Latest news with #ParentPlus
Chicago Tribune
an hour ago
- Business
- Chicago Tribune
Terry Savage: Grace period on student loan repayment is over
Student loans have been looming in the background for more than five years, ever since payment requirements were suspended during the pandemic. During that five-year period, borrowers had several opportunities to reorganize their debts, based on more generous income provisions, to lower the monthly payments. Many took advantage of those plans, and resumed their payments at a lower level. But others simply ignored that huge cloud of debt, since it was not accruing interest during the suspension, until fall of 2023 when interest started accruing again. Of the nearly 43 million people who owe money, only about one-third have made regular payments, according to the Department of Education. At least 5 million borrowers are considered to be in default — not having made a payment in nine months. Millions more are expected to fall into default in the coming months as they are made aware of the repayment restart. Until now, the government did not institute collection procedures. But that grace period ended May 5. And the repayments are coming back with a vengeance. The headline that has shocked many borrowers is the fact that the government is now using its power to grab any tax refunds and other federal benefits, or even Social Security benefits (in the case of co-signing parents). Even more scary, the administration will start the process of garnishing wages on defaulted loans! And default will impact your credit score. All delinquent borrowers should have received an email notifying them of their status. But it's entirely possible that the Department of Education has lost track of your contact information — although not of your Social Security number! It's up to you — the borrower — to make sure that your information is updated. Do that at where you will use your original FSA ID number to sign in. There you can find not only the status of your loans but also who your current servicer is. Most student loans have changed servicing companies at least once, if not several times, since you graduated and first made your repayment plans. It is critical that you get in touch with the company servicing your loan to at least make sure they have your contact information. The next steps depend on whether you can now afford to make the full required monthly payment. For most people that will be quite a chore. But there are still plans (though less generous than two years ago) to help you deal with those payments and create reductions — if you act promptly. At you can learn about and apply for the remaining income-driven repayment plans for which you might qualify. Note that Parent Plus loans might also qualify for income-driven repayment plans, but only after the loans are consolidated. The previous administration's popular Saving for a Valuable Education (SAVE) plan is no longer available because of court challenges to its generous terms. But borrowers can still get into the PAYE (Pay as You Earn) plan, in which payments are capped at 10% of a borrower's income. And if you're able to pay more and want to pay down the loan faster, check out the Income-Contingent Repayment plan. Since these income-based plans are calculated based on family size and your discretionary income, you must recertify each year. Thus, if you are currently on an income-driven plan, it might also be time to recertify at There are several other alternatives for dealing with your student loans. Forbearance is still a possibility to temporarily stop payments or make substantially lower ones. But that won't make the problem go away — and interest continues to accrue. Graduated payment plans can help those whose incomes should rise in the future. And deferment is another possibility in case of extreme hardship. At you can compare the impact of those plans over the long run. And Public Service Loan Forgiveness remains in place, though the Trump administration is already limiting the jobs that are considered public service. Congress is now considering substantial changes to the various student loan plans, including doing away with 'subsidized' loans, which do not accrue interest while the student is still in school. Also on the potential chopping block are graduate student loans. In fact, the administration is even talking about ending or reorganizing the entire Department of Education. But that's not your immediate concern. The real challenge now is figuring out a repayment plan for your current loans. It's tempting to try to forget they exist. But the government is going to find you. And you'll have a lot more options if you find them first — and make an attempt at repayment. And that's The Savage Truth.
CNBC
5 days ago
- Business
- CNBC
Federal student loan interest rates just fell for the first time in 5 years—here's what borrowers will pay on new loans
Students and families borrowing money for college will get a slight reprieve for the upcoming school year. The interest rate for undergraduate federal student loans disbursed between July 1, 2025 and June 30, 2026 will be 6.39%, down from 6.53% for the 2024-25 school year, the Department of Education announced on May 30. Graduate loans will come with a 7.94% rate and Parent Plus loans will have an 8.94% interest rate, both lower than the prior year. The last time interest rates dropped for federal student loans was for the 2020-21 school year, when the undergraduate rate fell from 4.53% the previous year to 2.75%. Rates have ticked back up each year since then. Federal student loan interest rates are fixed for the life of the loan and are set by the federal government each year using a formula based on the yield of the 10-year Treasury bond. The Treasury Department sells these bonds at auction and the price can rise and fall based on numerous factors in the broader economy. "The bond yields are complicated," student loan expert Mark Kantrowitz said in an email. "A decrease in buyers might cause the price to decrease, which causes the yield to increase. Even a slight change in investor demand can keep yields high. Tariffs could be a factor, as could changes in the trade imbalance." For example, in 2024, the bond yield rose, bringing student loan interest rates with it — to their highest level in over a decade — in part because of inflation and the Federal Reserve's interest rate hikes, CNBC reported at the time. Borrowers taking out loans for the upcoming school year will have a slightly more affordable repayment, but uncertainty remains in the broader student loan landscape. Historically, financial planners and experts have favored federal student loans over private loans for families who need to borrow money to pay for college. That's because, for some borrowers, federal loans offer a lower interest rate, which means they'll pay back less over the life of the loan versus what they'd pay a private lender. But beyond interest rates, federal student loans come with a number of benefits that often make them a superior option. Subsidized interest, flexible repayment options and leeway during times of financial hardship make federal loans a smart option for many eligible borrowers. While some borrowers with good credit may be able to get a lower interest rate through a private lender, they generally won't receive any of those other benefits. However, several of those benefits could be eliminated in the near future. Republicans in Congress included provisions within their budget reconciliation package that may bring significant changes for current and future federal borrowers if enacted, including fewer repayment options and borrowing limits. For now, the current benefits remain in place. The Senate is currently weighing the bill and could make changes and vote on it in the coming weeks. "Despite the uncertainty around proposals from lawmakers and the White House, students should still explore all federal loan options before considering private loans," Sarah Austin, a policy analyst with the National Association of Student Financial Aid Administrators, said in an email. "Even with proposed or potential changes to the Direct Loan program, it is still highly likely that the benefits of federal loans outweigh any advantages of private loans." Not everyone is eligible for federal student loans, though, so private student loans may be some students' only option if they need to borrow money to pay for school. "As always, when comparing loan options, students should consider interest rates, fees, and repayment terms," Austin said.
Washington Post
02-05-2025
- Business
- Washington Post
‘Student loan forgiveness is a pipedream': 8 borrowers on resuming federal payments
With the Trump administration set to restart student loan repayments on May 5, we asked readers affected by the five-year pause in debt collection and interest accrual to tell us what the change in policy means to them. Here are some of those answers: A tough road ahead My partner is the primary borrower for his student loans. Because of a change in majors that set him back in getting his degree, he was left with more than $160,000 in student loan debt. He graduated the same year that the covid-19 pandemic started, and all his federal payments were placed in interest-free forbearance. That said, much of his total loan cost came from either Parent Plus loans (which his parents no longer wanted on their credit) or private loans. The forbearance and, subsequently, the Save program implemented by the Biden administration helped us manage his loan burden. It allowed him to refinance all the Parent Plus debt in his name and focus on paying off a significant portion of these debts. He has since paid off more than $60,000 over the past five years. We are now awaiting the end of interest-free forbearance, at which point we will likely start another income-based repayment plan on his federal loans while he continues to put most of his money toward his private loans. We're not sure what the projected payment for his federal loans will be, but the interest that will accrue worries us. We will have to cut back. I imagine others likely feel the same as us — with inflation and fears of tariffs further exacerbating the rising costs of goods, we're facing a tough road ahead. If the past five years have taught us anything, it's that student loan forgiveness is a pipe dream. Even so, the loan programs that the Biden administration put in place provided a much needed reprieve. It allowed us to work on building a financially independent household and prioritize our other debts. We will continue working hard to make that possible. Trevor Walsh, Arlington, Ohio Honor your obligations I pay my daughter's student loans. I watched for years as Democrats tried to put in place a better student loan repayment program. They never could get their act together, so I was always skeptical that student loans would actually be forgiven. I continued paying through the entire Biden administration. It's no surprise that the Trump administration is restarting collections. It's also no problem because I've been paying every month, which is what I agreed to do when I signed up to be my daughter's co-signer. This is what it means to honor your obligations. Bryan Ponnwitz, Fletcher, Vermont Story continues below advertisement Advertisement Impossible burdens During the pause in collection during the pandemic, I paid as much as I could toward student loan principles that carried the highest interest rates. Those payments add up to more than I borrowed, yet, despite paying on time and utilizing government loan repayment options, I still owe more than the original amount. This is due to predatory rates of interest federal lenders offer to students and their families — rates that are higher than those charged by private lenders. Rates for student loans should be fixed and low. Perhaps they should also vary based on societal need, incentivizing people to seek educations in fields where workers are badly needed. Additionally, the benefits of trade school should be emphasized more. Student loan debt is crippling my generation and affecting our ability to buy homes and contribute to our local economies. It impacts how many children we can have and how we are (not) able to care for our aging relatives. The impact of this debt will be impossible for many to recover from. Between this and rising housing prices, food costs, child-care costs, increasing rates of chronic disease and medical bills, my generation is drowning. Yes, we each should repay what we owe — that's our burden. However, the disastrous lending structure is damaging the potential of all of our futures and needs to be reformed. Jeanne Scott, Dennis, Massachusetts Out of the frying pan ... My student loan debt started out at $80,000. My balance has since ballooned to $150,000. I have no way to repay back such a huge amount, though I would love to be able to afford my payment of $1,100 per month. I am 60 years old. I took out a student loan to be able to return to school and escape an abusive marriage after being a stay-at-home mother for years. Now I feel like I am being abused by my own government in the form of loan sharklike interest rates. I am terrified I might never be able to retire. If I were to default, my social security check would be garnished. So much for my golden years. Cheryl Cosey, Austell, Georgia Story continues below advertisement Advertisement Stuck in a mess I haven't made a single loan payment yet, and I essentially can't — even though I want to start. I finished my undergraduate program in 2020 with all of my loans in pandemic forbearance. My gap year with AmeriCorps and my graduate degree education extended my grace period for another three years. I finished grad school right around when the Biden administration's Save plan opened for enrollment. Of course, I signed up. I work in public service, and I had hoped to make payments on an income-driven repayment plan to count toward the Public Service Loan Forgiveness Program, which requires 10 years of payments to qualify. (Nine if I can get my AmeriCorps award to count for its promised 12 payments, but with how things are going between them and the government, who knows?) Now I'm stuck in forbearance. I can't make PSLF-eligible payments because I can't make Save payments. For a time, I couldn't even switch to a different income-driven plan because the Education Department wasn't processing applications. (That has since changed, so we'll see.) What would the resumption of the requirement to make federal payments do to me without an alternative option? I have no clue. I can only anticipate the worst because this administration has done nothing to suggest it has students' or public servants' interests in mind. Emily Mains, Binghamton, New York What borrowers don't understand I was one of the fortunate ones who had student loans forgiven through the Public Service Loan Forgiveness program. I teach in a 'Chapter 766' school in Massachusetts (all our students are on individualized education programs), so I met all of the requirements for forgiveness. Mind you, I started repaying my loans for graduate school in 2000 and, despite paying extra each month, still owed about $10,000 after 20-plus years. So many people are upset about the idea of loan forgiveness, but they don't realize folks like me paid off our initial loan amounts years ago; the only reason I was still paying was because of compounded interest. Banks have it turned around; my payment went to interest first, then to principal. As a young student, I did not understand this at all. My spouse, on the other hand, paid off his student loans years ago. However, he was then required to get a master's degree so he could continue to teach in Massachusetts. He graduated in 2019, and we made those loan payments until the pause. When the payments were scheduled to start again in October, I decided to wait and see if President Joe Biden would forgive more loans for public school teachers. When Donald Trump replaced him, I knew we would not receive any more help from the government. K. Stackow, Belchertown, Massachusetts All debt, no point I've been holding off on paying ever since the student loan pause. We live paycheck to paycheck, and my husband already pays $400 per month on his private student loans, so any dollar we can save by holding off on paying is crucial. I enrolled in the Biden administration's Save plan, which would cap my payments at around $50 a month, but now I don't know what's going to happen with that. I'm anxious about how much we're going to have to start paying. I would have never gone to college had I known that the student loan situation was going to be this chaotic. I was never taught how much of a burden these loans could impose on my ability to take out other loans for things such as a mortgage or a car. I'm already not working a job in the field I studied, so it's not like my education really had any benefit at this point. Brigit McArdle, Chicago Like giving a teen a mortgage The nonaccrual of federal interest during the covid-19 pandemic was the best thing anybody with student loans could have asked for. I continued paying throughout the five years. If I did it over again, though, I would not take out student loans. It's like giving a teenager a mortgage. Even though I paid off my graduate degree and have contributed large chunks to my undergraduate loans, I am still making payments after more than 20 years. I even consolidated my loans to a 10-year plan, and I have never missed a payment, yet here I am. It feels like I've been lied to. These loans are a dark cloud over my head, and I'll be so glad when they're gone. Catherine Harris, Decatur, Texas
New York Post
30-04-2025
- Business
- New York Post
GOP lawmakers unveil plan to overhaul student loan system, forcing schools to foot the bill for defaulted accounts
Republican lawmakers on the House Education and Workforce Committee unveiled a plan Tuesday to overhaul the federal student loan system, with changes that include new caps on borrowing and forcing schools to reimburse the government for loans in default. The legislation, which is also aimed at offsetting the cost of extending President Trump's tax cuts, will reduce federal spending by $330 billion, according to the GOP-led committee. 'For decades, Congress has responded to the student loan crisis by throwing more and more taxpayer dollars at the problem — never addressing the root causes of skyrocketing college costs,' Chairman Tim Walberg (R-Mich) said in a statement. 'Colleges have ridden this gravy train of taxpayer dollars without any accountability for the quality of the education they provide or whether students can find jobs when they graduate,' the congressman added. 'This plan brings accountability and holds schools financially responsible for loading students up with debt.' 3 Walberg indicated that the changes will ensure programs like federal Pell Grants remain sustainable. House Committee on Education & Workforce If passed, the bill would impose a borrowing limit of $50,000 in federal student loans for undergraduate students starting on July 1, 2026, while graduate students will be limited to borrowing $100,000 and professional students will be capped at $150,000. Current limits depend on several factors but have allowed undergrad, grad and professional students to take out as much as $57,500, $138,500 and $224,000, respectively. Students would also be required to borrow the maximum amount they can before parents would be allowed access to the Parent Plus loan program, which the committee described as 'predatory,' under the bill. Parent PLUS loans currently allow parents to borrow up to the 'cost of attendance' for their children. As part of the bill's 'skin in the game' initiative, colleges and universities would be forced to pay 'a portion of their students' unpaid loans.' The percentage will be based on 'how much of a return on investment the degree provided,' according to a fact sheet released by the committee. 'Institutions that continue to saddle their students with debt eventually face increasing penalties and risk loss of access to federal student aid,' the House Education and Workforce Committee warned. 3 The Student Success and Taxpayer Savings Plan will cut an estimated $330 billion in federal spending, according to the GOP-led committee. REUTERS The plan eliminates unemployment deferment and economic hardship deferment for federal student loan borrowers and 'streamlines the litany' of repayment plans into just two: a fixed repayment plan and an income-driven repayment plan. A host of 'burdensome and costly' Biden-era repayment and loan forgiveness options will be scrapped under the proposal. 3 The proposal includes new caps on federal student loan borrowing and eliminates unemployment and economic hardship deferment. Allison Bailey/NurPhoto/Shutterstock Pell Grant recipients will also be forced to enroll in more classes – 30 hours each academic year, up from 24 hours – in order to receive the financial aid. The Pell Grant program will also be offered to individuals enrolled in short-term workforce training programs under the proposal. Walberg said the overhaul will ensure 'the fiscal sustainability of targeted programs like the Pell Grant.' 'Bottom line, it's time to fix this broken cycle that is costly to taxpayers and leaves students worse off than if they never went to college,' the congressman said.
Yahoo
26-10-2024
- General
- Yahoo
I didn't cosign my kids' student loans because I couldn't take on more debt as a single mom. I supported them in other ways.
I was a single mother with a lot of debt, so I couldn't cosign student loans for my two sons. We opened the financial and college discussions early, so they understood. I helped them pay for their small college expenses along the way. While I very much wanted my sons to go to college, as a divorced single parent, I chose not to cosign or take on Parent Plus loans that would add to my personal debt. I already shouldered a mortgage, a car loan, and the daily expenses for my two sons that were not covered by modest child support. I knew I could not take the stress and anxiety of more money woes heading into my midlife years. Too much debt had previously been a problem for me, and I had learned some financial lessons the hard way. Together, my sons and I worked out a plan that would help them graduate from college with my support in other ways instead of signing a slew of promissory notes. After the divorce and years before their college journeys, I often talked with my sons about value, daily expenses, managing money, and making good financial decisions. We discussed making sacrifices — such as fewer takeout dinners or miscellaneous purchases — to fund what they wanted, like sports camp or a new video game system. From a younge age, they understood the value of money, so that when the college conversation started, they would understand where I was coming from. When it was time to finally chat about college, we all agreed to have a calm discussion where everyone could share their perspective and be heard. College is an adult decision, so I wanted to treat them and their opinions with a mutual level of respect as adults. Since I wasn't going to be able to cosign their loans, I wanted to help them out financially in other ways. I decided I could help my sons with expenses as we went along — like textbooks and housing. All of this meant I had to save up some money. I got real with myself, so I took a true picture of my financial situation. I zeroed in on my budget numbers and what I could realistically handle mentally and physically. From there, I explained I wanted them to graduate without a heavy financial burden following them for years, so we reviewed all the options and tried to choose the best college with a solid education that we could all afford. My oldest son selected a school one hour away and funded it with a combination of merit and athletic scholarships. I helped pay for the meals purchased at school. I also funded books and other supplies that he needed for his industrial design major. I made his favorite foods and brought them to him when I visited. Later, I chipped in for housing. My younger son received a small scholarship from a local university and had some college savings. He decided to commute, which was much more affordable than the private institution he also liked. I gave him my older car to drive, helped him prep his meals for the week, and let him live at home so he did not have to pay rent on a campus dorm or apartment. I ensured my sons understood the door was always open for more conversations. I told them plans could be altered if they were unhappy or the school was not a good fit. We focused on the best options for our family and not what other friends were saying they were doing. My sons have graduated from college and are working in their chosen fields. Life has had some twists and turns, but we came prepared. I'm grateful for our thoughtful steps while embarking on their college journeys.
