For decades, one of the biggest frustrations with borrowing for medical school has been watching your loan balance balloon before you even earn your first paycheck. A student who borrows $250,000 for medical school may start their residency program with a balance of $300,000 due to all the interest they have racked up.
As of July 1, 2026, a new repayment option, Repayment Assistance Plan (RAP), has been introduced, and it creates a unique opportunity for medical students to stop some of the unpaid interest from accumulating while in school. This trick could save tens of thousands of dollars before you start your residency training.
Let's explore how this works and who is eligible.
The Problem with Medical School Interest
Federal direct unsubsidized and Direct PLUS Graduate loans begin accruing interest the day they are borrowed. And unlike undergraduate subsidized loans, the federal government does not pay the interest on your loans while you're in school. Interest rates are currently quite high for those borrowing in 2026 for medical school.
- Direct Stafford unsubsidized: 8.07%
- Direct PLUS Graduate: 9.07%
According to the National Institutes of Health, the average medical school graduate owes more than $240,000 in total student loan debt. Let's now break that out over four years to show the interest.
Suppose you borrow:
- $50,000 during your first year
- $50,000 during your second year
- $50,000 during your third year
- $50,000 during your fourth year
In total, you borrowed $200,000, but your loan balance is actually in the $240,000-$250,000 range due to the interest you accumulated while in school, a fact that shocks many of the docs I work with at White Coat Planning. Historically, there wasn't much you could do other than try to voluntarily pay the interest on your loans. RAP, though, could help you curb some of the growth while you're in school.
What Is Repayment Assistance Plan (RAP)?
RAP is the newest iteration of Income Driven Repayment (IDR) plans created by the One Big Beautiful Bill Act (OBBBA) in the summer of 2025 that is now available for enrollment. Payments are based on a percentage of your income, similar to legacy IDR plans. However, the most important distinction is that RAP includes a full interest subsidy. That is, if your required RAP payment is less than your monthly interest that accrues, the government waives the remaining unpaid interest. This popular interest subsidy was available in the previous IDR, plans such as Revised Pay As You Earn (REPAYE) and Saving On a Valuable Education (SAVE).
RAP is a great way to keep your interest at bay, but there are some key considerations for those who are currently enrolled in medical school.
More information here:- Helping a Pre-Med Run the Numbers on Medical School
- How to Get Private Medical School Loans (and a Rant About Why This Is So Hard Now!)
Can Medical Students Enroll in RAP?
Short answer? Some yes. Long answer? There are a couple of factors you need to keep in mind if you want to enroll in RAP while in medical school.
Normally, federal student loans automatically enter in-school deferment, meaning payments aren't required as long as you're enrolled at least half-time. However, some of the loans that are borrowed for medical school are eligible to waive the deferment and voluntarily enter repayment instead. Only Direct PLUS Graduate loans can move into repayment while in school. Your Stafford loans are required to stay in in-school deferment until you graduate or drop below half-time enrollment. This means only your balance on the Direct PLUS Graduate loans can be frozen while in school.
A quick note on borrowing changes this year. Prior to July 1, 2026, a medical or any other graduate/professional degree student could finance their entire education from the federal government. If your program of study begins on July 1, 2026, or later, you are subject to the new loan limits of $50,000 per year for medical school or $20,500 for graduate school. This change was brought about by OBBBA. Professional and graduate programs are commonly more expensive than these new limits, and they would result in new borrowers sourcing financing from different sources such as savings, scholarships, family contributions, or private student loans. Those who began their studies prior to July 1, 2026, are grandfathered into the old federal borrowing rules, allowing for the full cost of attendance to be covered in federal student loans.
If you need to borrow more than $50,000 per year, you can apply through the links on the WCI website for private student loans, and we'll throw in the student version of our flagship online Fire Your Financial Advisor course for free. Some of the lenders will give you some cash back, too. WCI works hard to make sure the best deals available from private lenders are those we advertise.
† Bonus may include cash rebates and value of free course. Student loan borrowers who use the WCI links will be enrolled in The White Coat Investor’s flagship course, Fire Your Financial Advisor: STUDENT for free ($99 value). Borrowers may still receive the amazing cash rebates that WCI has negotiated with lenders. Offer valid for loan applications submitted from May 1, 2026 through October 31, 2026. Free course must be claimed within 90 days of first loan disbursement. To claim free course enrollment, visit https://www.whitecoatinvestor.com/loanbonus.
Those starting medical school this summer (or beyond) will not be offered Direct PLUS Graduate loans and will be unable to freeze their loan interest while in school. This strategy is only available to those in their second, third, or fourth year of medical school with Grad PLUS loans.
Why Your RAP Payment Could Be Extremely Low
RAP payments are based on your Adjusted Gross Income, or AGI. While in medical school, most earn little to no taxable income, which would result in a meager loan payment. If you earned $0 and enrolled in the RAP plan, you would have a monthly payment of $10.
An exception here would be if you are married to an earner. Their income could be factored into your RAP payment if you are filing taxes jointly as a married couple. You could file taxes separately, though, and base the payment purely on your income to have a low RAP payment while in medical school.
Eventually, as you finish medical school and begin residency, your income will increase, and so would your payment in RAP due to the annual income certification requirement.
A Realistic Example
Let's suppose Sarah started medical school in 2025. Her school's cost of attendance is $100,000 per year. The federal government would offer ~$40,000 per year in Direct Stafford loans and the remaining $60,000 in Direct PLUS Graduate loans. Sarah is single, and she files a tax return reporting a $0 income. She enrolls in the RAP plan, and her $10 monthly payment kicks in during the fall of 2026.
As a result, she curbs the interest on her Direct PLUS Graduate loan of $60,000. How much would her loan have grown this year? Last year's Direct PLUS Graduate loan interest rate was 8.94%. The interest charged over the course of the year on her $60,000 loan is $5,364. She pays $120 for the entire year, and RAP waives the unpaid interest of $5,244.
Sarah continues to borrow $100,000 federally each year until she graduates medical school. For each additional $60,000 of Direct PLUS Graduate loans she borrows, she's eligible for an even larger interest subsidy. Here's roughly what she would save in interest over her final three years of medical school.
She can save almost $50,000 in interest over three years while paying $10 per month. You'll notice the interest waived for her first and second year is the same. That's because RAP was not available during her first year of medical school but is available for her remaining three. Please note, the interest on her roughly $160,000 of Direct Stafford loans borrowed is not subsidized.
Can I Federally Borrow Only Direct PLUS Graduate Loans?
After considering the previous scenario, I've had some reach out and ask if it's possible to procure Direct PLUS Graduate Loans only and forgo Direct Stafford unsubsidized loans. The default borrowing for medical school is as follows: usually the first ~$40,000 is Direct Stafford unsubsidized loans. If you need more, you'll need to dip into the Direct PLUS Graduate loans.
PLUS Grad loans carry a higher interest rate (9.07% vs 8.07% in 2026), and they have 4x the origination fee vs. Stafford (4.228% vs 1.057% in 2026). This would likely result in you having to pay more on your loans over time. However, nothing in federal regulations forces you to borrow Stafford before applying for Grad PLUS. You could, in theory, forgo Stafford entirely and fund the full cost of your attendance through PLUS instead.
Here's why someone might actually want to do that: Stafford loans automatically sit in an in-school deferment while you're enrolled, but PLUS can be voluntarily moved into repayment while in school. If all your federal borrowing for the rest of your education is PLUS loans, you could enroll in RAP while in school and freeze any interest growth on your PLUS loans. Your Stafford loans previously borrowed would remain in deferment and grow until you graduate from medical school.
Since RAP is a brand new program, we have not yet seen this work in practice. If you decide to pursue this strategy, please write in and let us know how this process goes.
More information here:Is There Any Downside to Enrolling in RAP While in School?
Although the potential subsidy can sound quite attractive, you should keep a couple of things in mind.
- You'll need to make payments while in school. Although the payment amount is small, you need to make on-time payments to be eligible for your subsidy. Sign up for autopayment to not miss a month.
- You'll need to file a tax return and certify your income each year. While it's not too difficult, it takes time to do both of these, and you'll be busy balancing a student schedule.
- Loan servicers or the Department of Education may be confused. It's likely that if you try to enroll in repayment, the Department of Education or a loan servicer rep will notify you that it is not possible. While that is true with your Stafford loans, you can take your Direct PLUS Graduate loans out of in-school deferment and enroll in repayment. As you borrow each year, you may have to call your loan servicer each time to ensure that you are enrolled in the RAP plan for all of your PLUS Graduate loans.
The potential savings here can add up to thousands, which makes RAP worth a closer look for anyone carrying Grad PLUS debt while in school.
How Does RAP Change as a Resident?
While the RAP interest subsidy only impacts your Direct PLUS Graduate loans while in medical school, it will apply to all of your student loans as a resident. As a new graduate, all of your federal loans will exit their in-school deferment and move into repayment. If you file a tax return in April right after you match, you'll still have another year of $10 monthly payments since you likely made little income during your M3/M4 year.
Here's an idea of how the subsidy would work for our earlier example with Sarah. She now owes $400,000 in federal student loans, and she is required to pay $10 per month for her first year as a resident.
Her required annual payment of $120 is far below the interest charged for the year of $34,160. This results in a massive subsidy for the first year of her residency. Her effective interest rate after the subsidy is applied is 0.03%. RAP can be a very powerful tool. As long as you make your required payment, your loan balance will never go higher.
RAP can also qualify for the PSLF program if you are employed full-time at a nonprofit, though it's quite difficult for payments in RAP to qualify for PSLF while in medical school due to the employment requirement.
By opting out of in-school deferment and enrolling in RAP, second-, third-, and fourth-year students can significantly reduce the interest growth that would have otherwise accumulated during medical school. The process of enrolling in RAP while in school is not automatic, and it requires additional administrative work. But the potential savings can be worth the hassle. Learning repayment habits and how the federal system works while in medical school is a fast track to tackling your student loans.
What do you think? Are you going to enroll in RAP? Why or why not?
White Coat Planning is a Division of Extraordinary Trust, LLC.
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