Latest news with #RepaymentAssistancePlan
CNBC
a day ago
- Business
- CNBC
You could be repaying student loans for 30 years under GOP plan. It's 'indentured servitude': expert
Federal student loan borrowers could be in repayment for up to 30 years under proposed changes in the House Republicans' massive spending and tax package, dubbed the "One Big Beautiful Bill Act." Currently, most student loan repayment plans range from 10 years to 25 years — which already generate concerns about people bringing their education debt into middle-age and beyond, said higher education expert Mark Kantrowitz. "A 30-year repayment term means indentured servitude," Kantrowitz said. The House passed the bill last week. With control of Congress, Republicans can use "budget reconciliation" to pass their legislation, which only needs a simple majority in the Senate. The House bill's student loan provisions are unlikely to significantly change in the upper chamber before Trump signs it into law, Kantrowitz said. Under the House GOP's bill, there would be just two repayment options for those with federal student loans. (Currently, borrowers have about a dozen ways to repay their student debt, according to Kantrowitz.) If the legislation is enacted as currently drafted, borrowers would be able to pay back their debt through a plan with fixed payments over 10 years to 25 years, or via an income-driven repayment plan, called the "Repayment Assistance Plan," which would conclude in loan forgiveness after three decades. Monthly bills for borrowers on RAP would be set as a share of their income. Payments would typically range from 1% to 10% of a borrowers' income; the more they earn, the bigger their required payment. The new plans would potentially make student loan repayment terms much longer for some borrowers. The U.S. Department of Education now offers a 10-year fixed repayment program, known as the standard plan, and its IDR plans typically conclude in debt cancellation after 20 years or 25 years. "Simplifying the program with fewer repayment plans is a good idea, but not at the cost of another decade of repayment," said James Kvaal, who served as U.S. undersecretary of education for former President Joe Biden. More from Personal Finance:What the House GOP budget bill means for your money'Maycember' is almost over — here's how to recover financiallyCourt order challenges Trump's plan to move student loans to SBA Longer repayment terms will only exacerbate the problem of more Americans carrying student loans into their old age, consumer advocates say. There are some 2.9 million people aged 62 and older with federal student loans, as of the first quarter of 2025, according to Education Department data. That is a 71% increase from 2017, when there were 1.7 million such borrowers.
Newsweek
23-05-2025
- Business
- Newsweek
Trump Student Loan Changes Risk 'Punishing Ambition'
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. Higher education experts have warned that President Donald Trump's plans to reduce student loan repayment options from borrowers could thwart "ambition and innovation." In an effort to streamline student loan repayment, the Trump administration is considering a sweeping overhaul of its federal student loan programs, cutting back multiple income-driven repayment (IDR) options to just two. The plans were put forward in the GOP's One Big Beautiful Bill Act, which was passed by the House of Representatives on Thursday. Currently, the federal student loan system offers several IDR plans that adjust monthly payments based on income and family size, which can offer relief for low-income borrowers, freelancers, and those in unpredictable job sectors. Under the proposed budget plan passed by the House, these options would be reduced to just two repayment structures: a standard 10-year plan and a "Repayment Assistance Plan." Higher education experts and borrower advocates warn that the move may increase repayment costs, sacrifice flexibility and put vulnerable borrowers at greater risk. "Consolidating repayment options into two streamlined plans may sound like simplification, but it could be a double-edged sword," Dr. Shaan Patel, CEO and founder of the standardized test prep and college admissions company Prep Expert, told Newsweek. "The current menu of repayment plans—while admittedly confusing—allows borrowers to match repayment to their financial circumstances." Donald Trump and a student are seen in this composite image created by Newsweek. Donald Trump and a student are seen in this composite image created by Newsweek. Photo IllustrationStudent Borrower Protection Center has estimated that the new proposed repayment plan would increase payments by $2,928 a year for a typical student loan borrower enrolled in former President Joe Biden's Saving on a Valuable Education (SAVE) plan, if it is not blocked by the courts. There is fear this reduced menu of options will also disproportionately impact borrowers whose financial lives don't fit neatly into a predictable mold. "Many borrowers—particularly first-generation graduates, freelancers, or those entering volatile industries—depend on flexible, income-based options to stay afloat," Patel said. "If not, we'll see higher delinquency and default rates—especially among the borrowers this reform is supposedly meant to help." Proponents argue that the simplified structure will reduce confusion that often leaves borrowers stuck in punishing repayment plans or facing unexpected interest growth. However, experts say the real issue isn't the number of choices—it's a lack of education about those choices. "Confusion is a solvable problem with better education and outreach—not fewer choices. Imagine if we tried to fix the complexity of health insurance by only offering two plans. The outcome wouldn't be clarity—it'd be rigidity," Patel said. The changes could also impact what future would-be students would pursue in higher education, Patel explained. "Roughly 70 percent of federal borrowers rely on IDRs, especially early in their careers. These are often teachers, social workers, or entrepreneurs—people whose incomes are inconsistent but whose degrees provide immense long-term value," Patel explained. "If the new repayment model doesn't flex with income volatility, we risk punishing ambition and innovation in favor of uniformity." "I would imagine that the new repayment plans would cover the vast majority of borrower situations," Jack Wang, host of the Smart College Buyer podcast, told Newsweek. "But I think the new rules will impact career choices, such as those entering the arts or fields that tend to have lower starting pay but yet require advanced degrees." "If the proposed changes go through, my opinion is that higher education will be similar to what it was decades ago—only the kids from rich families can go to college," he continued. "And only those rich kids can go to medical, law, dental, vet school. It's kind of bleak." The proposed changes are part of a broader budget bill that includes substantial cuts to federal student aid, including the elimination of loan forgiveness options after 20 or 25 years under current IDR plans. The bill also aims to repeal the SAVE plan, one of the Biden administration's centerpiece reforms, which reduced monthly payments for low-income borrowers and shortened the forgiveness timeline for smaller loan balances. While the bill has passed in the House, it faces an uncertain future in the Senate, where it is expected to encounter stronger opposition.
Time of India
23-05-2025
- Business
- Time of India
Is this the end of affordable loans? What Trump's ‘One Big Beautiful Bill' means for students
A sweeping domestic policy package, referred to by President Trump as his 'One Big Beautiful Bill,' is moving quickly through the House of Representatives, with House Speaker Mike Johnson indicating a floor vote could come soon after the Rules Committee concludes its review this week. The legislation—still subject to changes in the Senate—extends Trump's 2017 tax cuts and commits billions to conservative policy goals, including renewed funding for a U.S.-Mexico border wall. But perhaps its most consequential provisions for everyday Americans are those targeting federal student loan programs, which would see their most significant restructuring in decades. Fewer repayment choices, higher monthly costs At the heart of the bill is a plan to eliminate nearly all current student loan repayment options, replacing them with just two: A fixed monthly payment plan and a new income-based Repayment Assistance Plan (RAP). The fixed plan would spread out payments over time depending on the size of the loan. Smaller loans—up to $25,000—would be paid off in 10 years. Larger loans of up to $100,000 would require 20 years of repayment, while balances above that could stretch to 25 years. RAP, meanwhile, offers monthly payments tied to annual income. Borrowers making under $10,000 would pay as little as $10 per month, while those earning over $100,000 would pay 10% of their gross annual income. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like 21st Century Skills Start with Confident Communication Planet Spark Learn More Undo However, forgiveness under this plan would only come after 30 years of payments—longer than the current 20-25 year timelines. The plan also introduces a $10 minimum monthly payment and allows for $0 payments only for very low-income borrowers. Tighter limits on how much students and parents can borrow The bill introduces strict new borrowing caps. Undergraduate students would be limited to $50,000 in total federal loans, while graduate and professional students could borrow between $100,000 and $150,000 depending on their program. Parents would be restricted to just $50,000 in total loans—no matter how many children they're supporting. In total, no family would be allowed to borrow more than $200,000 across all federal programs. Additionally, the bill phases out eligibility for Federal Direct PLUS Loans for graduate students and parents beginning in July 2026, further shrinking federal options and potentially pushing many toward private lenders. Pell Grant access and loan amounts to shrink for many One of the most controversial changes lies in how the federal government would calculate loan amounts. Rather than basing aid on the actual cost of a student's school, the bill pegs loan eligibility to the median cost of similar college programs. That means students attending more expensive institutions could receive significantly less federal support—even if their program costs more. Advocacy groups like the Student Borrower Protection Center have condemned this provision, warning it could disqualify many students from Pell Grants, push borrowers toward high-interest private loans, and make college less accessible for low- and middle-income families. Changes to deferment, forbearance, and rehabilitation The legislation also makes it harder for borrowers to pause payments. Starting in July 2025, students will no longer be able to defer loan payments due to unemployment or financial hardship—a safeguard widely used during economic downturns. Forbearance, or temporary suspension of payments, would be capped at 9 months within any 24-month period. However, there's a modest silver lining: borrowers in default would be allowed two chances to rehabilitate their loans, rather than just one as under current rules. Who will be affected—and when? The bill's repayment changes would apply to all borrowers still repaying their loans. However, those already paying off loans would be able to continue deferring payments due to hardship—and any such months would still count toward the 30 years required for forgiveness under the new income-based plan. The bill directs the Secretary of Education to begin transitioning to the new system within nine months of the legislation becoming law, with full implementation expected by July 1, 2026. Student advocates warn of widespread harm Borrower advocates are sounding the alarm. The Student Borrower Protection Center (SBPC) and other groups argue the bill would increase monthly payments, strip away protections for struggling borrowers, and restrict access to affordable education for future generations. As the bill advances through Congress, its student loan provisions are likely to be one of the most fiercely contested elements—particularly with millions of borrowers, parents, and future students watching closely. Invest in Their Tomorrow, Today: Equip your child with the essential AI skills for a future brimming with possibilities | Join Now
Epoch Times
22-05-2025
- Business
- Epoch Times
Reconciliation Bill Advances Student Aid Revamp, With Colleges on the Hook for Unpaid Loans
A sweeping reconciliation bill approved by the House early May 22 would bring massive changes to federal student loans and financial aid, while slashing $330 billion in education-related spending. The bill narrowly passed by a mostly party-line vote of 215–214. The proposed changes are part of broader Republican efforts to reduce federal spending and help offset the cost of extending trillions of dollars in tax cuts from President Donald Trump's first term along with new tax relief measures. 'President Trump's America First agenda is finally here, and we are advancing that today,' House Speaker Mike Johnson (R-La.) said after the bill's passage. The budget features what's known as the Loan and Aid Reforms For student loans, the proposal seeks to consolidate income-driven repayment programs into a single option called the Repayment Assistance Plan, or RAP. Borrowers who take out federal student loans after July 1, 2026, would have to choose between RAP and the standard repayment plan. In contrast to the Biden administration's SAVE Plan, which allows borrowers to pause payments for up to a year due to economic hardship, RAP does not offer deferments based on financial difficulty or unemployment. It would also shorten the borrower's discretionary forbearance period from 12 months to nine. Beyond loan repayment changes, the bill would cap the amount of financial aid students can receive each year to the national median cost of attendance for their program of study. Related Stories 5/13/2025 5/7/2025 While the bill includes $10.5 billion in new funding for the Pell Grant program from fiscal 2026 to 2028 to address projected shortfalls, it would simultaneously raise the bar of eligibility. To qualify for a Pell Grant, a full-time student would have to be enrolled in at least 30 credit hours per academic year, up from the current 24. At the same time, the bill proposes to stop providing Grad PLUS loans, starting July 1, 2026, and eliminate subsidized loans for undergraduate students after that date. These types of loans do not accrue interest while the student is in college and for six months after leaving school. Moreover, the bill would cap total unsubsidized loan borrowing at $50,000 for undergraduate students, $100,000 for graduate students, and $150,000 for those in professional degree programs. Students would have to exhaust their unsubsidized loan options before their parents could take out Parent PLUS loans, which currently allow parents to borrow up to the 'cost of attendance' for their children. For colleges and universities, the bill includes a 'skin-in-the-game' accountability provision, requiring them to repay the government a portion of the unpaid loan balances of their former students. The Path Ahead Many of these provisions are inherited from the With Trump in office, the higher education measures have a clear path to becoming law if the Senate passes the reconciliation bill with identical provisions. 'Today we cleared a huge hurdle, and we are one step closer to delivering on our promise to the American people to cut government waste,' Rep Tim Walberg (R-Mich.), chairman of the House Education Committee, 'It's time we stopped asking taxpayers to foot the bill for our broken student loan system that has left borrowers in trillions of dollars of debt and has caused college costs to balloon. It's time we stopped asking a factory worker in Michigan or a rancher in Texas to subsidize the student debt of a lawyer in Manhattan. 'I urge my colleagues in the Senate to end the status quo and get this bill to the president's desk.' Student loan borrower advocates were quick to denounce the bill. Mike Pierce, executive director of the Student Borrower Protection Center, criticized the measure during a Senate hearing on Wednesday and urged lawmakers to reject it. 'Rather than check the abuses of the executive branch, congressional Republicans appear ready to abuse the reconciliation process to rewrite higher education policy—shrinking access to federal financial aid, cutting or eliminating grants for about two-thirds of Pell recipients, removing guardrails that protect students from predatory schools, and placing enormous pressure on state higher education budgets,' Pierce 'The result will push millions of families into the private loan market and, in the same bill, gut the CFPB [Consumer Financial Protection Bureau], the regulator charged with protecting these very same families.'
Business Insider
22-05-2025
- Business
- Business Insider
4 ways Trump's 'big beautiful' tax bill could impact your wallet
From taxes to student-loan forgiveness, provisions in President Donald Trump's " big beautiful bill" are one step closer to affecting Americans' wallets. The House passed Trump's tax bill on Thursday morning — an expansive piece of legislation that extends the president's 2017 tax cuts and makes other key changes to the tax system, along with implementing significant changes to Medicaid and SNAP. The bill is now headed to the Senate, where it is still subject to change. "Now, it's time for our friends in the United States Senate to get to work, and send this Bill to my desk AS SOON AS POSSIBLE!" Trump wrote. "There is no time to waste." The nonpartisan Congressional Budget Office said that the tax bill in its current form would increase the US deficit. Moody's Analytics downgraded the US's credit rating last week, saying Trump's tax bill could add $4 trillion to the federal deficit over the next decade. This is not a short-run hit to Americans' wallets. Instead, it could lead to higher interest rates on mortgages, auto loans, and more down the road. Here are four other key ways the tax bill could impact Americans' wallets. A slew of tax policies Many of Trump's campaign promises are included in the tax bill. The legislation would allow workers who typically receive tips and overtime wages to claim a tax deduction on those amounts. The bill also calls for a $4,000 tax deduction for seniors making less than $75,000 a year. Those twoprovisions would extend until 2029. The bill also extends the child tax credit from $2,000 to $2,500 through 2028. Additionally, the bill would eliminate electric vehicle tax credits and would establish a $250 annual registration fee for electric vehicle owners. The bill also makes Trump's 2017 tax cuts permanent and increases the state and local tax deduction, known as SALT, from $10,000 to $40,000. Student-loan forgiveness repealed Under Trump's tax bill, millions of student-loan borrowers would see their repayment options change. The legislation proposes eliminating existing income-driven repayment plans and replacing them with two options: the Repayment Assistance Plan and a standard repayment plan. The Repayment Assistance Plan would allow for loan forgiveness after 360 qualifying payments based on the borrowers' income, while the standard repayment plan requires a fixed monthly payment over a period of time set by the servicer. The bill also repeals former President Joe Biden's SAVE plan, an income-driven repayment plan that promised cheaper monthly payments and a shorter timeline to debt relief. The plan is blocked in court pending a final legal decision. 'Trump accounts' If the bill passes, parents could get extra money for their kids down the line. The tax bill includes a "Trump account," previously called a "money account for growth and advancement," or MAGA account. The government would put $1,000 into accounts for babies born after December 31, 2024, and before January 1, 2029. The baby must be born in the US and have a Social Security number to receive the cash. The accounts would have tax incentives; earnings would be tax-deferred, meaning taxes on the accounts would not need to be paid right away. Withdrawals from the accounts would also be taxed at the long-term capital-gains rate, which is dependent on income and typically lower than the regular income tax rate. Work requirements for Medicaid and SNAP Lower-income Americans may face bigger healthcare costs or lose federal assistance benefits. The tax bill would mean significant changes for the millions who rely on Medicaid and SNAP. The legislation would mandate that states implement an 80-hour-a-month work requirement by the end of 2026 for childless adults on Medicaid without a disability. The Congressional Budget Office previously estimated that worked requirements on Medicaid could strip coverage from over 8 million Americans over the next decade. Additionally, the bill would extend the age range of adults subject to work requirements to receive SNAP to include adults age 55 to 64. Currently, adults age 18 to 54 without children can only receive SNAP benefits if they work at least 20 hours a week.
