Latest news with #TICAS
Newsweek
6 days ago
- Business
- Newsweek
Student Loan Update: Warning Issued Over Trump's New Plan
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 Institute for College Access and Success (TICAS), a student loan borrower advocacy organization, is warning against a new repayment plan that the Trump administration is introducing within the next few months. The Department of Education (ED), headed by Education Secretary Linda McMahon, has unveiled a new repayment plan option, called Repayment Assistance Plan (RAP), to replace older plans that allowed borrowers to repay based on their specific income and eventually gain student loan forgiveness. Newsweek has reached out to TICAS and the ED for comment via email. Why It Matters RAP was introduced under the "Big Beautiful Bill" that President Donald Trump signed into law last month. Under the new regulations, three other income-driven repayment (IDR) plans: Income-Contingent Repayment (CIR), Pay As You Earn (PAYE), and Saving on a Valuable Education (SAVE) are being phased out by 2028. Enrolling in RAP will be a new option, but student loan borrower advocates warn there could be long term negative consequences to signing up for the plan. What To Know Beginning July 1, 2026, all borrowers who consolidate their student loans through the federal direct loan program will have to choose between RAP and the standard plan, which does not depend on a borrower's income. Under RAP, your monthly payments for each year are determined based on your income, and after a fixed term, you would qualify for student loan forgiveness. However, it differs from other IDR plans because it has higher monthly payments and uses a different formula where the percentage of income that is counted toward your monthly payment increases for every $10,000 in additional income earned by the borrower with a cap of $100,000. Other IDR plans use a fixed repayment formula and factor in inflation. RAP plan enrollees will also be subject to a minimum required monthly payment even if they bring in no income, unlike ICR, PAYE, SAVE and Income-Based Repayment (IBR). Additionally, while the other options factored in all the other people the borrower lived with in their home, RAP only adjusts a $50 monthly payment reduction for a dependent child. RAP also mandates a longer repayment period of 30 years before borrowers can qualify for student loan forgiveness, unlike older plans which allowed for this after 20 or 25 years. The Institute for College Access and Success warned that this new plan means many borrowers will likely find themselves in default on their loans compared to prior options. "The plan departs radically from the core design tenets of all previous income-based repayment plans," TICAS wrote in a recent blog post. "One stark difference is that it removes the 'income protection' that all prior plans have, which is meant to 'protect' a certain amount of a borrower's income so they can stay current on their loan payment while still having enough funds to cover their basic needs." It added: "RAP scraps this approach and instead bases a borrower's payment on their gross income, rather than their discretionary income. Unlike all existing income-based plans—which require monthly payments only once a borrower's income is a certain amount above the federal poverty threshold—RAP will require payments from even those earning far below the poverty level." As the cost-of-living increases, TICAS said RAP will likely "push more borrowers than ever into the nightmarish world of loan default." "All told, the RAP proposal is not much of a safety net," TICAS wrote. "When it's the only thing standing between borrowers and loan default, we can expect many more borrowers to enter the draconian student loan collections system, in which many will be trapped." President Donald Trump listens to questions from reporters in the Oval Office on August 7 in Washington, D.C. President Donald Trump listens to questions from reporters in the Oval Office on August 7 in Washington, People Are Saying Education and Workforce Committee chairman Tim Walberg, a Michigan Republican, said in a previous statement: "The student loan repayment process has become bloated and too complex. The plan simplifies the loan repayment system to help troubled borrowers repay loans without saddling taxpayers with the burden of paying back the loans of wealthy borrowers." Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek: "The warning is valid. The setup looks eerily similar to prior plans like IBR and PAYE, but with a few important twists. The structure feels familiar, yet as the saying goes, 'all that glitters isn't gold.'" He continued: "Calling it a debt trap is putting it mildly. This design pushes people to stay in the workforce longer, keeping them tied to repayment well into their lives. From a business perspective, it's a tool to keep labor in the system. On the 'bright' side, more companies are offering loan repayment perks—but those are just retention levers to keep people tied to the company." Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek: "While the new Repayment Assistance Plan beginning next year may appear similar to other recently introduced programs designed to lessen monthly payment amounts for some borrowers, the reality is there are some stark differences that could have negative effects on those carrying substantial student debt. The new plan will still require a monthly payment regardless of whether the borrower has a job or not, differing from plans like SAVE which could lower the amount to $0 if the loan holder is out of work." What Happens Next? Once ICR, PAYE and SAVE are phased out, borrowers will be forced to choose a different repayment plan by July 2028. RAP will likely be more affordable than IBR for many borrowers, despite TICAS's warned risks. "These are the kinds of pro-business policies you get when the people crafting the legislation have a business mindset," Thompson said. "They see people as one thing and one thing only: inputs to the labor force."
Forbes
09-07-2025
- Business
- Forbes
It's About To Get Harder To Pay Off Your Student Loans—Here's What Changed
Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations. It will soon get harder to pay off your student loans. On Friday, President Trump signed the One Big Beautiful Bill Act into law, restructuring the federal student loans system and making it more difficult to finance your education through loans. 'This bill can only be described as one big mistake, the consequences of which will negatively affect college students, borrowers, and their families for years to come,' said Sameer Gadkaree, president and CEO of The Institute for College Access & Success (TICAS). 'By increasing the amount, riskiness and duration of student loan debt, the bill directly reduces the likelihood that current borrowers and future students can do better financially than their parents. The rushed legislation is sure to have unintended consequences, but it is equally sure to achieve one clear objective: fewer college graduates to support our nation's economy and workforce.' Two Worse Plans to Pick From The bill wipes out current income-based repayment plans and replaces them with two less equitable options. The first is the 'Repayment Assistance Plan' (RAP), which determines monthly student loan payments based on your income level, ranging from 1% to 10%, with a minimum payment of $10. RAP waives unpaid interest and forgives any remaining balance after 30 years. This option is less forgiving than former President Biden's 'Saving on a Valuable Education' (SAVE) plan, which the bill supersedes. SAVE reduced payments on undergraduate loans from 10% to 5% of a borrower's income and forgave loans after 10 years for borrowers with original balances of $12,000 or less. Currently, the SAVE plan is blocked in court pending a final decision. Eight million borrowers enrolled in the SAVE plan, awaiting the decision, may have at least a year to enroll in a new plan, between July 2026 and July 2028. The second option is a standard repayment plan that establishes fixed payments for a period of 10 to 25 years, depending on the principal balance. The duration of repayment would depend on the original amount borrowed. Time to Rebudget Borrowers at all income levels will face higher monthly payments under the new plan, according to a report from the Student Borrower Protection Center. 'Based on our review of this proposal, contrasted with the benefits and protections available to borrowers under the Saving on a Valuable Education (SAVE) repayment plan, we found that a typical borrower will see monthly student loan costs spike by hundreds of dollars per month, or thousands of dollars per year,' read a report sent to senators Bill Cassidy and Bernie Sanders. The center's report found that: A typical current borrower with a degree will pay an additional $2,929 per year in student loan payments compared to the SAVE plan. A typical current borrower with some college but no degree will pay an additional $1,761 per year when compared to the SAVE plan. A typical family of four, headed by a borrower with a bachelor's degree, will pay an additional $2,808 per year when compared to the SAVE plan. It also noted that borrowers under RAP would have to make monthly payments for 30 years, compared to SAVE, which provided debt relief after 10, 20 or 25 years, depending on the amount borrowed. The bill also eradicates borrowers' ability to defer payments in the face of economic hardship or unemployment. Further, it reduces the total period a borrower may be in standard forbearance, or a short-term pause of payments, which remains the only option to temporarily delay payments. The Cost of Higher Education The bill also terminates the Graduate PLUS program, which previously allowed graduate and professional students to borrow up to the full cost of attendance. Students already enrolled in the program are exempt. It also places a lifetime borrowing cap of $65,000 per student on the parent PLUS loan program, regardless of how many years a student spends in college. New borrowing caps include: Graduate students can borrow up to $100,000 Law or medical students can borrow up to $200,000 Parents can borrow up to $65,000 per student via Parent PLUS Pell grants, funds given to low-income students, also face new restrictions. Changes to the student aid index, a household income calculation that determines whether you qualify for the grant, make fewer students eligible. There's also an increase in the number of credits needed to qualify as full-time and receive a Pell Grant award. What This Means for Americans Currently, nearly one in three Americans, an estimated 5.8 million people, are delinquent on their payments (meaning they haven't made a payment in over 90 days) and may be plunging toward default. After 270 days past due, the borrower automatically defaults, leaving their paychecks subject to collection by the U.S. Department of Education. TransUnion estimates that a third of newly delinquent borrowers, or 1.8 million people, will default on their payments by July 2025. Another one million are expected to default the following month in August an additional two million more in September. For those who default on their payments, an additional clause of the bill has expanded the loan rehabilitation program. Currently, borrowers can use this program just once; the bill increases the maximum use to two. If you are at risk of defaulting, take advantage of this program or contact your loan provider to negotiate a settlement or refinance. For students who may hit the cap for federal loans, we strongly advise against turning to private loans. Private loans provide limited protections, extremely high interest rates, fewer repayment options and aggressive collection tactics. Exhaust your federal loan options first and consider attending a school with a lower cost of attendance. While the full implementation of the bill will take some time, Gadkaree warns of the repercussions that will ripple across the education sector. 'From Congress to the White House, it's painfully apparent that federal policymakers are divesting from higher education access, success and affordability,' she said. 'This misguided direction will reverse 60 years of progress toward increased educational attainment and undermine the longtime consensus on the need to invest in a globally competitive workforce. The result will be a less prosperous nation.'
NBC News
10-02-2025
- Business
- NBC News
To pay for Trump's tax cuts, House Republicans could raise student loan bills for millions of borrowers
As House Republicans look for ways to slash spending to fund President Donald Trump's tax cuts, they've floated proposals that could raise federal student loan bills for millions of borrowers. GOP lawmakers are expected to use the budget reconciliation process to make major cuts to the federal budget. The savings from the student repayment plan overhaul would be $127.3 billion over 10 years, according to their estimate. The timing is uncertain on when any of these changes could surface. It's also possible that the final Republican plan will be different than those proposed. But the average student loan borrower could pay nearly $200 a month more if the GOP plans to reshape the repayment program succeed, according to an early estimate by The Institute for College Access & Success. 'Most people don't have an extra $200 a month to throw toward their student loan bill,' said Michele Shepard Zampini, senior director of college affordability at the institute. Under the Republican-backed plans, the average borrower could see their monthly bill swell to $288 from $95, TICAS calculated. Researchers at TICAS estimated the monthly bill from repayment terms floated under current and former GOP-backed proposals. They compared those bills to what borrowers would pay under the Biden administration's new income-driven repayment option, known as the Saving on a Valuable Education plan, or SAVE. The changes to the student loan system would likely only apply to new borrowers, said higher education expert Mark Kantrowitz. If GOP lawmakers mirror the repayment terms in the legislation introduced by Rep. Virginia Foxx, R-N.C., and supported by many House Republicans last year, the College Cost Reduction Act, the typical student loan borrower with an associate degree could pay around 50% more over time than they would under SAVE, a new report by the Center for American Progress noted. Graduate students, however, could pay between 10% and 15% less than on SAVE. 'Paying for tax cuts for corporations and the wealthy on the backs of student loan borrowers who are already struggling would be deeply unfair and harmful to millions of Americans,' said Sara Partridge, associate director of higher education policy at the Center for American Progress. A reversal from SAVE plan Republicans have expressed interest in narrowing the number of income-driven repayment, or IDR, plans for student loan borrowers to just one. Congress created IDR plans in the 1990s to make borrowers' bills more affordable. The plans cap people's monthly payments at a share of their income, and cancel any remaining debt after a certain period, typically 20 years or 25 years. More than 12 million people were enrolled in the plans as of September 2024, according to Kantrowitz. Former President Joe Biden's SAVE plan, which is currently tied up in legal challenges, had the most generous terms of any IDR plan to date. It cut many borrowers' bills in half and offered expedited loan forgiveness to those with smaller balances. SAVE could cost as much as $475 billion over a decade, an analysis by the University of Pennsylvania's Penn Wharton Budget Model found. That made it a target for Republicans, who argued that taxpayers shouldn't be asked to subsidize the loan payments of those who've benefited from a higher education, experts explained. Critics also accused Biden of trying, with SAVE, to find a roundabout way to forgive student debt after the U.S. Supreme Court ruled in June 2023 that his sweeping debt cancellation plan was unconstitutional. Meanwhile, consumer advocates say that most families now need to borrow to send their children to college and that they will require more affordable ways to repay their debt. Research shows that student loans make it harder for people to start businesses, buy a house and even have children. In addition to scrapping SAVE and leaving borrowers' with just one IDR plan option, Republican lawmakers may also move to end the loan forgiveness that borrowers are currently entitled to after a certain time period on the plans, experts said. That would deprive many borrowers of a way out of their debt, according to Kantrowitz. 'It will effectively be a form of never-ending indentured servitude,' he said.
