Student loan bills could double for some borrowers as Biden-era relief expires
Earlier this month, the Trump administration announced that the so-called SAVE interest-free payment pause will expire on Aug. 1, and that enrollees' education debts will begin to grow again if they don't make payments large enough to cover the accruing interest.
The Biden administration had moved people who enrolled in its SAVE plan into forbearance — a period during which federal student loan borrowers are excused from making payments — while the legal challenges against its program played out. The SAVE, or Saving on a Valuable Education, plan, is now essentially defunct.
While borrowers can remain in the SAVE forbearance for the time being, they'll face interest charges again starting next month if they do.
But those who look to move into another repayment plan will likely face a much larger monthly bill.
'SAVE was incredibly generous,' said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers.
The 'best plan' for former SAVE borrowers
Nearly 7.7 million federal student borrowers enrolled in the SAVE, plan, the Education Department said in its press release earlier this month.
Secretary of Education Linda McMahon said in a statement that borrowers in SAVE should 'quickly transition to a legally compliant repayment plan — such as the Income-Based Repayment Plan.'
Borrowers who wanted to be in the SAVE plan but now can't be should probably switch into the IBR plan, Buchanan said: 'That's the best plan for almost everyone.'
There are a few reasons for that. One is that other income-driven repayment plans will eventually be phased out under President Donald Trump 's 'big beautiful bill.'
(Congress created income-driven repayment plans back in the 1990s to make student loan borrowers' bills more affordable. The plans cap borrowers' monthly payments at a share of their discretionary income and cancel any remaining debt after a certain period, typically 20 years or 25 years.)
End of SAVE means bigger student loan bills
But borrowers could see their monthly bills double under IBR, compared with on SAVE.
That's because the SAVE plan calculated payments based on 5% of a borrower's discretionary income. IBR takes 10% — and that share rises to 15% for certain borrowers with older loans.
Many federal student loan borrowers simply won't be able to afford the payments under IBR, said Nancy Nierman, assistant director of the Education Debt Consumer Assistance Program in New York City.
'In severe cases, it could result in people being forced to move, or they will just resign themselves to default and involuntary collections,' Nierman said.
In the new legislation passed by Republicans, borrowers will have access to another income-driven repayment plan, called the 'Repayment Assistance Plan,' or RAP, by July 1, 2026.
However, it's uncertain whether a borrower will have a lower monthly payment on RAP than IBR.
'It's going to range dramatically based on your income,' Buchanan said.
There are tools available online to help you determine how much your monthly bill would be under different plans.
Carolina Rodriguez, director of the Education Debt Consumer Assistance Program, said she's working with one partner in a married couple, both with federal student loans, who are facing a nearly $4,000 monthly combined student loan payment under IBR.
'My client said that these payments would mean no extracurricular activities and other opportunities for his children, which might set them back in comparison to their peers,' Rodriguez said.
Under SAVE, the family's student loan bill would have been around $2,400, she said.
Borrowers who can't afford to make a monthly payment on their student debt under the current repayment options can pursue deferment and forbearance options.
Those who've taken out loans before July 1, 2027, will maintain access, for example, to the economic hardship deferment and the unemployment deferment, under the new law.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Reuters
11 minutes ago
- Reuters
Wall St extends gains after report of US-EU nearing trade deal
July 23 (Reuters) - Wall Street's main indexes moved higher on Wednesday after a Financial Times reported that the EU and the United States were closing in on a trade deal, similar to the agreement U.S. President Donald Trump struck with Japan. Wall Street, already on an upward trajectory, spiked after the report said that the U.S. and the EU are nearing a deal to set 15% tariffs on all European imports. Both sides would waive tariffs on some products, including aircraft, spirits and medical devices, the report said. The bullish momentum followed closely on the heels of Trump's trade deal with Japan, which will slash tariffs on Japanese autos to 15% from 27.5%, with duties on other goods also dropping to 15% from 25%. An agreement with the Philippines also followed, which yielded a modest cut in tariff rate. At 12:20 p.m. ET, the S&P 500 (.SPX), opens new tab gained 31.08 points, or 0.49%, to 6,340.70 and the Nasdaq Composite (.IXIC), opens new tab rose 43.28 points, or 0.21%, to 20,935.97. The Dow Jones Industrial Average (.DJI), opens new tab edged higher 417.80 points, or 0.93%, to 44,917.71, within striking distance of its record peak. Wall Street's "fear gauge", the CBOE Volatility Index (.VIX), opens new tab, dipped to its lowest level in over five months. Earlier in the day, the European Commission was preparing to seek approval for 93 billion euros ($109 billion) in counter-tariffs on American goods just in case the talks fell through. "The key thing is the markets have confidence that the White House is going to continue to work through these trade deals," said Larry Tentarelli, chief technical strategist for Blue Chip Daily Trend Report. Investors are now laser-focused on earnings from the "Magnificent Seven" — a group of marquee names that has helped propel U.S. stocks to all-time highs. EV maker Tesla (TSLA.O), opens new tab and Google-parent Alphabet (GOOGL.O), opens new tab are set to report after the bell on Wednesday. With AI optimism running high and valuations stretched, expectations for these tech giants are sky-high, leaving little margin for disappointment. Shares of Tesla were largely steady, while Alphabet moved 0.9% lower. GE Vernova's (GEV.N), opens new tab shares climbed 14.1% to an all-time high, as the power equipment maker raised its current-year revenue and free cash flow forecasts after beating Wall Street estimates for second-quarter profit. The stock, which has gained about 91% so far this year, boosted the S&P's industrials index (.SPLRCI), opens new tab for the day, up 1.6%. Medical equipment maker Thermo Fisher (TMO.N), opens new tab surged 11.8% after beating Wall Street's estimates for second-quarter profit and revenue. Of the 117 companies in the S&P 500 that have reported earnings to date, 84.6% have reported above analysts' expectations, as per data compiled by LSEG I/B/E/S. On the downside, Texas Instruments (TXN.O), opens new tab tumbled 12.1% after its quarterly profit forecast failed to impress investors, pointing to weaker-than-expected demand for its analog chips from some customers and underscored tariff-related uncertainty. The earnings also weighed on its peer analog chipmakers, with NXP Semiconductors (NXPI.O), opens new tab, Analog Devices (ADI.O), opens new tab and ON Semiconductor (ON.O), opens new tab falling between 2.7% and 6.7%. In economic data, U.S. existing home sales fell more than expected in June. Focus now shifts to Thursday's weekly jobless claims numbers and S&P Global's flash PMI data to gauge economic health in the wake of tariff uncertainties. Following a mixed set of economic data last week, traders have ruled out an interest rate cut by the Federal Reserve next week. Odds for a September reduction stand at about 58%, according to the CME FedWatch tool. Advancing issues outnumbered decliners by a 1.97-to-1 ratio on the NYSE and by a 1.91-to-1 ratio on the Nasdaq. The S&P 500 posted 43 new 52-week highs and two new lows, while the Nasdaq Composite recorded 80 new highs and 16 new lows.
The Independent
40 minutes ago
- The Independent
Germany vs Spain live: Lionesses wait to discover Euro 2025 final opponents
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging. At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story. The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it. Your support makes all the difference.
The Independent
40 minutes ago
- The Independent
Harvard under investigation over participation in visa program for foreign students and researchers
In the latest in series of Trump administration inquiries targeting Harvard University, the State Department said Wednesday it is investigating whether the Ivy League school will remain part of a government program that provides American visas for students and researchers from other countries. Harvard has faced mounting sanctions and scrutiny from Washington since rejecting demands from a federal antisemitism task force in April. Harvard has filed a lawsuit challenging $2.6 billion in federal cuts and has accused the Republican administration of waging a retaliation campaign. The statement from Secretary of State Marco Rubio did not say why his department was examining Harvard's eligibility to take part in the Exchange Visitor Program, which allows foreign nationals to study or work in the United States through cultural and education exchange programs. It said all sponsors, such as Harvard, 'are required to fully comply with exchange visitor regulations, transparency in reporting, and a demonstrated commitment to fostering the principles of cultural exchange and mutual understanding upon which the program was founded.' A spokesman for Harvard did not immediately respond to a request for comment. The department said the investigation will seek to ensure that its programs "do not run contrary to our nation's interests.' The administration also has tried several times to prevent the school in Cambridge, Massachusetts, from hosting foreign students, and President Donald Trump has threatened to revoke Harvard's tax-exempt status. Last month, his administration issued a finding that Harvard tolerated antisemitism, a step that could jeopardize all of Harvard's federal funding, including student loans or grants. The penalty is typically referred to as a 'death sentence.' Harvard's president, Alan Garber, has said the university has made changes to combat antisemitism and will not submit to the administration's demands. ___ The Associated Press' education coverage receives financial support from multiple private foundations. AP is solely responsible for all content. Find AP's standards for working with philanthropies, a list of supporters and funded coverage areas at
