In this work, a two-dimensional plane strain model has been developed using the finite element program ABAQUS/Standard. The model describes a cross section of a rail head and includes a subsurface crack. The development of squats is suspected in this area and is assumed to grow from existing defects. This model allows to analyze the tendency of cracks to propagate. This propagation can be caused by the wheel load and by residual stresses developed near the running band. Three-dimensional cyclic investigations of a cylindrical wheel rolling on a rail showed that a characteristic residual stress field develops as a result of the plastic deformation below and near this running band. To consider the influence of the residual stress field on crack propagation, the residual stresses of the three-dimensional analysis are mapped onto the two-dimensional model. This mapping includes also the cyclic deformed shape of the rail head and the displacement conditions of the nodes on the rail surface during a wheel pass. To find critical locations, sizes and orientations of cracks or crack like defects for squat growth, modeled cracks are placed in different positions of the cross section of the rail head. The results of the maximum value and direction of the crack driving force (CDF) can be plotted over the rail profile and thus indicate regions associated with possible crack propagation. It can be shown that residual stresses, especially the tensile stresses, have a high significance for crack growth. In addition, the influence of the “white etching layer” (WEL) on crack initiation and propagation is investigated. This is done by applying strains associated with the structural change by a WEL.