Latest news with #StandardRepaymentPlan
Time of India
7 days ago
- Business
- Time of India
How the US student loan ‘cliff effect' could add years and tens of thousands to your repayments
US student loan changes extend repayment terms up to 25 years. (AI Image) Millions of student loan borrowers in the US are set to face longer repayment timelines and significantly higher lifetime loan costs under a revised version of the federal Standard Repayment Plan. The redesigned plan, introduced as part of President Donald Trump's 'big beautiful bill,' changes the way repayment terms are calculated, creating what experts call a 'cliff effect' that could burden borrowers with thousands of dollars in additional payments. Historically, the Standard Plan required borrowers to repay their federal student loans in fixed amounts over a 10-year period, making it the fastest route to becoming debt-free among available federal options. However, under the new law, repayment terms will now range from 10 to 25 years, depending on the borrower's outstanding balance, as reported by CNN. Loan terms now scale by balance thresholds Under the new structure, the length of the repayment term increases in fixed five-year increments based on loan size. According to CNN, borrowers who owe up to $24,999 will remain on a 10-year repayment track. However, those with balances from $25,000 to $49,999 will be moved to a 15-year term. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Use an AI Writing Tool That Actually Understands Your Voice Grammarly Install Now Undo Borrowers with debts between $50,000 and $99,999 will see their repayment period extend to 20 years, and loans of $100,000 or more will require repayment over 25 years. Michele Shepard Zampini, senior director of college affordability at The Institute for College Access & Success, told CNN, 'The design of the new plan, in which a borrower's payment term is scaled up in five-year increments based on arbitrary thresholds, means some borrowers will face a problematic 'cliff effect'.' She added, 'A small difference in their balance will tip them into the next tier and extend their term. ' Longer terms increase total repayment amounts Although the new plan may reduce monthly payments by stretching the repayment period, it significantly raises the total amount repaid over the life of the loan due to accruing interest. CNN cited analysis from higher education expert Mark Kantrowitz, who estimated that a borrower repaying $100,000 over 10 years at 5% interest would pay back around $127,279. Under the new 25-year repayment structure, the same borrower would repay approximately $175,377—an increase of nearly $50,000. The impact is seen across various loan sizes. For example, a $60,000 loan repaid over 20 years under the new system would cost $95,034, compared to $76,367 under the current 10-year plan. Similarly, an $80,000 loan would result in total repayment of $126,712 under the new terms, as opposed to $101,823 previously. A $40,000 loan under the new 15-year term would cost $56,937, while the same amount paid back in 10 years would total $50,911, according to CNN data. Repayment choices to narrow from 2026 According to the US Department of Education, the revised Standard Plan will become available to borrowers by July 1, 2026. For those who take out loans after this date, only two repayment options will be available: the new Standard Plan and a revised income-driven repayment programme called the Repayment Assistance Plan (RAP), backed by Republicans. Borrowers with loans issued before July 1, 2026, will retain access to existing plans such as Income-Based Repayment (IBR) and the current Standard Plan. However, CNN reported that individuals who borrow again after that date—even if they hold older loans—will only be eligible for the new system for the new loans. Scott Buchanan, executive director of the Student Loan Servicing Alliance, told CNN, 'If you borrow again, you will be in the world of two choices.' Older borrowers could carry debt into retirement The revised loan structure may also affect borrowers later in life. Astra Taylor, co-founder of the Debt Collective, told CNN that the changes may result in 'an explosion of senior debtors.' The longer terms mean that borrowers could still be repaying student loans well into their 50s or 60s, potentially interfering with retirement savings and financial security. The full impact of the new plan will become clearer as it is implemented in the coming years. Until then, experts continue to analyse how balance-based repayment tiers and the resulting cliff effect will shape the financial outcomes of US student loan borrowers. TOI Education is on WhatsApp now. Follow us here . Ready to navigate global policies? Secure your overseas future. Get expert guidance now!
Newsweek
08-08-2025
- Business
- Newsweek
Student Loan Update: New Plan Rolled Out to Help 1.4 Million Borrowers
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. A new student loan reduction plan will be available to 1.4 million borrowers in New York City. Mayor Eric Adams on Thursday announced the loan reduction and college savings assistance program, which also offers specialized assistance for 1.6 million parents and guardians in lowering the costs of a college education. Why It Matters The program will help many borrowers who contribute to America's $1.8 trillion in student loan debt. Since President Donald Trump's One Big Beautiful Bill Act was signed into law last month, the Department of Education will abolish the SAVE program and other income-driven repayment (IDR) options by July 2028. Borrowers currently on SAVE will be transitioned to new plans, either the Repayment Assistance Plan (RAP), which is slated to launch by July 2026, or a revised Standard Repayment Plan. However, these plans typically offer higher monthly payments and may make it more difficult for borrowers to afford basic necessities. "Student loan programs have become overly complex, and the recent changes by the current administration have only made things worse," Kevin Thompson, CEO of 9i Capital Group and host of the 9innings podcast, told Newsweek. "Borrowers are struggling—many are in default, and some can't even access the federal loan portals they need. NYC is stepping up to reduce the burden, especially for public sector workers, by offering real solutions to lower debt and simplify the repayment process." New York City Mayor Eric Adams speaks during a news conference at City Hall on June 26. New York City Mayor Eric Adams speaks during a news conference at City Hall on June 26. Michael M. Santiago/Getty Images What To Know The student loan reduction and college savings assistance program will be available to all New York City residents, estimated to help them save a collective $1 billion. Since the city partnered with student loan platform Summer, city residents who work as public servants have lowered their debts through the federal government's income- driven repayment plans and the Public Service Loan Forgiveness program. Now the program will be available to another roughly 1.4 million New Yorkers who either already have student loan debt or are enrolling in college. "Anyone who lives in the city's five boroughs with student debt or who is planning for college can access Summer's platform for free, thanks to the city's sponsorship," Will Sealy, CEO and founder of Summer, told Newsweek. "In addition to providing financial relief, this program also removes the administrative burden on people who are trying to access loan assistance, scholarship programs, and other ways to save on college costs. We've already helped thousands of NYC employees determine their eligibility for and enroll in forgiveness programs because we've simplified the process." Parents and guardians in particular will also get specialized assistance. The city estimates the program will reduce student loan payments for New Yorkers by an average of $3,000 per year and $7,000 per year for those with advanced degrees. "Leading a financially healthy life is a difficult task when you are tackling student loan debt — something I know firsthand," Department of Consumer and Worker Protection Commissioner Vilda Vera Mayuga said in a statement. "With this new expansion, we are extending support to millions of New Yorkers who have or are thinking of taking on student loans." In the first three months of the city employee loan program, New Yorkers saw $13.8 million in savings and an average reduction of $3,800 in annual student loan payments. The pilot program was originally announced in May to help city employees take advantage of the Public Service Loan Forgiveness program, but now all New York City residents qualify to use Summer's online portal. Through this portal, you can verify your eligibility for programs that lower payments, compare repayment options and manage paperwork for enrolling in federal programs. On the college planning side, residents will have access to online tools to figure out how much they need to save and strategies to make higher education more affordable. Michael Ryan, finance expert and founder of said the program is a "smart move" by the local government, especially as it looks to keep young talent in the city. "Mayor Adams is focused on his admin's push to make the city family friendly," Ryan told Newsweek. "It's not altruism; it's to keep young talent from fleeing NYC to cheaper, more affordable places." What People Are Saying Adams, in a statement: "Getting an education shouldn't lead to a lifetime of debt; yet, for far too many New Yorkers, getting a college degree and a higher education means more bills, more debt, more money out of their pockets... Working with Summer, we will expand our groundbreaking partnership and help millions of New Yorkers bring down their monthly student loan payments by thousands of dollars and save even more on the cost of a college degree. We are lowering costs for families, helping them connect to debt relief, and making our city the best place to find opportunity, raise a family, and live the American Dream." Sealy, in a statement: "Student loan repayment and college cost planning are increasingly complex processes to navigate. Thankfully, the City of New York is stepping up to provide additional access to resources, tools, and programs to reduce that complexity." Thompson also told Newsweek: "Whether this becomes a model for other cities depends on the political climate. It's unlikely red states adopt anything close to this. They're more aligned with the administration's stance on repayment. But in blue or more progressive-leaning areas, this could absolutely catch on. That said, don't be surprised if this ends up being another battleground in the courts." What Happens Next As the first program of its kind for any major U.S. city, Sealy said Adams and the New York City government are setting a larger example for what other cities can do to improve affordability for residents. "This public-private model lets other cities leverage existing expertise without building from scratch," Sealy said. "Student debt affects local workforce retention and economic development. Cities don't need to wait for D.C. to take action when they have the tools to help their own residents today. Many other large municipalities already have similar programs of their own in the works, which we're excited to support."
CNBC
08-08-2025
- Business
- CNBC
Student loan borrowers face an expensive ‘cliff effect' under the new 'standard' repayment plan, expert says
President Donald Trump's "big beautiful bill" overhauled the so-called Standard Repayment Plan for federal student loan borrowers. Next year, millions of current borrowers will have access to the changed program. For new borrowers, it will be one of just two options available to pay back their debt. That may not be to their benefit, experts say: For some borrowers, the new Standard Plan will keep them in debt longer and add tens of thousands of dollars to the total they must repay. "The design of the new plan, in which a borrower's payment term is scaled up in five-year increments based on arbitrary thresholds, means some borrowers will face a problematic 'cliff effect,'" said Michele Shepard Zampini, senior director of college affordability at The Institute For College Access & Success. "A small difference in their balance will tip them into the next tier and extend their term," Zampini said. Here's what to know about the changes to the Standard Plan. The current Standard Plan is fairly simple: Borrowers typically have their debt divided into fixed payments over 10 years. It's often the fastest option for people to pay off their student debt, compared with the U.S. Department of Education's other income-driven repayment plans. Historically, IDR plans cap a borrowers' monthly bill at a share of their discretionary income, and lead to loan cancellation after a certain period — typically 20 years or 25 years. (But the recent law makes changes to those plans, too. ) The new Standard Plan will spread a borrower's debt into fixed payments over one of four timeframes, depending on what they owe. Those who've borrowed up to $24,999 will still have a 10-year repayment term. But those who owe between $25,000 and $49,999 will pay their debt back over 15 years; a balance ranging from $50,000 to $99,999 will be paid back over 20 years; and a debt over $100,000 will lead to a 25-year repayment term. More from Personal Finance:Trump floats tariff 'rebate' for consumersStudent loan forgiveness may soon be taxed againStudent loan borrowers — how will the end of the SAVE plan impact you? Tell us The longer timelines will force people to carry debt later into their lives, when they should be preparing for retirement, said Astra Taylor, co-founder of the Debt Collective, a union for debtors. "We anticipate an explosion of senior debtors," Taylor said, in an earlier interview with CNBC. Under the new Standard Plan, some borrowers with higher balances may have lower monthly bills than under the current plan because their repayment term is longer, said Zampini. "However, many such borrowers will pay more in total over the life of the loan, as compared to the current Standard Plan," Zampini said. Indeed, a borrower who took out $100,000 in federal student loans would repay around $125,000 over 10 years under the current Standard Plan, according to an analysis by Kantrowitz. (He assumed a 5% interest rate.) But under the revised plan, that same borrower would be required to pay back more than $175,000 during their 25-year term — a difference of nearly $50,000. The modified Standard Plan will be available by July 1, 2026, according to the Education Dept. That plan will be one of just two repayment options available to borrowers who take out student loans after that date, along with Republicans' new IDR plan, called the Repayment Assistance Plan, or RAP. Borrowers with loans taken out before July 1, 2026 will maintain access to some existing repayment plans, including Income-Based Repayment, or IBR, and the current 10-year Standard Plan. But keep in mind: Even borrowers with old loans who take out a new one after July 1, 2026, will lose the existing options for that loan, said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers. "If you borrow again, you will be in the world of two choices," Buchanan said.
Newsweek
09-07-2025
- Business
- Newsweek
Student Loan Update: Borrowers' Payments May Surge Hundreds of Dollars
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. Millions of student loan borrowers in the United States are expected to see their monthly payments rise significantly following President Donald Trump's signing of the One Big Beautiful Bill Act. The law, enacted on Friday, replaces income-driven repayment options from former President Joe Biden's administration with new plans projected to cost borrowers hundreds of dollars more each month. Economic analyses warn that the sweeping changes will impact college students, families and existing borrowers across the country. The typical borrower will see monthly student loan costs spike hundreds of dollars per month, or thousands of dollars per year, according to a memo sent to lawmakers by the Student Borrower Protection Center. Graduation students, faculty and family gather in front of the statue of John Harvard in Harvard Yard on May 28, 2025, in Cambridge, Massachusetts. Graduation students, faculty and family gather in front of the statue of John Harvard in Harvard Yard on May 28, 2025, in Cambridge, It Matters The passage of the One Big Beautiful Bill marks a major shift in federal loan policy. For years, the SAVE plan and a variety of income-driven repayment (IDR) options let borrowers manage payments based on income and qualify for expedited debt forgiveness. The new law eliminates those protections, replacing them with choices viewed as less equitable by many. With higher monthly payments going into effect, borrowers—especially those already facing financial strain—could see budget pressures worsen. The legislation arrives against a backdrop of rising delinquency rates. Nearly one in three Americans with federal student debt, or 5.8 million people, were reported delinquent on payments in 2025. What To Know The One Big Beautiful Bill Act wipes out federal income-driven repayment plans, such as the SAVE plan introduced under Biden and installs two new choices for borrowers: the Repayment Assistance Plan (RAP) and an updated Standard Repayment Plan. Repayment Assistance Plan (RAP): Under RAP, monthly payments are determined by income, from 1 percent to 10 percent, with a $10 minimum. However, RAP offers less aggressive debt relief than the prior SAVE plan, with loan forgiveness only after 30 years and stricter rules on deferment. Under RAP, monthly payments are determined by income, from 1 percent to 10 percent, with a $10 minimum. However, RAP offers less aggressive debt relief than the prior SAVE plan, with loan forgiveness only after 30 years and stricter rules on deferment. Standard Repayment Plan: This plan requires fixed payments for terms ranging from 10 to 25 years, depending on the original amount borrowed, and lacks the income-based adjustments that previously benefited lower-earning borrowers. The Student Borrower Protection Center calculated the new loan framework would raise annual loan payments by: $2,929 for typical degree-holding borrowers $1,761 for those with some college but no degree $2,808 for a family of four headed by a bachelor's degree holder Loan payments could "spike by hundreds of dollars per month, or thousands of dollars per year," the center reported to Senators Bill Cassidy, a Louisiana Republican, and Bernie Sanders, a Vermont independent. The new framework extends the mandatory payment period for loan forgiveness under RAP to 30 years and eliminates the option to pause payments because of economic hardship or unemployment. Borrowers will also see their ability to use short-term forbearance (a pause in payments) reduced, increasing the risk of default for those facing financial challenges. The Act caps total borrowing for graduate students at $100,000, for law/medical students at $200,000, and for parents at $65,000 per student. The Graduate PLUS loan program is also phased out for new participants, and fewer students now qualify for federal Pell Grants due to tighter eligibility rules. "I don't know about you, but when I heard that medical school can cost over $300,000 at private universities, that $200,000 cap started looking Like trying to buy a house with a mortgage that only covers half the price," Michael Ryan, a finance expert and the founder of told Newsweek. That's likely to cause increased strain on borrowers: Up to 1.8 million could default by July 2025, with millions more expected to follow by the fall. Loan rehabilitation opportunities have been expanded under the Act, but experts warn that more Americans will face aggressive collection tactics as defaults rise. With stricter federal limits, some students may consider private loans. However, analysts strongly cautioned against this, noting that private student loans generally come with higher interest rates, fewer repayment options and less borrower protection than federal loans. "Without federal loans, students will have to turn to private lenders. And trust me, that's not the same thing at all. Private loans don't qualify for those public service forgiveness programs," Ryan said. "The ones that help doctors who choose to work in underserved communities actually pay off their debt. Plus, private loans are way less flexible. No income-driven repayment plans, fewer options if you hit a rough patch financially." What People Are Saying Michael Ryan, a finance expert and the founder of told Newsweek: "The whole thing feels like it's creating this weird two-tier system where only kids from wealthy families can afford to become doctors, lawyers or dentists. Which is ironic, right? Because the bill is supposedly trying to address how unlimited borrowing has driven up education costs. But their solution is the private market handle it?" Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek: "The issue for many borrowers who qualified for SAVE or other payment assistance programs is the lack of these options will equate to their monthly payments rising. Technically the borrower is not paying more over the duration of the loan; the same borrowed amount stands. However, monthly payments will rise for most due to a lack of assistance plans." What Happens Next Full implementation of the One Big Beautiful Bill will occur over a multiyear period. Borrowers currently enrolled in the SAVE plan may have at least one year—between July 2026 and July 2028—to choose a new repayment arrangement. "The long-term damage here is clear: a growing wealth divide that pushes more people to the margins. Many will fall into default—not because they don't want to pay, but because they simply can't," Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek. "And when that happens, it's more than just a financial mark. These loans become a permanent lien on people's lives—blocking access to homeownership, delaying family formation and cutting people off from participating fully in society."
Newsweek
03-05-2025
- Business
- Newsweek
Student Loans: The Best Repayment Plans Available
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. Millions of student loan borrowers who have fallen behind on their repayments have just a matter of days to arrange a payment plan and get back on track. But which repayment option is best for your financial situation? May 5 Deadline The Department of Education (ED) recently confirmed that forced collections on defaulted loans will begin on Monday, May 5. Borrowers become delinquent from the first day a payment is late, and for most federal student loans, the outstanding balance goes into default after 270 days, or roughly nine months, of non-payment. Defaulted student loans have not been collected since March 2020 when the federal government activated a process known as administrative forbearance, which was put in place due to the economic turbulence caused by the COVID-19 pandemic. Taking action now is important, as remaining in default on your loans can have a myriad of unpleasant consequences, including major damage to your credit score and garnishment of wages, tax refunds and federal benefits. But getting your head around the multitude of options available can be tricky. "Graduates may be scratching their heads at student loan repayment plan options, and rightfully so," Lindsey Crossmier, researcher and personal finance expert at MarketWatch Guides, told Newsweek. "The plans can be somewhat confusing at first, and it seems new legislation rulings are constantly coming out." Stock image/file photo: A mortarboard laid over U.S. Dollars. Stock image/file photo: A mortarboard laid over U.S. Dollars. GETTY Different Types of Loan Plans There are two categories of federal student loan repayment plans: fixed and income-driven repayment (IDR). A fixed-term repayment plan is a type of federal student loan repayment plan where your monthly payment stays the same each month, and your loan is fully paid off by the end of a set time period—usually 10, 20, or 30 years, depending on the plan and loan type. There are three types of fixed term plan: Standard Repayment Plan —has a 10-year term with fixed monthly payments. It usually results in the lowest total interest cost because the loan is paid off more quickly. —has a 10-year term with fixed monthly payments. It usually results in the lowest total interest cost because the loan is paid off more quickly. Graduated Repayment Plan —also spans 10 years, but payments start off lower and increase every two years. This option is helpful if you expect your income to rise over time. —also spans 10 years, but payments start off lower and increase every two years. This option is helpful if you expect your income to rise over time. Extended Repayment Plan—gives you up to 25 years to repay your loans and offers either fixed or graduated payments. However, it's only available if you owe more than $30,000 in federal student loans. While it can lower your monthly payment, you'll end up paying more in interest over the life of the loan. Fixed-term repayment plans do not adjust based on your income. The longer your repayment term, the more interest you'll pay overall. These plans are different from IDR plans, which calculate your payments based on your income and family size. As for IDR plans, there are four options available: Income-Based Repayment (IBR) —sets monthly payments at 10 to 15 percent of a borrower's discretionary income, making it a suitable option for those with a high debt-to-income ratio. Borrowers can qualify for loan forgiveness after making 20 to 25 years of payments. —sets monthly payments at 10 to 15 percent of a borrower's discretionary income, making it a suitable option for those with a high debt-to-income ratio. Borrowers can qualify for loan forgiveness after making 20 to 25 years of payments. Income-Contingent Repayment (ICR) —determines payments as either 20 percent of discretionary income or a fixed amount over 12 years, whichever is lower. Loan forgiveness is available after 25 years, and this is the only income-driven plan accessible to Parent PLUS Loan borrowers through consolidation. —determines payments as either 20 percent of discretionary income or a fixed amount over 12 years, whichever is lower. Loan forgiveness is available after 25 years, and this is the only income-driven plan accessible to Parent PLUS Loan borrowers through consolidation. Pay As You Earn (PAYE) —caps payments at 10 percent of discretionary income and is available only to those who took out loans after October 1, 2007. Borrowers can receive loan forgiveness after 20 years of qualifying payments. —caps payments at 10 percent of discretionary income and is available only to those who took out loans after October 1, 2007. Borrowers can receive loan forgiveness after 20 years of qualifying payments. Revised Pay As You Earn (REPAYE)—requires payments of 10 percent of discretionary income, regardless of income level. Loan forgiveness is granted after 20 years for undergraduate loans and 25 years for graduate loans. Which Repayment Option Should I Choose? Which option is best for you depends on your financial situation, Crossmier explained. "Traditional plans like Standard and Graduated have a fixed payoff period regardless of income changes, which can be especially useful for those anxious to be rid of debt quickly," she said. "Higher earners typically benefit most from traditional plans like Standard Repayment as they can afford larger monthly payments and reduce their total interest paid. If you anticipate your career taking off and earnings increasing over time, a Graduated plan, which start with lower payments and increase every two years, could be a good fit." As IDR plans adjust monthly payments based on your earnings and family size, Crossmier said these "can be especially useful if you're concerned about being able to afford repayments." She explained that these plans may be better for lower income borrowers or those who may be uncertain about their income over time. "Lower earners can do better with income-driven plans since payments scale with income, which can prevent stress during financial hardships," Crossmier said. "Traditional plans typically cost less in total interest paid, but IDR plans can provide more financial flexibility." Saving on a Valuable Education (SAVE) Plan The Saving on a Valuable Education (SAVE) plan, introduced under former President Joe Biden, is no longer an option for enrollment. This is because several Republican states took legal action against the previous administration, arguing that it does not have the authority to alter student loan repayment plans. Borrowers enrolled in SAVE have been placed in general forbearance and are not required to make repayments.
