Latest news with #repaymentplans
CBS News
23-05-2025
- Business
- CBS News
Student loan expert explains U.S. House's vote to repeal forgiveness and repayment programs
Massive delays and uncertainty about where certain payment plans stand are causing anxiety for some student loan borrowers. And early Thursday morning, the U.S. House voted to repeal several student loan forgiveness and repayment programs. KDKA Consumer Investigator Meghan Schiller talked to a student loan expert to help borrowers make sense of it all. On Thursday, House Republicans passed what President Trump calls his "one big beautiful bill," and it includes sweeping changes to student loan forgiveness and repayment. What changes would be made to student loans? It's still early, but it's a step towards what the future might look like for those in debt after pursuing higher education. A total overhaul of income-driven repayment plans, a new repayment assistance plan and new caps on borrowing are all on the table following an early morning vote. "There's a lot of details that are still to come, so I wouldn't panic quite yet, but people do need to be thinking about, 'what do I need to do with my budget if my payment is going to increase?'" said Amy Lins, the VP of customer success at Money Management International. Lins says there could be big changes. The legislation looks to repeal the Income-Contingent Repayment plan, Pay As You Earn plan and Saving On a Valuable Education, or "SAVE," plan. It would also automatically move borrowers into a modified version of the income-based repayment plan, which may result in higher payments, according to the Student Borrower Protection Center. And it would create a new income-driven plan called the Repayment Assistance Plan, or "RAP." "It's looking like 360 payments. So, a little more like a mortgage, right?" said Lins. "So, it's a longer period. Instead of 20 years or 25 years, now it's a 30-year repayment period." What should borrowers do? Lins encourages everyone with student loan debt to rely on the loan simulator calculator at to inform your decisions. "You got to really start to kind of go into beast mode, right? Go into that beast mode of like, 'OK, how do I increase my income? How do I decrease my expenses? What is my drop-dead number on what I can pay? Do I have to tweak my lifestyle? Do I have to start thinking about economizing?'" said Lins. The bill also looks to prohibit the Department of Education from enacting any new broad student loan forgiveness programs using regulatory action, like former President Biden tried to do. Nothing is final yet. All eyes now turn to the Senate.
Forbes
22-05-2025
- Business
- Forbes
House Passes Trump's ‘One Big Beautiful Bill', Here's What It Means For Student Loan Forgiveness And Repayment
In the early hours of May 22, House Republicans passed President Donald Trump's "One Big Beautiful Bill," a sweeping package of tax breaks and spending cuts passed after an all-night session. The 1,000-page bill, which narrowly passed 215-214 at dawn, carries significant implications for student loan forgiveness and repayment. Tucked within the multitrillion-dollar legislation are dramatic changes to federal student aid: A complete overhaul of income-driven repayment plans, a new Repayment Assistance Plan, new caps on borrowing, and more. GOP leaders hail these reforms as overdue fixes to a broken system that will save taxpayers billions, while critics warn the bill raises costs for students to fund tax cuts elsewhere. Under the House GOP plan, the spaghetti bowl of income-driven repayment plans would be simplified to just two choices for future borrowers. Gone would be programs like PAYE, ICR, and the Biden administration's contested SAVE plan, all eliminated in favor of a simplified system. Starting July 1, 2026, new federal student loan borrowers would have only a Standard Repayment Plan with fixed payments over 10 to 25 years, or the new Repayment Assistance Plan, which ties payments to income. This means the menu of IDR options borrowers have grown accustomed to over the past decade would be largely wiped away. House Education Committee Chairman Rep. Tim Walberg (R-Mich.) argues this streamlining is needed to fix a system "littered with incentives that push tuition prices upward," according to NPR. By contrast, Democrats like Rep. Bobby Scott (D-Va.) say the GOP remedy would "increase costs for colleges and students" and then use "so-called 'savings' to pay for more tax cuts for the wealthy." Republicans project over $330 billion in savings from the education provisions alone, signaling how central the student loan changes are to fund the bill's broader agenda. RAP is the centerpiece of the GOP's student loan overhaul, billed as a single, simpler, income-driven plan for 40 million borrowers. Your monthly payment under RAP is tied to your income on a sliding scale. Borrowers will pay a small percentage of their total income, between 1% and 10% depending on their earnings, with lower earners paying less and higher earners paying more. RAP fixes a major pitfall of earlier income-driven plans: Accruing interest that makes balances balloon over time. Under RAP, if a borrower's payment doesn't fully cover the monthly interest, the government waives the remaining interest. This means borrowers will no longer see their loan balances grow just because they can't afford full interest each month, a feature hailed as ending the cycle of negative amortization. With these borrower safeguards comes a longer timeline. RAP extends the repayment term to a maximum of 360 qualifying payments before any remaining balance is forgiven, a full 5 to 10 years longer than today's IDR plans, which promise forgiveness after 20 or 25 years. For many graduate borrowers with large balances, the extra years mean they'll likely pay off their debt in full before hitting the forgiveness mark under RAP, effectively receiving no forgiveness. Another limitation is that once a borrower opts into RAP, they cannot switch to another plan later. This one-way door could give some borrowers pause before committing to RAP's rules long-term. Beyond repayment plans, Trump's bill imposes significant new limits on student borrowing and aid. For the first time, federal student loans would face aggregate caps: undergraduates could borrow a maximum of $50,000 total, graduate students up to $100,000, and professional students up to $150,000. These caps aim to prevent students from accumulating six-figure debts but could also push students who hit the limit toward private loans. The bill eliminates the Grad PLUS loan program. 'We know that private loans have much less protections… The more we push folks out of the federal market and into the private market, the less borrowers have safeguards if things go wrong," warns Aissa Canchola Bañez of the Student Borrower Protection Center to NPR. Several other noteworthy changes would reshape federal aid: In sum, these measures seek to curb how much students can borrow and put schools on notice for their graduates' outcomes. But they also risk making it harder to finance degrees: Graduate students, for instance, may need to find private loans once federal loans hit the new cap, likely at higher interest and with no forgiveness safety net. Public Service Loan Forgiveness, the program that forgives student debt for nonprofit and government workers after 10 years, isn't directly altered in the House bill's education section. However, a late provision in the broader package could indirectly put PSLF at risk for many borrowers. In the tax portion of Trump's bill, House Republicans inserted a clause giving the Treasury Department unilateral authority to revoke the tax-exempt status of any 501(c)(3) nonprofit organization it deems supporting terrorism. Crucially, if a nonprofit employer were stripped of its 501(c)(3) status under this law, employees of that organization would instantly lose eligibility for PSLF since the program requires working for a nonprofit or public employer. The House-passed Big Beautiful Bill now heads to the Senate, where its overall fate will be decided. However, significant changes appear unlikely when it comes to the student loan provisions. Republicans are advancing the package via budget reconciliation, meaning it only needs a simple majority in the Senate. With the GOP holding the chamber and eyeing the bill's $4.9 trillion tax cuts and spending priorities, party leaders likely have little appetite to remove the education cuts that help pay for it. The savings from the student loan reforms, estimated at over $300 billion, are financing other parts of Trump's agenda. If senators watered down the loan provisions, they'd have to plug a large budget hole elsewhere. Therefore, aides suggest that the core student loan measures will remain largely intact through Senate negotiations. Some tweaks are possible, but observers note that Republicans view these education changes as both good policy and fiscal necessity. "Bottom line, it's time to fix this broken cycle… that leaves students worse off than if they never went to college," Rep. Walberg said of the plan to Business Insider, signaling the party's commitment to seeing it through. A new student loan forgiveness and repayment regime is likely on the horizon. If enacted, current federal loan borrowers would see significant changes by 2026, and future borrowers would face a very different landscape of college financing. Income-driven repayment will become less generous on paper but more predictable; forgiveness will be rarer but delivered in trickles along the way.
The Independent
16-05-2025
- Business
- The Independent
Student loans have been confusing lately. Here's a guide to know where you stand
Between collections resuming, courts blocking student loan programs and layoffs at the Education Department, borrowers might be confused about the status of their student loans. Recently, the Education Department announced it would start involuntary collections on defaulted loans, meaning the roughly 5.3 million borrowers who are in default could have their wages garnished by the federal government. At the center of the turmoil are the government's income-driven repayment plans, which reduce monthly payments for borrowers with lower incomes. Those plans were temporarily paused after a federal court blocked parts of the plans in February. 'There's so much confusion, they've made it very complicated,' said Natalia Abrams, president and founder of the Student Debt Crisis Center. At the same time, some borrowers are struggling to get their loan servicers on the phone, making it hard to find answers to their questions, said Abrams. If you're a student loan borrower, here are some answers to your questions. What if I want to enroll in an income-driven repayment plan? Applications for income-driven repayment plans are open, but they're taking longer than usual to process. The applications were temporarily shut down earlier this year after a federal court in Missouri blocked the SAVE plan, a Biden administration plan that offered a faster path to loan forgiveness. The judge's order also blocked parts of other repayment plans, prompting the Education Department to pause income-driven applications entirely. Amid pressure from advocates, the department reopened the applications on May 10. Borrowers can apply for the following income-driven plans: the Income-Based Repayment Plan, the Pay as You Earn plan and the Income-Contingent Repayment plan. Abrams expects applications will continue to be approved but at a slower pace than before the application pause. Borrowers currently enrolled in an income-driven plan should be receiving notifications about recertification, said Khandice Lofton, counsel at the Student Borrower Protection Center. Recertification is required annually to update information on family size and income, and dates are different for each borrower. To review income-driven repayment plans, you can check the loan simulator at What if I applied to the SAVE plan? Borrowers enrolled in the SAVE plan have been placed in administrative forbearance while a legal challenge is resolved. That means they don't have to make payments and interest is not accruing. Time in forbearance normally does not count toward Public Service Loan Forgiveness. The Education Department will notify borrowers with updates on payments and litigation. "We don't know for sure when the SAVE forbearance is going to end," Abrams said. While the future of the SAVE plan is decided in court, Abrams encourages borrowers to explore their eligibility for other income-driven repayment plans. What if I want to consolidate my student loans? The online application for loan consolidation is available again, at If you have multiple federal student loans, you can combine them into one with a fixed interest rate and a single monthly payment. The consolidation process typically takes around 60 days to complete. You can only consolidate your loans once. What if my loan was forgiven? It would be difficult for the Education Department to reinstate loans that were canceled during President Joe Biden 's administration. So far, it isn't believed to be happening, Abrams said. What about the Public Service Loan Forgiveness program? Nothing has changed yet. President Donald Trump wants to change the Public Service Loan Forgiveness program to disqualify workers of nonprofit groups deemed to have engaged in 'improper' activities. He signed an executive order to that effect, but it has yet to be enforced. Borrowers enrolled in PSLF should keep up with payments to make progress toward loan forgiveness, said Sarah Austin, policy analyst at the National Association of Student Financial Aid Administrators. 'There could be some changes coming in regards to PSLF but at this current time PSLF is still functioning and there is still loan forgiveness being processed under the PSLF provision,' said Austin. An income-driven repayment tracker has disappeared from the federal student loan website for many borrowers, said Abrams. For keeping track of their status, Abrams is recommending that borrowers take screenshots of their payments. What if I can't get a hold of my loan servicer? Contacting your loan servicer is crucial to managing and understanding your student loans. Due to the large number of people trying to get answers or apply for programs, loan servicers are taking longer than usual to respond. Abrams recommends borrowers prepare for long wait times. 'We've heard borrowers being in hold for three or four hours, then being transferred to a supervisor and then being hung up on, after all that wait time. It's incredibly frustrating,' Abrams said. What can I do if I'm delinquent on my student loans? If you're delinquent, try to get back on track. Borrowers who don't make their payments for 270 days go into default, which has severe consequences. 'If you're delinquent but have not defaulted yet, do whatever you can do to avoid going default,' said Kate Wood, a student loans expert at NerdWallet. Borrowers who are delinquent on their student loans take a massive hit on their credit scores, which could drop 100 points or more, Wood said. A delinquency stays on your credit report for seven years. Wood recommends contacting your servicer to ask for options, which can include forbearance, deferment or applying for an income-driven repayment plan. What if I'm in default on my student loans? The Education Department is recommending borrowers visit its Default Resolution Group to make a monthly payment, enroll in an income-driven repayment plan or sign up for loan rehabilitation. Betsy Mayotte, president of The Institute for Student Loan Advisors, recommends loan rehabilitation. Borrowers in default must ask their loan servicer to be placed into such a program. Typically, servicers ask for proof of income and expenses to calculate a payment amount. Once a borrower has paid on time for nine months in a row, they are taken out of default, Mayotte said. A loan rehabilitation can only be done once. What happened to Fresh Start? The Fresh Start program was a one-time temporary program that helped borrowers get out of default. This program ended Aug. 31, 2024. ___ The Associated Press receives support from Charles Schwab Foundation for educational and explanatory reporting to improve financial literacy. The independent foundation is separate from Charles Schwab and Co. Inc. The AP is solely responsible for its journalism.
Associated Press
16-05-2025
- Business
- Associated Press
Student loans have been confusing lately. Here's a guide to know where you stand
NEW YORK (AP) — Between collections resuming, courts blocking student loan programs and layoffs at the Education Department, borrowers might be confused about the status of their student loans. Recently, the Education Department announced it would start involuntary collections on defaulted loans, meaning the roughly 5.3 million borrowers who are in default could have their wages garnished by the federal government. At the center of the turmoil are the government's income-driven repayment plans, which reduce monthly payments for borrowers with lower incomes. Those plans were temporarily paused after a federal court blocked parts of the plans in February. 'There's so much confusion, they've made it very complicated,' said Natalia Abrams, president and founder of the Student Debt Crisis Center. At the same time, some borrowers are struggling to get their loan servicers on the phone, making it hard to find answers to their questions, said Abrams. If you're a student loan borrower, here are some answers to your questions. What if I want to enroll in an income-driven repayment plan? Applications for income-driven repayment plans are open, but they're taking longer than usual to process. The applications were temporarily shut down earlier this year after a federal court in Missouri blocked the SAVE plan, a Biden administration plan that offered a faster path to loan forgiveness. The judge's order also blocked parts of other repayment plans, prompting the Education Department to pause income-driven applications entirely. Amid pressure from advocates, the department reopened the applications on May 10. Borrowers can apply for the following income-driven plans: the Income-Based Repayment Plan, the Pay as You Earn plan and the Income-Contingent Repayment plan. Abrams expects applications will continue to be approved but at a slower pace than before the application pause. Borrowers currently enrolled in an income-driven plan should be receiving notifications about recertification, said Khandice Lofton, counsel at the Student Borrower Protection Center. Recertification is required annually to update information on family size and income, and dates are different for each borrower. To review income-driven repayment plans, you can check the loan simulator at What if I applied to the SAVE plan? Borrowers enrolled in the SAVE plan have been placed in administrative forbearance while a legal challenge is resolved. That means they don't have to make payments and interest is not accruing. Time in forbearance normally does not count toward Public Service Loan Forgiveness. The Education Department will notify borrowers with updates on payments and litigation. 'We don't know for sure when the SAVE forbearance is going to end,' Abrams said. While the future of the SAVE plan is decided in court, Abrams encourages borrowers to explore their eligibility for other income-driven repayment plans. What if I want to consolidate my student loans? The online application for loan consolidation is available again, at If you have multiple federal student loans, you can combine them into one with a fixed interest rate and a single monthly payment. The consolidation process typically takes around 60 days to complete. You can only consolidate your loans once. What if my loan was forgiven? It would be difficult for the Education Department to reinstate loans that were canceled during President Joe Biden's administration. So far, it isn't believed to be happening, Abrams said. What about the Public Service Loan Forgiveness program? Nothing has changed yet. President Donald Trump wants to change the Public Service Loan Forgiveness program to disqualify workers of nonprofit groups deemed to have engaged in 'improper' activities. He signed an executive order to that effect, but it has yet to be enforced. Borrowers enrolled in PSLF should keep up with payments to make progress toward loan forgiveness, said Sarah Austin, policy analyst at the National Association of Student Financial Aid Administrators. 'There could be some changes coming in regards to PSLF but at this current time PSLF is still functioning and there is still loan forgiveness being processed under the PSLF provision,' said Austin. An income-driven repayment tracker has disappeared from the federal student loan website for many borrowers, said Abrams. For keeping track of their status, Abrams is recommending that borrowers take screenshots of their payments. What if I can't get a hold of my loan servicer? Contacting your loan servicer is crucial to managing and understanding your student loans. Due to the large number of people trying to get answers or apply for programs, loan servicers are taking longer than usual to respond. Abrams recommends borrowers prepare for long wait times. 'We've heard borrowers being in hold for three or four hours, then being transferred to a supervisor and then being hung up on, after all that wait time. It's incredibly frustrating,' Abrams said. What can I do if I'm delinquent on my student loans? If you're delinquent, try to get back on track. Borrowers who don't make their payments for 270 days go into default, which has severe consequences. 'If you're delinquent but have not defaulted yet, do whatever you can do to avoid going default,' said Kate Wood, a student loans expert at NerdWallet. Borrowers who are delinquent on their student loans take a massive hit on their credit scores, which could drop 100 points or more, Wood said. A delinquency stays on your credit report for seven years. Wood recommends contacting your servicer to ask for options, which can include forbearance, deferment or applying for an income-driven repayment plan. What if I'm in default on my student loans? The Education Department is recommending borrowers visit its Default Resolution Group to make a monthly payment, enroll in an income-driven repayment plan or sign up for loan rehabilitation. Betsy Mayotte, president of The Institute for Student Loan Advisors, recommends loan rehabilitation. Borrowers in default must ask their loan servicer to be placed into such a program. Typically, servicers ask for proof of income and expenses to calculate a payment amount. Once a borrower has paid on time for nine months in a row, they are taken out of default, Mayotte said. A loan rehabilitation can only be done once. What happened to Fresh Start? The Fresh Start program was a one-time temporary program that helped borrowers get out of default. This program ended Aug. 31, 2024. ___ The Associated Press receives support from Charles Schwab Foundation for educational and explanatory reporting to improve financial literacy. The independent foundation is separate from Charles Schwab and Co. Inc. The AP is solely responsible for its journalism.
