The Education Department quietly updated its online guidance on Monday for borrowers to reflect new changes to federal student loan repayment and loan forgiveness programs. The updates provide new details for borrowers on reforms that are broadly impacting federal student loans, and the current guidance heavily emphasizes the importance of making “on-time” payments for borrowers to be able to benefit from key benefits going forward.
The department is in the process of implementing sweeping student loan reforms under the One Big, Beautiful Bill Act. Several student loan repayment plans are being phased out, while new plans just recently launched. New regulations to enact these reforms went live in July. With key deadlines now passed, the landscape continues to evolve for millions of borrowers.
Here’s a breakdown of the latest guidance, what it means for federal student loans, and why making timely payments is going to be really important for many borrowers going forward.
Payments On Student Loans Must Be On Time To Receive RAP Interest Subsidy
The Education Department clarified key aspects of the Repayment Assistance Plan (or “RAP”), a new income-driven repayment plan that offers borrowers payments tied to their income and eventual student loan forgiveness after 30 years in repayment. Borrowers who took out all of their federal student loans prior to July 1, 2026 can retain access to certain legacy repayment plans, but can opt to enroll in RAP if they want. But borrowers who take out any new federal student loans on or after July 1, 2026 can only enroll in either RAP or a new Tiered Standard Repayment plan, which is not based on income.
One of the key features of RAP are interest and principal benefits that can help keep federal student loan balances from ballooning over time due to interest accrual.
“Borrowers whose full, on-time monthly payments are less than the interest accrued between the previous due date and the current payment date will have their unpaid interest for that month subsidized,” says the department’s current guidance. That means that any interest that accrues above and beyond a borrower’s minimum monthly payment amount will be waived if their RAP payments are less than the amount of interest that accrues each month.
But to receive this benefit, RAP payments must be made “on time.”
“The interest subsidy is applicable only for Direct Loans being repaid under RAP and can be applied only to months for which (1) a borrower receives a bill with a monthly payment amount that’s derived using the RAP formula when (2) the borrower (or someone on the borrower’s behalf) makes a full and on-time payment to satisfy that same bill.”
Borrowers can pay more than their minimum required monthly payments under RAP if they want. But doing so may cause them to reduce or eliminate the resulting interest subsidy.
“If a borrower’s monthly payment amount isn’t enough to cover the interest that accrued since the previous due date and the borrower (or someone on the borrower’s behalf) chooses to pay more than the monthly payment amount, then any amount paid above the monthly payment amount will be applied first to accrued interest and then to the principal,” says the department’s updated guidance. “This means that the additional amount paid may reduce or eliminate any interest subsidy that the borrower would’ve been entitled to if they hadn’t paid more than the amount due.”
On Time Payments On Student Loans Also Required For RAP Principal Benefit
In addition to the interest subsidy, RAP also offers a principal benefit for borrowers whose minimum required monthly payment isn’t enough to cover all the accruing interest on their federal student loans. In these circumstances, the government will direct up to $50 to the loan principal balance. That means that, between the interest subsidy and the principal benefit, a borrower’s federal student loan balance should not only never increase while the borrower is in RAP; the balance may actually incrementally decrease, even if a borrower has low RAP payments.
But just like with the RAP interest subsidy, the principal benefit also comes with strict rules, including that the payment must be made on time, and in full for the borrower to receive the benefit. And the borrower must actually get billed in order to receive the benefit. Periods of non-payment, paid-ahead periods, and billing periods where a borrower pays extra, may not be eligible for the RAP principal benefit.
“If a borrower makes a payment (or a payment is made on the borrower’s behalf) in a month in which the borrower hasn’t been billed due to being enrolled in RAP and/or because the borrower’s loan isn’t in a repayment status, then that month won’t be eligible for a matching principal payment,” explains the department in its online guidance. “If a borrower’s monthly payment amount would result in their principal being reduced by less than $50, but the borrower (or someone on the borrower’s behalf) pays more than the amount due for that month, then the expected matching principal payment might be reduced or eliminated for that month, since additional amounts paid can affect the calculation.”
Payments On Student Loans Must Be Made On Time To Count Toward Loan Forgiveness
RAP payments must also be made in full and on time for the payments to count toward student loan forgiveness under RAP’s 30-year term. The Education Department’s current guidance also indicates that the same is true for payments toward Public Service Loan Forgiveness (or PSLF), at least while a borrower is enrolled in RAP.
“For a month to count as qualifying for PSLF while in RAP, the payment must be both on time and in full,” says the department’s online guidance. “An on-time payment is a payment that is received on or before the current month’s due date and after the previous month’s due date. A payment is not considered on time if it’s made to resolve delinquency. To make a payment in full, the amount paid in the month must be greater than or equal to the monthly payment amount.”
Historically, payments made within 15 days of the payment due date were considered to be “on time” for PSLF purposes. But that is no longer true for PSLF for borrowers enrolled in RAP.
In addition, separate online Education Department guidance has been updated to now suggest that borrowers in any qualifying PSLF repayment plan, including legacy income-driven repayment plans like IBR and PAYE, now have to make their payments on or before the due date to qualify for PSLF. This represents a major shift from past practice, when borrowers effectively had a 15-day grace period for the payments to be considered timely for PSLF purposes.
“For borrowers with only loans disbursed before July 1, 2026, a qualifying payment is a full, on‑time monthly payment you make while working full time for a qualifying employer,” says separate online PSLF guidance. “The payment must be for the amount listed on your bill, made on or before the due date, and made after October 1, 2007.”
The department has not clarified how it will handle situations where a borrower makes an on-time payment on their federal student loans, but the billing date falls on a weekend or a holiday such that the actual payment is not debited from their bank account until the next business day. It is possible that under those circumstances, the payment could be considered untimely, causing the borrower to temporarily lose access to RAP’s interest and principal benefits for that month, and the payment may also not count toward student loan forgiveness under RAP and PSLF. Until the department provides further clarification, it may be prudent for borrowers in RAP, as well as borrowers pursuing PSLF under any qualifying repayment plan, to ensure that payments are made at least a few days prior to the billing due date to ensure that they are considered to be “on time.”
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