RAPpath

RAP guide

RAP for Self-Employed Borrowers

RAP is a percentage of your AGI — and as a self-employed borrower, you have more control over your AGI than almost anyone. Lower it the smart way and your student loan payment drops with it.

From line 11 of your IRS Form 1040.

−$50/mo each

For IBR compare

Estimated RAP payment
$—
RAP
$—
IBR
$—

Lowering AGI lowers your payment

Say your net business income is $90,000. Contributing about $20,000 to a SEP-IRA, solo 401(k), and HSA brings your AGI to $70,000 — and your RAP payment with it:

AGIRAP/mo
$90,000 (no contributions)$600
$70,000 (after contributions)$350

That is about $250/month — roughly $3,000 a year — while you also save for retirement.

AGI levers for the self-employed

Frequently asked questions

How is RAP calculated if I am self-employed?

RAP uses your Adjusted Gross Income (AGI) from your tax return, just like for employees. For the self-employed, AGI is your net business income minus adjustments such as the deductible part of self-employment tax, contributions to a SEP-IRA or solo 401(k), HSA contributions, and self-employed health insurance premiums.

Can I lower my RAP payment by contributing to retirement?

Yes. Because RAP is a percentage of AGI, pre-tax contributions to a SEP-IRA, solo 401(k), or HSA reduce your AGI and therefore your RAP payment — while also building tax-advantaged savings. This is one of the strongest levers self-employed borrowers have.

What income does RAP use if my earnings vary year to year?

RAP recalculates from your most recent AGI when you recertify income. In a high year your payment rises; in a low year it falls (down to the $10 minimum). Self-employed borrowers should plan for that swing and recertify accurately.

Educational estimate, not tax advice. Contribution limits and deductions have rules — confirm with a tax professional.

Next: RAP payment by income · How RAP works