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Yahoo
2 days ago
- Business
- Yahoo
Is your student loan getting taxed again?
President Donald Trump's One Big Beautiful Bill Act (OBBBA), recently signed into law, ushers in a number of new tax write-offs and credits. Some of those include the 'No Tax on Tips' provision (which allows eligible tipped workers to deduct a portion of their income from tips on their federal income taxes), car loan and charitable donation deductions, and a child credit. However, other deductions that Trump's tax bill did not renew will expire at the end of this year, including those related to student loan forgiveness. As a result, borrowers with certain federal student loans may have to pay more taxes. How to respond to 'quiet cracking,' a new workplace threat AT&T to pay $177 million in data breach settlement. Here's how to claim up to $5,000 Housing market reality check: Homeowners finally accept 3% mortgage rates aren't coming back 'There are two things that student loan borrowers need to know: There are changes in the way student debt is taxed, and the other is Congress didn't extend tax-free student loan forgiveness,' Mike Pierce, executive director of the Student Borrower Protection Center (SBPC), told Fast Company. Some student loans may once again be taxed in 2026 'Forgiven student loan debt is generally considered taxable income in the year it's discharged,' Miryam Wisnicki, tax principal at CliftonLarsonAllen, told Fast Company. 'However, the American Rescue Plan Act of 2021 temporarily excluded certain types of student loan forgiveness from taxable income through December 31, 2025. This provision was enacted in response to the COVID-19 pandemic and aimed to provide relief to borrowers.' But while student loan forgiveness remains tax-free through the end of 2025, it will be subject to income tax on the amount discharged starting at the beginning of 2026. Which student loan provisions will remain tax-free? The OBBBA did separately make some student-loan-related tax provisions permanent, according to Wisnicki: Loan discharge due to death or total disability will continue to be excluded from taxable income. Employer-provided student loan repayment assistance—up to $5,250 annually—will remain tax-free under qualified educational assistance programs. This benefit, previously set to expire at the end of 2025, is now permanent and will be adjusted annually for inflation. New loan limits While undergraduate loan limits won't change, they will for graduate students and parent borrowers, NPR reported. The new law puts a cap on unsubsidized student loans for graduate students at $20,500 per year and $100,000 for a lifetime (down from $138,500). It caps borrowing for professional degrees, for example in law or medicine, at $50,000 per year and $200,000 for a lifetime (up from $138,500). It limits federal student loan borrowing to a total of $257,500 for a lifetime (for both undergraduate and graduate studies). It also caps borrowing for parents through the federal Parent PLUS loan program at $20,000 per year per student and $65,000 for a lifetime, which, according to the SBPC, could force millions into a risky private market. The law eliminates the Graduate PLUS loan program for all new students on July 1, 2026, gutting a critical financial aid program that had previously allowed eligible graduate and professional students to borrow up to the full cost of attendance for their advanced degree. How will the new law affect repayment options? After July 1, 2026, borrowers with new loans will have only two repayment options: a new standard option and a new Repayment Assistance Plan (RAP) option based on income. Current borrowers with loans taken out before July 1, 2026, will continue to have access to an Income-Based Repayment (IBR) plan and can continue to enroll in or remain on an Income-Driven Repayment plan, but will need to switch to IBR or RAP by July 1, 2028. Current borrowers who take on any new loan after July 1, 2026, including a consolidation loan, will be eligible only for RAP or the new standard plan, per the SBPC. According to NPR, experts have said monthly RAP payments for many middle-income borrowers will be lower compared with earlier RAP plans, but not as low as they were on the previous Saving on a Valuable Education option. Meanwhile, the lowest-income borrowers will make a minimum monthly payment of $10, or $120 per year, instead of $0. 'Congress eliminated the most generous repayment terms and replaced it with a new plan that will cost more money,' Pierce explained. 'It is making sure that the lowest-income borrowers have to pay something.' There are still many ways to get your student debt canceled, Pierce said, but the canceled debt will be treated as taxable income: 'For example, an average borrower who earns $50,000 a year would end up paying $2,200 more in taxes a year for every $10,000 that is canceled.' This post originally appeared at to get the Fast Company newsletter: Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Time of India
6 days ago
- Business
- Time of India
Explained: How Trump's RAP rips up student debt rules; bigger bills, gutted aid, a brutal new reality for borrowers
Trump's RAP creates a brutal reality for student borrowers. When the Trump administration signed its sweeping tax-and-spending bill on 4 July 2025, a quiet but consequential shift was tucked into its 700-plus pages. Amid the fanfare over tax cuts and spending reallocations, the Repayment Assistance Plan (RAP) was introduced as the new framework that will govern federal student loans from 1 July 2026. Marketed as a simplification of America's complex income-driven repayment (IDR) system, RAP promises 'legal compliance' after courts struck down parts of Biden's student debt relief agenda. But scratch the surface, and RAP looks less like reform and more like a recalibration of who carries the weight of higher education costs in America. From discretionary to gross income: Redrawing the fairness line Under Biden's Saving on a Valuable Education (SAVE) plan, repayment was tied to discretionary income—earnings above 225% of the federal poverty line, giving low-income borrowers breathing room. According to the Student Borrower Protection Center (SBPC), over 40% of SAVE borrowers earn less than this threshold (around $35,213 for a single person, $72,338 for a family of four), meaning many legally owed $0 monthly payments, with no interest piling up. RAP wipes out this buffer. Payments will now be based on gross income, not adjusted for essential living costs. A borrower earning $30,000 annually—once paying close to nothing—may see monthly bills rise to $100–$150, depending on Department of Education calculations. Supporters call this 'shared responsibility'; critics call it regressive taxation disguised as reform, extracting more from those least able to pay while offering little relief to those already struggling. A symbolic minimum payment, masking compounding debt RAP introduces a mandatory $10 minimum payment for all borrowers, even for those with no verifiable income. The administration presents this as a fairness measure: every borrower must contribute 'something.' Yet this token sum does little against loans accruing hundreds of dollars in interest monthly. Where SAVE paused unpaid interest to prevent balances from ballooning, RAP allows interest to compound without restraint. A borrower paying $10 on a loan generating $200 in monthly interest will see their debt grow, month after month, despite 'repayment.' The minimum payment, far from ensuring fairness, ensures an ever-lengthening shadow of debt for the most vulnerable borrowers. New borrowing limits and Pell Grant restrictions : The quiet gatekeepers RAP is not just about repayment; it reshapes the entry point to higher education financing. The July 2025 bill introduces caps on federal loans, setting stricter annual and lifetime borrowing limits. Families whose tuition costs exceed these caps—common in graduate and professional programmes—will be pushed toward private lenders, with higher interest rates and fewer protections. Simultaneously, Pell Grant eligibility tightens, with new academic and enrolment criteria limiting who qualifies for this low-income student aid. While framed as fiscal prudence, the effect is clear: future students from disadvantaged backgrounds will have to borrow more from riskier sources or scale back their education plans, perpetuating inequality long before repayment even begins. The legal pretext: Policy by injunction The Department of Education has repeatedly justified RAP, and the recent interest accrual restart (effective 1 August 2025), as necessary compliance with federal court rulings that struck down SAVE. Yet, legal scholars and debt advocates note that no ruling mandated these specific policy shifts. Ending interest-free forbearance, replacing discretionary income formulas, or introducing minimum payments are choices, not obligations, presented under a veneer of judicial inevitability. This narrative of 'our hands are tied' masks a deliberate policy direction: reducing federal liability for student loans, shifting risks back to borrowers, and signalling that higher education is increasingly a personal gamble, not a public investment. A more expensive, less forgiving future For the 8 million borrowers currently in SAVE, interest is already accruing again, costing an estimated $300 per month or $3,500 per year on average, per SBPC data. When RAP kicks in from July 2026, these same borrowers could face higher mandatory payments, relentless interest growth, and fewer safety nets if their income falters. Future students will encounter tighter borrowing limits, reduced grants, and a repayment system less sensitive to their real ability to pay. In effect, RAP signals a policy retreat from income-driven protection, making the student debt system more rigid, more punitive, and less aligned with the principle that education should elevate, not impoverish. The bottom line RAP is sold as simplification and legality, but in practice, it reshapes the student loan system into a harsher, more market-driven regime. By moving from discretionary to gross income, introducing compulsory minimums, lifting interest safeguards, and constraining federal aid, it redraws the boundaries of opportunity in American higher education. For millions of borrowers—especially those below the poverty line—the promise of education as an accessible, upward path is narrowing, replaced by a reality where debt obligations harden even as economic security remains elusive. The legal justifications may soothe the policymakers' conscience; they will do little to soften the arithmetic facing graduates in 2026. TOI Education is on WhatsApp now. Follow us here . Ready to navigate global policies? Secure your overseas future. Get expert guidance now!
USA Today
6 days ago
- Business
- USA Today
Is your student loan payment increasing? What to know about SAVE plan updates
Millions of student loan borrowers who were enrolled in a Biden-era repayment plan will soon see their monthly payments increase after the current administration restarted interest accrual Aug. 1. Nearly 8 million borrowers on the Saving on a Valuable Education (SAVE) plan are now collecting interest on their loans for the first time since former President Joe Biden placed the group in forbearance in July 2024, pausing both monthly payments and interest accrual. "Borrowers in the SAVE Plan will see their loan balances grow when interest starts accruing on August 1," the Department of Education said in its July 9 announcement of the changes. "When the SAVE Plan forbearance ends, borrowers will be responsible for making monthly payments that include any accrued interest as well as their principal amounts." While SAVE plan borrowers will now be responsible for paying the interest on their loans, they remain in general forbearance for their minimum monthly payments. Yet payments on interest alone could cost the typical borrow hundreds of dollars per month, according to a recent analysis from the Student Borrower Protection Center, a debt-focused advocacy group. For many borrowers, this change means they will once again face loan-related monthly payments after more than a year of relief. More: What will student loans look like now that Trump's spending bill is signed? The Department said the move is part of an effort to comply with an injunction issued in April to implement a court order striking down SAVE, however, the rulings they cited do not specifically call the interest-free forbearance illegal. Here's what to know: What is the SAVE plan? That program, launched in 2023 by the Biden administration, was designed to provide more generous terms than prior income-based repayment plans, with monthly payments dropping to as low as $0 for some borrowers. It also provided debt forgiveness for some smaller loans in as few as 10 years, compared to the 20- or 25-year timeline under earlier rules. But the program was quickly challenged in court, caught up in a string of rulings over the administration's student debt relief plan. In 2024, two courts issued injunctions against the SAVE plan, effectively blocking it, leading the Biden administration to place SAVE plan borrowers into an interest-free forbearance as its legal fights continued. Like several other student loan programs, the SAVE plan has come under fire from President Donald Trump's Department of Education as it began to aggressively overhaul the federal student loan system and institute aggressive collection policies. The Department said it began direct outreach to the millions of SAVE plan borrowers in early July about the resumption of interest charges, including instructions on how to move to what it calls a "legal repayment plan." How much will payments increase? For the typical borrower on the plan, the resumption of interest charges could cost them about $300 per month, according to a July analysis from the debt-focused advocacy group Student Borrower Protection Center. That amounts to more than $3,500 in interest costs annually. The center said it estimates more than 40% of borrowers in the SAVE plan make less than 225% of the federal poverty line, which it calculated to be $35,213 per year for single borrowers and up to $72,338 for borrowers heading a household of four. Borrowers can check how the resumption of interest on their loans will impact their payments by going to the loan simulator on the Federal Student Aid website. What is the Repayment Assistance Plan? Education Secretary Linda McMahon urged SAVE borrowers to transition quickly to alternate repayment plans. "For years, the Biden administration used so-called 'loan forgiveness' promises to win votes, but federal courts repeatedly ruled that those actions were unlawful," she said in a statement on July 9. "Congress designed these programs to ensure that borrowers repay their loans, yet the Biden administration tried to illegally force taxpayers to foot the bill instead." McMahon said the department urges all borrowers in the SAVE plan to transition to what she calls "legally compliant" repayment plans, pointing to the administration's proposed Repayment Assistance Plan, RAP, slated to replace the existing Income-Based Repayment Plan in 2026. SAVE based monthly payments, which could be as low as $0, on discretionary income. In comparison, RAP bases payments on gross income and requires all borrowers, even those who report no income, to make minimum monthly payments of at least $10. The new plan was part of a series of student loan changes included in Trump's massive tax and spending bill, signed into law on July 4. Most of the overhauls take effect July 1, 2026, and include new limits on the amount that students and their families can borrow and new eligibility criteria for Pell Grants, which help low-income undergraduate students. Contributing: Reuters; Zachary Schermele, USA TODAY. Kathryn Palmer is a national trending news reporter for USA TODAY. You can reach her at kapalmer@ and on X @KathrynPlmr.
CBS News
02-08-2025
- Business
- CBS News
Student loan interest for millions resumes today. The average monthly payment could rise $300.
Millions of people with student loans who had signed up for a Biden-era repayment plan will start seeing interest accrue to their accounts starting today, Aug. 1, a change that could result in an additional $300 in monthly costs for the typical borrower, according to one analysis. The Department of Education announced on July 9 that it planned to restart charging interest for borrowers enrolled in the Saving on a Valuable Education, or SAVE, plan, which was created by the Biden administration in 2023 to help lighten the financial burden faced by millions of student loan borrowers. But two courts last year issued injunctions against the SAVE plan, effectively halting the repayment program. In response, the Biden administration moved all of the SAVE plan's enrollees into zero-interest forbearance, meaning that their loans were temporarily placed on hold and interest stopped accruing. The Education Department says resuming interest on the loans represents a measure of "fiscal responsibility," according to its July 9 statement. But the monetary impact on the roughly 8 million borrowers enrolled in the SAVE plan could be significant, given that a typical borrower could see an increase of $300 per month due to new interest charges, according to a calculation by the Student Borrower Protection Center, an advocacy group for people with higher-education debt. SAVE enrollees can opt to remain in forbearance, which means they won't need to make monthly payments, but "the most significant impact is that your total loan balance will start growing again" because interest will resume, Bethany Hubert, a financial aid specialist at lender Earnest, told CBS MoneyWatch. She added, "If you choose not to make payments, the accruing interest can really balloon your balance, making it much more challenging and expensive to pay back over time." While the typical borrower could see costs increase by about $300 per month, or $3,500 per year, the specific increase will depend on your loan balance. Borrowers can check how the resumption of interest on their loans will impact their payments by going to the loan simulator on the Federal Student Aid website, Hubert said, although she noted that it might not yet include all the recent changes impacting student loans. Borrowers should evaluate the four repayment plans available, which can be found at here at the Federal Student Aid website, Hubert said. Changing plans will depend on your situation, added Betsy Mayotte, president of The Institute of Student Loan Advisors, a nonprofit that provides free advice for student borrowers. Borrowers who are seeking loan forgiveness, which can be earned after repaying a loan for anywhere from 10 years to 25 years, depending on the plan, may want switch because "the SAVE forbearance doesn't count towards the payments needed to get the balance forgiven under those plans," she said. There's also a new repayment plan in the works that borrowers could consider, called the Repayment Assistance Plan (RAP), which is due in 2026 and is part of the "big beautiful" tax and spending bill signed into law by President Trump on July 4. "For earners who make less than $10,000, their [monthly] payment will be $10 under RAP," Hubert said. For those with adjusted gross income (AGI) above $10,000 per year, the repayments will be based on 1% to 10% of their income minus $50 in payments each month for each child the borrower has. "With that in mind, we can estimate that a borrower who has an AGI of $45,000 and no children would have their monthly payment set at $150," she added. RAP payments could carry a higher monthly payment for some borrowers than under the SAVE plan, but the SAVE plan is likely to eventually be eliminated due to the court cases, Mayotte said. "At a minimum, I would suggest trying to make payments that cover the monthly interest as it begins to accrue to prevent your balance from growing," Hubert added.
Economic Times
02-08-2025
- Business
- Economic Times
Millions face $300 monthly hike as SAVE Student Loan interest resumes in August
Agencies Student loan borrowers face new interest charges as SAVE repayment plan resumes in August 2025. Student loan borrowers under the SAVE repayment plan will see significant changes starting August 2025. The U.S. Department of Education has resumed interest charges, which may increase monthly costs by about $300. Millions of Americans are now reviewing their repayment options to manage the financial 2023, the SAVE plan was introduced to help student loan borrowers manage payments. It included a pause on interest accumulation. However, two court rulings in 2024 halted the plan, and borrowers were shifted into a zero-interest forbearance. On July 9, 2025, the Department of Education confirmed that the interest pause would end. Interest started accumulating again on August 1, interest charges reinstated, borrowers could now see an average increase of $300 in their monthly payments. According to the Student Borrower Protection Center, this equates to about $3,500 per year in interest for those on the SAVE Hubert from Earnest explained that remaining in forbearance is still an option, but interest will continue to grow. Borrowers who delay payments might see their balances increase quickly. Also Read: Gary Busey Guilty: Did he actually try to undo bra of a woman at Monster-Mania Convention 2022? See what happened The SAVE plan forbearance allows borrowers to delay payments, but interest will now accumulate. Experts warn that avoiding payments may lead to higher overall loan costs in the advised that borrowers consider paying at least the monthly interest to avoid balance Mayotte from The Institute of Student Loan Advisors suggested some borrowers may benefit from switching to a different repayment plan. For example, those aiming for loan forgiveness should know that time in SAVE forbearance does not count toward forgiveness can use the Federal Student Aid website's loan simulator to check how different plans would affect their payments. Also Read: Is Venmo and Paypal down today? Live updates on outage, user impact and alternative payment options A new Repayment Assistance Plan (RAP) will start in 2026. It was included in the One Big Beautiful Bill signed into law by President Donald Trump on July 4, is designed to help low-income borrowers. Those earning under $10,000 annually will pay $10 per month. For those with higher income, payments range from 1–10% of income after subtracting $50 per provided an example: a borrower with a $45,000 AGI and no children would pay $150 monthly under experts, including Hubert, recommend that borrowers begin paying interest immediately, even if they stay in forbearance. This helps prevent long-term debt SAVE interest restart comes amid other challenges. Many Americans were unable to access their loan details this summer, causing another example, one couple paid off $190,000 in student loan debt in 27 months by using a financial tool. How much more will SAVE borrowers pay each month after August 2025? Most SAVE borrowers could pay around $300 more each month due to the resumed interest, which amounts to about $3,500 annually. What is the Repayment Assistance Plan starting in 2026? RAP helps low-income borrowers. Payments start at $10 for low earners and scale based on income, adjusted by the number of children.
