Latest news with #SavingonaValuableEducation
CNBC
a day ago
- Business
- CNBC
Federal student loans will still be a 'better bet' than private—even with coming changes, experts say
The question of whether college students should take out federal or private student loans to pay for their education may have just gotten harder to answer. That's due to a number of changes in President Donald Trump's so-called "big beautiful bill" that will affect many current and future federal student loan borrowers. The bill undoes several of the reforms President Joe Biden made during his time in office, such as protections for defrauded borrowers. It also eliminates repayment options and benefits like economic hardship deferrals that predate the Biden administration. Historically, federal student loans have generally been a better deal for borrowers, Kate Wood, a lending expert at NerdWallet, tells CNBC Make It. The coming changes won't necessarily make federal loans a "poor choice," she says, but the decision may not be as obvious as it once was. Lesley Turner, an associate professor at the University of Chicago Harris School of Public Policy, agrees. Turner has published several research papers on the role and impact of federal financing in higher education and previously served as an economic adviser within the Department of Education. "By reducing the available protections for federal student loans, all else equal, that does make private student loans more attractive," Turner says. If you're weighing private versus federal student loans to pay for your education, there are generally five major factors to consider. Here's a look at each. If you're enrolled at least part-time at an academic institution that participates in the federal direct loan program, you may be eligible to receive federal student loans. You must submit a Free Application for Federal Student Aid to see if you qualify, but there are no income limits. You must be a U.S. citizen or permanent resident, have a valid Social Security number, not be in default on another federal student loan and have a high school diploma or equivalent credential. Private student loans are subject to lender approval. It can be very difficult to get approved for a loan with poor or no credit history, but you can apply with a cosigner. You may have to meet enrollment, income and other eligibility requirements, depending on the lender. Currently, federal student loan borrowers have several options for repayment plans that best fit their needs. There's a standard repayment plan that keeps monthly payments fixed over the life of the loan and several income-driven repayment plans that are designed to make monthly payments affordable for lower-income borrowers. On the latter plans, borrowers have to certify their income annually, which can raise or lower monthly payments. Trump's policy bill narrows the number of available payment plans for future borrowers. Borrowers currently on the Pay as You Earn, Saving on a Valuable Education and Income-Contingent income-driven repayment plans will have to switch payment plans as the policy eliminates these options. But those borrowers will still have a standard and an income-driven repayment option. Private student loan terms can vary by lender and loan, Wood says. You'll typically have better options with federal loans as private loans typically don't offer income-driven payment plans. Repayment timelines are often shorter for private loans too, ranging from eight to 12 years, compared with up to 25 years for federal loans. All federal student loan interest rates are fixed for the life of the loan and determined by Congress each year. For the upcoming 2025-26 school year, they are 6.39% for undergraduate loans, 7.94% for graduate loans and 8.94% for parent and grad PLUS loans. Borrowers don't need a credit history to qualify and a good or bad credit score won't impact their interest rate. Undergraduate borrowers with demonstrated financial need have access to direct subsidized loans. With these loans, the federal government pays the interest while the borrower is in school and during certain deferment periods. Unsubsidized and subsidized loans have the same fixed interest rates. With private loans, however, your interest rate may be fixed or variable, depending on your loan terms. Lenders assign interest rates depending on the broader rate environment and borrowers' creditworthiness. It's feasible some creditworthy borrowers — or borrowers who have a cosigner with good credit — could get a better interest rate with a private loan. But it's fairly uncommon, Turner says. She cites a 2012 Consumer Financial Protection Borrower study — "the best evidence we have," she says — that found the average student loan borrower was always offered a higher interest rate from private lenders than the federal interest rate. A major advantage of federal student loans has been the economic hardship and unemployment deferments that allow current borrowers to pause their monthly payments for a limited period of time when experiencing certain financial hardships, Wood says. Currently, borrowers can receive economic hardship and unemployment deferments for up to three years and general forbearances for a maximum of 12 months at a time. However, Trump's policy reforms eliminate these options for future borrowers. Anyone who takes out loans after July 1, 2027 will be required to make monthly payments unless their loan servicer approves a general forbearance for situations like financial difficulties, medical expenses or changes in employment. The new policy will limit forbearances to a maximum of nine months in a two-year period. "On one hand, that's a lot worse than it used to be, but that's probably still better than what a lot of private lenders are going to offer you," Wood says. There's no law or regulation requiring private lenders to help you out if you fall on hard times while paying back your loan. Like credit card companies or other lenders, you may be able to negotiate a pause on your payments for a brief period if you have a good relationship with the lender and a history of on-time payments, but "it may come down to what your loan agreement allows," Wood adds. Plus, interest will likely continue accruing if you do successfully pause private loan payments, while interest may be paused for some federal loan forbearance periods. Though federal student loans may offer better terms, you may be limited in the amount you can borrow. Undergraduate dependent borrowers have a lifetime limit of $31,000 and annual limits depending on what year of school you're entering. The annual limits are as follows: Graduate and professional students have an annual loan limit of $20,500 and a lifetime limit of $138,500 including any amounts borrowed in undergrad. Grad students and parents of undergraduate students can also currently borrow up to the cost of attendance after any aid through PLUS loans, which have higher interest rates and slightly different protections than federal direct loans. The new law doesn't change the current loan limits for undergraduate students, but it does impose lower borrowing limits for graduate loans and parents taking out loans on behalf of undergraduate students by eliminating grad PLUS loans and capping parent PLUS loans for undergraduate students at $20,000 per student per year, up to an overall total of $65,000 per student. After July 1, 2026, grad students will be able to borrow up to $20,500 a year and a maximum of $100,000 over the course of their studies — not including undergraduate borrowing — or $50,000 a year and $200,000 in total for professional studies like law or medicine. For private loans, however, "ostensibly, no limits exist," Wood says. The amount a borrower can receive is up to the lender's discretion. "The amount that they're going to be open to lending you is going to depend on your characteristics as a borrower," Wood says. "Is your credit strong? Do you pay your bills on time? Are you likely to pay back this loan? The stronger financially that you are, the more a lender will be open to lending you." Though the list of benefits may be shrinking, both Wood and Turner recommend students and families exhaust their federal student loan options first before turning to private lenders if they need to borrow to pay for school. "For the majority of borrowers, federal loans will be the better product in terms of both interest rates and the protections that continue to exist after the [new Repayment Assistance Plan] goes into effect," Turner says. Not everyone will qualify for federal student loans, but you won't know until you file a FAFSA. The FAFSA determines whether you qualify for federal grants and scholarships that you don't have to pay back, as well as federal loans. "Everybody should still be submitting your FAFSA," Wood says. "You're not committing to anything. You're just finding out what you could get."
Time of India
2 days ago
- Business
- Time of India
Why student loan bills are doubling for millions as the SAVE plan ends this August
Millions must switch repayment plans as SAVE student loan relief expires. (AI Image) Millions of federal student loan borrowers across the US are expected to see their monthly repayments double as the Biden-era SAVE (Saving on a Valuable Education) plan comes to an end. The plan, which allowed interest-free forbearance on repayments, is now effectively defunct following recent policy changes announced by the Trump administration. The SAVE plan had enrolled nearly 7.7 million borrowers, according to the US Department of Education. Many of these borrowers are now required to transition to new repayment plans, most of which result in significantly higher monthly bills. The end of the SAVE programme will particularly affect borrowers who are unable to make payments that cover accruing interest, which resumes from August 1, as announced earlier this month. SAVE plan allowed reduced repayments for millions Under the SAVE plan, introduced during President Biden's term, borrowers were allowed to make payments based on just 5% of their discretionary income. This plan was described as 'incredibly generous' by Scott Buchanan, Executive Director of the Student Loan Servicing Alliance, a trade group for federal loan servicers, as reported by NBC News. While legal challenges to the SAVE plan were underway, the Biden administration placed enrolled borrowers in forbearance, which paused mandatory payments and interest accumulation. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Bangladesh: Dubai Villa Prices Might Be Cheaper Than You Think Villas Dubai | Search Ads Undo However, with the programme now defunct, this interest-free period is set to expire, and borrowers who do not switch to a new plan will begin to see their loan balances grow again. Borrowers advised to switch to income-based repayment plans US Secretary of Education Linda McMahon stated in a press release, as reported by NBC News, that borrowers in the SAVE programme should 'quickly transition to a legally compliant repayment plan — such as the Income-Based Repayment Plan.' According to NBC News, Buchanan explained that the IBR plan is now the most viable option for most former SAVE enrollees. The IBR plan calculates repayments at 10% of a borrower's discretionary income, a substantial increase from the 5% calculation under SAVE. For some borrowers with older loans, the share could rise to 15%. Higher repayment burdens under IBR plans The end of the SAVE plan is likely to impose financial pressure on many borrowers. Nancy Nierman, Assistant Director of the Education Debt Consumer Assistance Program in New York City, told NBC News that many federal student loan borrowers 'simply won't be able to afford the payments under IBR.' Other income-driven repayment plans created by Congress in the 1990s are also expected to be phased out under what President Donald Trump has referred to as his 'big beautiful bill,' as reported by NBC News. These plans typically cap monthly payments at a percentage of discretionary income and cancel remaining debt after 20 or 25 years. TOI Education is on WhatsApp now. Follow us here . Ready to navigate global policies? Secure your overseas future. Get expert guidance now!
Yahoo
4 days ago
- Business
- Yahoo
Student loan 'SAVE plan' interest to resume: What to know
Student-loan borrowers who are on the Saving on a Valuable Education (SAVE) plan will begin seeing interest accruing on their loans again, starting on August 1. Mark Kantrowitz, student loan expert and author of "How to Appeal for More College Financial Aid," joins Mind Your Money with Allie Canal to break down the details. To watch more expert insights and analysis on the latest market action, check out more Mind Your Money here. So Mark, if you're in the SAVE plan right now, what is going to happen to your loans? Well, starting August 1st, they will start accruing interest and that interest will be added to your loan balance. Uh, it won't be capitalized just yet, but, uh, you'll be in a general forbearance for at least another month, but you should consider switching into the income-based repayment plan so that those monthly payments count towards eventual forgiveness. So you you said you should expect to be in the forbearance period for at least another month. When should borrowers expect to start making payments again? Well, the Trump administration has not yet said when that forbearance will end. Based on previous announcements from the Biden administration, it suggests that they'll restart in September, but we haven't had any information one way or another from the US Department of Education. Is there anything borrowers with loans outside of the SAVE plan need to be doing right now? Well, uh, there's several different income driven repayment plans that are ending. It's not just the SAVE repayment plan, but any uh, repayment plan that was based on income contingent repayment such as the PAYE, the pay plan, and the repay plan, those will be ending. Uh, the income contingent repayment plan, they're going to start phasing that out because of the budget reconciliation bill. Um, and in general those don't count towards forgiveness of their own, the payments you make will count towards forgiveness under income-based repayment. So if you want to eventually receive forgiveness after 20 or 25 years, you need to switch into one of those repayment plans. You mentioned No, no, continue. Okay. There's a new income driven repayment plan called the RAP plan that was introduced by this new legislation. Uh, we expect that it will become available sometime, uh, this fall. So how does RAP stand up against some of the existing plans like SAVE and I know you mentioned IBR, that's the uh, interest um, or income-based repayment plan as well. Right. So comparing RAP with IBR, the monthly payments under RAP are a little bit lower than under IBR if your income is lower than about $80,000. So if you're lower modern income, uh, you'll have lower payments, but the number of payments you have to make until the remaining debt is forgiven is 30 years whereas IBR is 20 or 25 years depending on whether you have loans from uh, before July 1, 2014 or just afterwards. And let's talk policy too. How does President Trump's bill change the student loan repayment system at this point? Right. So for new borrowers as of July 1, 2026, they will have only two repayment plans available. A standard repayment plan, which is more like an extended repayment plan. The higher your debt, the longer the repayment term that's available to you. If your debt's under $25,000, you'll have a 10-year repayment term, and it goes all the way up to a 25-year repayment term. The other repayment plan is the RAP plan which bases the payments on a percentage of your adjusted gross income ranging from 1% to 10% uh, as your income grows. If your income is over $100,000, you'll pay 10% of income, uh, towards payments on that debt, and the remaining debt will be forgiven after 30 years in repayment. And when do these go into effect these new plans under the Trump administration? Um, for new borrowers as of July 1, 2026, uh, they will be in those repayment plans. Uh, they will also be phasing out the income contingent repayment plan uh, through July 1 of 2028. And then when you're talking to borrowers, what are some general tips when it comes to them paying back their student loans and and other resources that people can turn to to try and make this an easier process because it can be very complicated. Well, they can talk to the college financial aid administrator at their college, uh, who can provide them with some insights into these plans. Um, it is going to be simpler in a way because currently there are a dozen different repayment plans, including as many as four different income driven repayment plans, two extended repayment, two graduated repayment and one standard repayment. Uh, so it is going to get simpler. Um, but the only way to tell whether you're better off with the standard repayment plan or the RAP plan is to model it out for your own particular circumstances. There are very few rules of thumb that say which is better for you when. Related Videos 4 tips to save money on back-to-school shopping US Core Capital Goods Orders Slide Amid Tariff Uncertainty India's Goyal Sees UK Trade Deal as Win-Win German Exporters Can Live With 15% Tariff, Ifo Says 擷取數據時發生錯誤 登入存取你的投資組合 擷取數據時發生錯誤 擷取數據時發生錯誤 擷取數據時發生錯誤 擷取數據時發生錯誤
Los Angeles Times
5 days ago
- Business
- Los Angeles Times
What's happening with forgiveness for student loans on income-based repayment plans?
Amid a federal overhaul of student loan plans, many borrowers have been left wondering what it means for their hopes of loan forgiveness. In particular, those who are enrolled in a repayment plan known as income-based repayment, or IBR, have wondered if forgiveness will still be available to them. A recent update from the Education Department said forgiveness through the IBR plan is paused while systems are updated. 'IBR forgiveness will resume once those updates are completed,' the agency said. IBR is not affected by a federal court's injunction blocking former President Joe Biden's Saving on a Valuable Education, or SAVE, plan. The IBR plan was created by Congress separately from other existing repayment plans, including those known as PAYE and ICR. It's also exempt from some changes coming from President Donald Trump's tax and spending bill. Here's what to know. Following a court injunction last summer, loan forgiveness for the SAVE, Income-Contingent Repayment, or ICR, and Pay As You Earn, or PAYE, plans is currently paused because those plans were not created by Congress. The legal action called into question whether student loan forgiveness was authorized under the federal statute that governs those plans. The IBR plan was created under a different authority. IBR, created by Congress, reduces monthly payments for borrowers with lower incomes. It also invokes a statute that authorizes student loan forgiveness of the balance at the end of a 20- or 25-year repayment term. The Education Department hasn't given a timeline for when its system update will be complete and forgiveness will resume. Borrowers enrolled in IBR who have reached the threshold for forgiveness but who are not seeing their loans discharged as a result of the pause may continue to make payments with the expectation that the Education Department will refund the excess payments. The plan offers forgiveness after 240 or 300 monthly payments, depending on when borrowers enrolled. Borrowers can also request forbearance from their loan servicer. In that case, interest would continue to accrue on any remaining balance. Trump's tax and spending law will eventually phase out the ICR, PAYE and SAVE plans, replacing them with the Repayment Assistance Plan. IBR plans will continue to exist and to provide forgiveness after 20 or 25 years. RAP, in contrast, will require 30 years of repayment before forgiveness is granted. Lewis writes for the Associated Press.
Time of India
5 days ago
- Business
- Time of India
Student loan forgiveness under IBR plan temporarily paused in the US: What borrowers need to know now
In a development impacting millions of student loan borrowers across the United States, the Department of Education has temporarily paused loan forgiveness under the Income-Based Repayment (IBR) plan. The decision comes amid a series of legal and administrative challenges stemming from ongoing lawsuits targeting the Biden administration's broader student loan relief efforts. Roughly 2 million borrowers enrolled in IBR, one of the oldest and most widely used federal income-driven repayment (IDR) plans, are affected by this pause. The move reflects a growing legal entanglement involving multiple federal repayment programs and has added to the uncertainty surrounding student loan forgiveness. Why has IBR forgiveness been paused? The pause follows federal court injunctions issued in response to legal challenges over the SAVE (Saving on a Valuable Education), ICR (Income-Contingent Repayment), and PAYE (Pay As You Earn) plans. Although the IBR plan was initially unaffected, being established under different legal authority, it is now temporarily included in the freeze due to overlapping issues with how payments are counted across IDR programs. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like TV providers are furious: this gadget gives you access to all channels Techno Mag Learn More Undo The Department of Education has stated that it is working to recalculate payment histories to ensure that discharges are accurate and legally compliant. This recalibration is necessary because SAVE-related discharges could influence eligibility calculations under other IDR plans, including IBR. What the IBR forgiveness pause means Borrowers enrolled in the IBR plan who have either completed or are nearing the 20- or 25-year repayment threshold are the ones most likely impacted by the current pause. While loan forgiveness has been temporarily suspended, these individuals are still considered eligible for discharge once the Department of Education completes its recalculations. Despite having technically qualified for forgiveness, borrowers are advised to continue making their scheduled payments. Halting payments without official confirmation could lead to missed qualifications or accrued penalties. For those facing financial difficulty, forbearance remains an option, but it's important to note that interest will continue to accrue during that period. The Department of Education has reassured borrowers that no payments made beyond the forgiveness point will be lost. Once discharges resume, any overpayments made during the pause will be refunded. Importantly, this administrative hold does not mean the IBR plan is ending. The program remains in effect, and both its repayment structure and eligibility rules are unchanged—the pause applies only to forgiveness processing, not to enrollment or payment terms. Borrowers are encouraged to check their loan status regularly via their loan servicer or the official Federal Student Aid website and stay updated on the Department's announcements. How to respond to the pause The Department of Education has issued the following guidance for borrowers affected by the pause: Continue making payments: Payments made during this pause will still count toward forgiveness. Refunds guaranteed: Any payments made after reaching forgiveness eligibility will be refunded once the loan is discharged. Forbearance is an option: Borrowers experiencing financial hardship can request a temporary forbearance, although interest will continue to accrue during this time. Stay updated: No firm timeline has been given for when forgiveness will resume, but the Department has assured that eligible discharges will proceed once the recalculations are complete. What's next? As the Department of Education continues to navigate legal and logistical hurdles, many borrowers are left in limbo. For those who have faithfully made payments for decades, the delay is both financially and emotionally taxing. This situation underscores the complexity of the US student loan system, where overlapping repayment programs, shifting legal rulings, and evolving administrative policies can quickly upend expectations. More than 33 million borrowers are enrolled in federal income-driven plans, and the outcome of this recalibration effort could set important precedents for how forgiveness is implemented across the board. TOI Education is on WhatsApp now. Follow us here . Ready to navigate global policies? Secure your overseas future. Get expert guidance now!
