Latest news with #SAVEPlan
Forbes
2 days ago
- Business
- Forbes
Student Loan Interest Jumps This Week For 7.7 Million Borrowers
UNITED STATES - MAY 21: Education Secretary Linda McMahon testifies during the House Appropriations ... More Subcommittee on Labor, Health and Human Services, Education, and Related Agencies hearing on the Department of Education's budget in Rayburn building on Wednesday, May 21, 2025. McMahon announced in July that the department would resume charging interest on student loans covered by the SAVE plan forbearance. (Tom Williams/CQ-Roll Call, Inc via Getty Images) Millions of federal student loan borrowers will see their interest rates jump this week as the Trump administration moves forward to end benefits for borrowers enrolled in the SAVE plan. For more than a year, nearly eight million borrowers who had enrolled in the SAVE plan have remained in a forced administrative forbearance due to a lawsuit brought by a coalition of Republican-led states. The involuntary forbearance, which has suspended monthly payments and set interest rates to zero since last summer, was put into effect after a federal appeals court issued an injunction blocking SAVE while the legal challenge proceeded. But following the Trump administration's announcement earlier this month that interest accrual will resume during the SAVE plan forbearance, millions of borrowers will see their rates jump from zero percent to the interest rates established by their loan promissory note, which could be anywhere from around five percent to more than eight percent. The Department of Education characterized the move as necessary 'to bring fiscal responsibility to the federal student loan portfolio" in a statement issued earlier this month. The student loan interest rate hike will go into effect on Friday, August 1. Here's what borrowers need to know. Department Of Education Blames Court Ruling For Student Loan Interest Resumption The Trump administration suggested that the resumption of interest for SAVE plan borrowers was the result of another recent court ruling in the ongoing litigation over the future of the program. 'The Department will take this action to comply with a federal court injunction that has blocked implementation of the SAVE Plan, including the Department's action to put SAVE borrowers in a zero percent interest rate status,' said the department in its prior statement. 'The Department had the authority under the SAVE plan to prevent borrowers from going into negative amortization, which is the authority the Department relied on to put borrowers in zero percent interest rate status. Outside of that regulatory provision in SAVE (which is enjoined), the Department lacks the authority to put borrowers into a zero percent interest rate status.' However, critics of the move argued that nothing in the recent rulings associated with the SAVE plan litigation requires that the department start charging interest again. And no court has ordered the department to do so. 'No court has ordered the Department to resume charging interest to borrowers in the SAVE forbearance,' said the Student Borrower Protection Center in an analysis after the department's announcement. 'On February 18, 2025, the U.S. Court of Appeals for the 8th Circuit upheld the District Court for the Eastern District of Missouri's preliminary injunction temporarily blocking the SAVE plan itself, and instructed the lower court to widen the injunction in accordance with its analysis. Nowhere in the 8th Circuit's opinion or order is there any discussion of the legality of the Department's temporary, interest-free SAVE forbearance.' Student Loan Payments For SAVE Plan Will Remain Paused For Now While interest will start accruing again on August 1 for federal student loans that are in the involuntary SAVE plan forbearance, borrowers still won't have to make payments, at least for the time being. 'Under this general forbearance, you don't have to make your monthly payments on your student loans,' says updated Department of Education guidance. But, 'interest does accrue, starting Aug. 1, 2025.' The time spent in the forbearance still won't count toward student loan forgiveness under income-driven repayment plans or Public Service Loan Forgiveness. That has been the case since last year, and that won't change once interest starts accruing again. The SBPC argued that even though payments aren't due, borrowers in the SAVE plan forbearance will still pay a price for the department's decisions to restart interest, as their overall balances increase over time. 'Nearly 8 million people will be charged $27 billion in interest charges each year,' said the SBPC in its analysis. 'Borrowers from working class families will bear the brunt of these costs. We estimate that over 40% of the borrowers who would be forced to pay interest while in forbearance make under 225% of the federal poverty line.' The SBPC also found that the lowest income borrowers will be charged more than $3,000 per year in interest as a result of the department's decision. Student Loan Borrowers In SAVE Plan Will Eventually Need To Switch While those in the SAVE plan forbearance don't yet need to make payments on their student loans, even as interest starts accruing again, these borrowers will eventually need to switch plans, as SAVE will not be returning. Earlier this month, President Trump signed the 'Big, Beautiful Bill,' reconciliation legislation that passed Congress on a party-line vote. The bill repeals SAVE, as well as the PAYE and ICR plans, by July 1, 2028. Prior to that date, borrowers will need to switch to a different repayment plan. For those borrowers who want to continue making payments based on their income, their only choices would be Income-Based Repayment, or IBR, which is the only current IDR option preserved by the bill; or, they will need to select the Repayment Assistance Plan, a new IDR program that the bill directs the Department of Education to create. While RAP retains some of the key benefits of the SAVE plan, such as a subsidy designed to prevent student loan balances from ballooning over time due to interest accrual, many borrowers will have higher monthly payments under RAP than they would have had under SAVE. And borrowers will have to make payments for far longer under RAP (in some cases, for an 10 additional years) before they can qualify for student loan forgiveness. So far, the Department of Education has not provided SAVE plan borrowers with concrete information on when they will need to select a different repayment plan. While the 'Big, Beautiful Bill' indicates that SAVE would be officially repealed by July 1, 2028, most observers expect the department to force borrowers to switch repayment plans much sooner than that, particularly if a federal court winds up striking down the program entirely. Options For Student Loan Borrowers Student loan borrowers in the SAVE plan forbearance who are concerned about the resumption of interest accrual have a menu of imperfect options. They can remain in the SAVE plan forbearance even while interest accrues, given that payments still aren't due. But that means that their student loan balances will start increasing again, which could increase their monthly payments once the forbearance ends if they opt out of income-driven repayment altogether. Alternatively, borrowers can make voluntary payments while in the SAVE plan forbearance to cut down on the interest accrual. But voluntary payments made while their student loans are in a forbearance status would still not count toward student loan forgiveness under both IDR and PSLF. Another option is changing to a different repayment plan, which the Department of Education is encouraging borrowers to do. 'The Department urges all borrowers in the SAVE Plan to quickly transition to a legally compliant repayment plan – such as the Income-Based Repayment Plan,' said Secretary of Education Linda McMahon in a statement earlier in July. "Borrowers in SAVE cannot access important loan benefits and cannot make progress toward loan discharge programs authorized by Congress.' However, the department has also paused student loan forgiveness under the IBR plan, and has provided no timeline on when loan forgiveness processing will resume. Meanwhile, the department is contending with a massive backlog of more than 1.5 million IDR applications. The department has indicated that borrowers who apply online to switch IDR plans and utilize the IRS data retrieval tool to import their income information into the online application can expect faster processing, notwithstanding the backlog.
CNET
23-07-2025
- Business
- CNET
Yes, You Can Still Get Student Loan Forgiveness With IBR. What You Need to Know
Zooey Liao/CNET/Getty Images Student loan forgiveness options have dwindled considerably during President Donald Trump's second administration, but the Department of Education says forgiveness through Income-Based Repayment isn't going away. However, it is on pause. The Federal Student Aid website says IBR forgiveness is on hold while the Education Department retools its system to recalculate eligible payments. "IBR forgiveness will resume once those updates are completed," said an FAQ section updated July 9. The key question is how the Education Department counts payments made under the Saving on a Valuable Education repayment plan, which was struck down by the courts earlier this year. Borrowers on the IBR can have the payments they made on other income-driven repayment plans (including SAVE, PAYE and ICR) count toward their IBR forgiveness. But one of SAVE's features allowed borrowers to count months in certain types of forbearance when they didn't make payments, according to student loan expert Mark Kantrowitz. "The decision of the 8th Circuit Court of Appeals blocks these additional deferments and forbearances from counting toward forgiveness," he said in an email. "So the US Department of Education will need to make changes to the qualifying payment counts." IBR is an income-driven student loan repayment plan that adjusts monthly payments based on borrowers' income. Eligible student loan borrowers can receive forgiveness after 20 or 25 years' worth of payments, depending on when they took out their loan. It's currently the only repayment plan available that offers a path to forgiveness to existing borrowers. We'll explain what could happen with IBR, and what you should do if you're waiting for student loan forgiveness. Read more: SAVE Student Loan Borrowers: You Don't Have to Move to IBR by Aug. 1, but You May Want to: Here's How to Decide Is student loan forgiveness going away? Multiple paths to student loan forgiveness have disappeared in the past year. ICR, PAYE and SAVE plans are no longer eligible for forgiveness directly, following the court ruling in February that Congress exceeded its authority by approving them. Since IBR was created under a different rule, it wasn't affected by the court's ruling. Forgiveness through IBR should be safe for now. But it's understandable that borrowers -- deciphering confusing and misleading information as they wait for forgiveness -- may be skeptical of the Education Department's reassurances that IBR forgiveness is coming back. After February's court decision, the application for income-driven repayment plans was removed from the federal student loan site, causing concern among borrowers. But it was made available again a month later with revisions. This could, in theory, be a similar scenario, where the IBR forgiveness will resume at a later date. When will IBR forgiveness come back? Though the Education Department calls it "temporary," there's no indication how long the IBR pause will last. With a backlog of 1.5 million applications for repayment plans and huge swaths of the Department of Education staff wiped out, it's unclear how long it could take to resolve the payment recalculation. The Washington Post reported that several student loan servicers have said the Education Department hasn't asked them to process loan forgiveness for any borrowers since mid-January. "This not only affects the loan servicers, but also the US Department of Education, since final approval of loan forgiveness is handled in-house," Kantrowitz said. The Department of Education didn't immediately respond to a request for comment. Are there other options for forgiveness besides IBR? Besides IBR, existing borrowers will have another option next year under the new Republican-backed law passed earlier this month: the Repayment Assistance Plan. The new Repayment Assistance Plan could offer slightly lower monthly payments for some borrowers, but the plan calls for 30 years of qualifying payments before loans are forgiven, compared with the 20 to 25 years under the current IBR. So you'll end up paying more in interest over time. Anyone who takes out student loans after July 2026 will have just two repayment options: RAP and the standard repayment plan. Should I still apply for IBR if I'm a SAVE borrower? Millions of borrowers enrolled in SAVE will start accruing interest on their loans again starting Aug. 1. However, payments remain on hold while your loans are in a general forbearance, which could last until mid-2026. You aren't required to switch plans until then, although interest will pile up during that time. However, if you decide to switch, you can compare other income-driven repayment plan options using the Federal Student Aid loan simulator. You can apply to switch to an IDR on the FSA website to restart payments that count toward forgiveness. If you do apply for a new plan, expect the application to take several months to process due to the backlog, Kantrowitz said. The Department has been encouraging SAVE borrowers to switch to IBR, which could mean an even higher volume of applicants as the Aug. 1 deadline approaches. What should I do if I'm enrolled in an IBR? If you're enrolled in an IBR and near or past the payment threshold to be eligible for loan forgiveness, Kantrowitz advises you to continue making payments until you receive notification that your loans have been forgiven, which should happen automatically. "Any excess payments will be refunded," he said. "They could switch into a general forbearance, but there's a risk that they've counted their qualifying payments incorrectly. It is better to just continue making payments."
Axios
22-07-2025
- Business
- Axios
What to know about forgiveness pause in IBR student loan repayment plans
The Department of Education has temporarily suspended loan forgiveness under its popular Income-Based Repayment plan (IBR). Why it matters: IBR is the only current student loan forgiveness plan not subject to a legal challenge or court injunction, and Trump's signature " big, beautiful bill" significantly cut back on repayment options for borrowers. How it works: Income-Based Repayment is one of four federal plans that establish monthly payments based on earnings and family size over a 20 or 25 year period. Monthly payments are generally equal to 15% of a person's discretionary income (10% if you are a new borrower on or after July 1, 2014), divided by 12, per the DOE. After the 20 or 25 years, remaining loan balances are eligible for forgiveness. What's happening: The DOE said it was pausing forgiveness under the plan in an FAQ earlier this month. The reason for the pause, it says, has to do with required changes to forgiveness calculations caused by court actions impacting the related SAVE Plan. "Currently, IBR forgiveness is paused while our systems are updated," the department said. "IBR forgiveness will resume once those updates are completed." What they're saying: In a statement to Axios, Ellen Keast, Deputy Press Secretary repeated that the IBR pause was to "comply with ongoing court injunctions regarding the Biden Administration's illegal attempts at student loan forgiveness." "For any borrower that makes a payment after the date of borrower eligibility, the Department will refund overpayments when the discharges resume." Here's what to know: How many people will be impacted by the IBR suspension? About 2 million borrowers are enrolled in the plan. What other repayment plans are suspended? After much court back-and-forth, the SAVE, ICR, and PAYE plans are all in legal limbo. IBR was created separately by Congress, which is why it was exempt from the freeze. What does the One Big Beautiful Bill Act change? The bill cuts the number of repayment plan choices that federal student loan borrowers have down to two. One is a standard repayment plan, which gives borrowers a fixed monthly payment to repay their loans in 10–25 years. The current standard plan has a loan period of 10 years, regardless of loan size. The other is the Repayment Assistance Plan, which will involve monthly payments between 1% and 10% of a borrower's discretionary income (current offerings set payments at 10%, 15% or 20% of income). Borrowers on any current repayment plan other than the Saving on a Valuable Education (SAVE) plan will be able to keep their current payment structure, however. What happened to the SAVE plan? The BBB changes will affect those who take on loans from July 1, 2026, onward and current SAVE plan borrowers, as an appeals court blocked the Biden administration plan in February. Under the Republicans' plan, SAVE borrowers will have between July 2026 and July 2028 to choose a new plan. After July 1, 2028, those borrowers, if they haven't chosen one, will automatically be enrolled in the income-based repayment plan. There are about 8 million
Boston Globe
22-07-2025
- Business
- Boston Globe
How will changes in federal student loans impact you?
Here's what these changes mean for borrowers around the country, and why student debt is both a product of and helps to exacerbate the racial wealth gap. There are new limits on federal student lending Federal student loans for graduate professional degrees, such as medical and law school, will be capped $50,000 a year, or $200,000 total. Parent PLUS loans, used by caregivers to borrow for their children's undergraduate degree, will be capped at $20,000 a year, $65,000 total. Grad PLUS loans will be eliminated. Graduate students will still be able to borrow federal student loans, but will be capped at $20,500 annually, $100,000 total. Federal student loan borrowers will now have a lifetime limit, considering undergraduate and graduate education, of $257,500 in federal student loans. Students who have full-ride scholarships will no longer be eligible for Pell Grants, which is federal aid that does not need to be repaid. However, Pell Grants will now be available for job training programs, including at community colleges. Paying off loan debt Borrowers will now have only two ways they can pay off their federal student loans: Advertisement Enroll in a standard payment plan, with fixed monthly payments based on the initial amount borrowed. Enroll in the Repayment Assistant Plan, with variable monthly payments based on income. Whereas borrowers facing economic hardship, such as lost income, can currently defer payments for up to three years without accruing interest, under the changes, borrowers facing economic hardship can only pause payments for nine months within a 24 month period. Interest will be accrued during this time. Get Starting Point A guide through the most important stories of the morning, delivered Monday through Friday. Enter Email Sign Up Changes to lending and paying of debt will go into effect July 1, 2026. What are the current interest rates for federal student loans? Undergraduate student loans are 6.39% fixed interest rate Graduate or professional student loans are 7.94% fixed interest rate Grad PLUS and Parent PLUS loans are 8.94% What other changes are on the horizon? President Trump aims to eliminate President Biden's SAVE Plan, which put a pause on loan repayments and eliminated interest accruals for approximately 8 million student borrowers, by July 2028. In the meantime, borrowers enrolled in the SAVE Plan will begin accruing interest again on August 1. Payments on the principal remain paused. Advertisement What options do current student loan borrowers have? If borrowers are considering changing plans or consolidating their loans in light of these changes, Natalia Abrams, founder and president of the Student Debt Crisis Center, advises them to speak to an adviser before moving forward, especially to make sure they understand the details of a new plan and the implications of consolidation. Abrams suggests saving as much documentation as possible, both from the student loan service provider and For the millions of borrowers who have or are expected to default in the coming months, Abrams stresses: There are options. For example, borrowers can enter How does student debt relate to the racial wealth gap? Groups that have been under-represented in higher education — Black and brown Americans and women — are more likely to rely on student debt for college, graduate and professional school. That's in part because they have less generational wealth to tap into, making them more dependent on loans. Students of color are also targeted by and overrepresented at private, for-profit institutions that cost more, have lower graduation rates and worse job outcomes. Once under-represented students take on debt, less generational wealth and racial and gender pay gaps makes those loans harder to pay off. To give a sense of the disparity: Advertisement Disparities in lending reach back decades and hinge on federal lending policies. Racial minorities, particularly Black Americans, were explicitly excluded from government-backed and subsidized mortgage programs that were pivotal in helping white families build wealth. People who have been historically excluded from credit have fewer assets and worse credit scores, making them more vulnerable to high-priced, high-risk loans. For example, the sub-prime mortgage crisis that kicked off the 2008 economic crisis primarily impacted Black, brown and low-income families. According to the Student Borrower Protection Center, the unequal burden of student debt 'fuels economic, gender, and racial inequality, inhibits asset accumulation, accelerates wealth gaps, and carves out a generational divide that, even in the best of circumstances, will take decades to erase.' Resources for federal student loan borrowers The Advertisement The This story was produced by the Globe's team, which covers the racial wealth gap in Greater Boston. You can sign up for the newsletter . Mara Kardas-Nelson can be reached at
Newsweek
22-07-2025
- Business
- Newsweek
Nearly Half a Million Student Loan Repayment Plans at Risk: Report
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. The Department of Education plans to deny 460,000 federal student loan borrowers from accessing lower repayment plans, according to a Politico report citing internal department documents. The affected students had selected the Saving on a Valuable Education (SAVE) Plan, a Biden-era policy that generally came with the lowest monthly payments and which the Education Department functionally abolished earlier this month. Newsweek has contacted the Department of Education for comment outside regular hours. Why It Matters The amendments to the SAVE Plan and the decision to deny lower-income students access is in line with the steps taken by President Donald Trump's administration to phase out educational policies and financial support systems enacted under his predecessor. While the Education Department has said it will support students transitioning to alternative plans, experts have said this could result in hundreds of dollars being tacked onto their monthly payments. What Was the SAVE Plan? The SAVE Plan was introduced in 2023, replacing the Revised Pay As You Earn (REPAYE) Program. Intended as a more generous income-driven option, undergraduates enrolled in the plan had payments capped at 5 percent of their discretionary income, rising to 10 percent for graduate borrowers, per Politico. According to the Department of Education, there are almost 7.7 million borrowers enrolled in SAVE. Amid a string of legal disputes and a court injunction blocking elements of SAVE in June 2024, enrollees have been in legal limbo and their loans placed in general forbearance with a zero percent interest rate since then. What To Know In early July, the Education Department announced that it would recommence interest accrual on loans in the "illegal" SAVE Plan. The change is set to take effect on August 1. An Education Department spokesperson told Politico that the reason for the 460,000 applications being denied was because loan servicers were now unable to process these "as SAVE is no longer an option, as it is illegal." In the place of SAVE, the department is rolling out two alternatives as part of the One Big Beautiful Bill Act, a budget package that Trump signed into law on July 4. These include a revised 10-year standard repayment plan and a new Repayment Assistance Plan. Education Secretary Linda McMahon testifies before the Senate Appropriations Committee's Labor, Health and Human Services, and Education Subcommittee in the Dirksen Senate Office Building on Capitol Hill in Washington, D.C., on June 3. Education Secretary Linda McMahon testifies before the Senate Appropriations Committee's Labor, Health and Human Services, and Education Subcommittee in the Dirksen Senate Office Building on Capitol Hill in Washington, D.C., on June its early July news release, the Education Department said it would "support borrowers in selecting a new, legal repayment plan that best fits their needs and helps them get on a sustainable financial path while protecting American taxpayers." The department has also begun outreach to the almost 8 million borrowers enrolled in SAVE, advising them on how to switch to a new plan. However, the new plans are "generally less generous than SAVE, requiring borrowers to pay more," according to Robert Kelchen, the head of the Department of Educational Leadership and Policy Studies at the University of Tennessee, Knoxville. According to the Student Borrower Protection Center, the decision to resume interest payments on SAVE debts could also force borrowers to pay more than $3,500 annually, or $300 per month, in additional fees. What People Are Saying Education Secretary Linda McMahon said in a news release on July 9: "Since day one of the Trump Administration, we've focused on strengthening the student loan portfolio and simplifying repayment to better serve borrowers. As part of this effort, the Department urges all borrowers in the SAVE Plan to quickly transition to a legally compliant repayment plan—such as the Income-Based Repayment Plan. Borrowers in SAVE cannot access important loan benefits and cannot make progress toward loan discharge programs authorized by Congress." Robert Kelchen, the head of the Department of Educational Leadership and Policy Studies at the University of Tennessee, Knoxville, told Newsweek: "The Department of Education fundamentally disagrees with the SAVE Plan and wants to quickly move to the new repayment options passed in the recent budget reconciliation bill. The fate of the 460,000 borrowers currently in SAVE will likely end up in court again, and the Trump administration will likely win based on other recent Supreme Court decisions in favor of [the Education Department]." What Happens Next The department has said interest will not be added retroactively to those previously enrolled on the SAVE Plan. It has urged borrowers to visit the government's Loan Simulator to assess monthly repayment options.
