only for loans disbursed on or after July 1, 2026. If you started medical school before that date you are ineligible and stuck with IBR. Who Actually Benefits from the RAP Interest Subsidy Monthly interest on $250,000 at 7.05% (2024–25 rate) is $1469. When does this become less than monthly RAP payment? RAP payment is 10% of disposable income (AGI minus poverty level at 225%). Monthly interest on $250,000 at 7.05% (2024–25 rate): Resident earning $70,000 AGI: For medical students with recent loans: Poverty level at or below 225% is approximately $33,300 Disposable income: $70,000 − $33,300 = $36,700 10% of this is $3,670 annually → $306 per month Thus monthly interest is $1469 and monthly RAP payment is $306. Subsidy covers $1163 gap each month. Benefit: $1163 each month × 12 months = $13,956 annually. This is substantial but only for recent loan medical students; existing borrowers do not qualify. Comparing the RAP Subsidy to IBR's Subsidy For MS1s starting in 2026 or later who are eligible for RAP, here are subsidies that matter: Plan | Subsidy Interest Rate | Who Receives Support RAP | 100% of unpaid interest for all types of loans and entire repayment | Only new loans starting July 1, 2026 IBR | No subsidy (balance increases if payment less than interest) | All Federal borrowers from beginning SAVE | 100% (Previously) | Vacated by the 8th Circuit by March 2026 and no longer available PAYE/ICR | No support (ended after July 1, 2026) | Only previous enrollees get grandfathered For existing medical students and residents: For current medical students and residents: Use IBR. There is no subsidy for interest; thus your balance grows during training. Use MedDebt Calculator to model your numbers and see what the balance will be with salary for attending. For MS1s starting in July 2026 or later: For MS1s starting July 2026 or later: RAP subsidy is used for IDR option. Assistance from subsidy is very helpful during residency. But longer repayment period of 30 years (versus IBR 20 to 25 years) and lack of cap for Standard Payments makes it less attractive for high earners when they start to practice. See blog for details on years of practice: [Comparison of RAP and IBR for Physicians 2026] (/blog/rap-vs-ibr-physicians-2026). Subsidy Math for a Full Medical Training Cycle Let's consider a doctor who st arts medical school in September 2026. They have $250,000 in loans eligible for RAP. They follow typical path: 4 years of medical school deferring payments, Internal Medicine residency of 3 years roughly $65,000 to $75,000 AGI per year, then become attending. Medical School (4 years deferring): No RAP payments are due during this time. Interest still accrues. The RAP subsidy does not kick in during deferment; it only applies when actively repaying. So by graduation, the balance has grown to roughly $316,000 (starting at $250,000 and adding 7% interest over 4 years). Residency Years (PGY 1-3 about $65,000-$75,000 AGI): During the first year, RAP payment is about $270 per month. Monthly interest on $316,000 is around $1,856 per month. The subsidy covers $1,586 per month. Annual subsidy value is roughly $19,000. Over three years of residency, subsidy stops roughly $55,000 to $60,000 in balance growth. This money would otherwise compound over attending years. This is a significant amount but remember that current IBR borrowers don't get this benefit. Attending Years (after residency): Once income reaches $250,000 or higher, RAP payments will exceed monthly interest. Subsidy will no longer apply; you pay regular IBR. At $250,000 income, RAP payment will be about $1,800 to $2,000 per month and covers most of interest. No subsidy required at this level. When the RAP Subsidy Matters (and When It Doesn't) The subsidy benefits most: During residency and fellowship years (low income and high debt payments are much smaller than interest). Fellows who train for long periods of time of 7 or more years also receive this subsidy for that long time at low income. For subspecialty fields such as Cardiothoracic Surgery (residency 7 years), Neurosurgery (7 years) and pediatric subspecialties that require fellowships. These fields take a very long time of training and the subsidy prevents large balance growth during this time. But subsidy is less relevant or doesn't matter: For attending physicians who have finished training (high income and payments exceed interest). For people who have already paid down their loans aggressively (subsidy is irrelevant if you are paying more). For borrowers who use Income Based Repayment (before 2026) because they cannot use RAP. For those who have already paid off their loans through Pay Your Loans Off (PSLF) and have 120 payments to balance forgiveness. How PSLF Interacts Doctors aiming for PSLF should pursue it regardless of whether you qualify for RAP or IBR. The 10 year forgiveness is most important. Use the IDR quiz at [/quiz] to find which plan saves you the most money for PSLF based on income. Interest subsidy doesn't change strategy: it doesn't matter if your balance is $200,000 or $400,000 and while that subsidy flattens your balance during training and that feels good, in financial terms it's meaningless for PSLF borrowers. PSLF-seeking physicians should still pursue it regardless of RAP vs IBR eligibility. The 10 year forgiveness is most important. Use the IDR quiz at [/quiz] to find which plan saves you the most money for PSLF based on income. One Catch: Refinancing Refinancing to a private loan means you immediately lose the RAP subsidy and all federal protections. Residents and fellows should almost never consider refinancing since RAP subsidy during training is real money that private lenders cannot match. Wait until you are attending with steady income before even thinking about refinancing; you can compare pros and cons on our refinancing page. Frequently Asked Questions Does RAP subsidy apply to loans that I currently have? No, it does not. RAP subsidy is only for new loans disbursed starting July 1, 2026. Loans disbursed before this date, including those from the academic year 2025–26 and earlier, are not eligible. Existing borrowers use IBR. Do subsidized interest apply during school years? No, there is no subsidy for accrued interest during deferment while in medical school. Once you enter repayment after graduation or leaving school, the subsidy kicks in. Will I lose the subsidy if I switch from RAP to IBR? Yes, you lose it. Interest accrues and unpaid amounts accumulate under IBR; the subsidy is for repayment not deferment. Is RAP subsidy better than what SAVE had to offer? They are similar. Both SAVE and RAP offered 100 percent subsidy for all loan types. The difference is timing of forgiveness: SAVE forgave undergraduate loans after 20 years and graduate loans after 25 years. RAP forgave loans after 30 years uniformly. SAVE was better for most doctors. RAP is the replacement for new borrowers. Will subsidy continue forever? We don't know. SAVE existed from 2023 and ended by 2026. RAP is by law and thus hard to change legally. Congress might still amend it though. Therefore do not make big financial decisions assuming subsidy will never change. Run Your Own Numbers Your unique debt situation requires you to use the MedDebt Calculator to design a repayment strategy that matches your own. You can model different strategies including Public Service Loan Forgiveness, aggressive repayment or refinancing and compare them to your actual loan balance and specialty along with income. It's free, takes only two minutes, and shows you projections for net worth year by year.

This article is for informational purposes only and does not constitute financial, legal, or tax advice. Every borrower's situation is unique — consult a certified student loan advisor or fee-only financial planner before making repayment decisions.

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