On July 1, a host of new student loan changes from the One Big Beautiful Bill Act will take effect, including the end of the Biden-era SAVE repayment plan, the introduction of two Republican-designed repayment plans, and stricter borrowing limits for some students. Navigating these changes can be complex, and not every borrower will be impacted by every change. This article provides a comprehensive guide to help borrowers understand their options and make informed decisions.
The End of SAVE
The Biden-era Saving on a Valuable Education (SAVE) plan, a flexible and generous income-driven repayment plan, is ending. Borrowers enrolled in SAVE will receive a notice and have a 90-day window to switch to a new plan. Financial aid experts warn that this transition could exacerbate student loan defaults, especially for those who qualified for $0 monthly payments due to low incomes.
Repayment Plan Options
Borrowers with old loans (issued before July 1) and no new loan plans have several options:
Standard Repayment Plan: Equal monthly payments over 10 years, with longer terms for consolidated loans. The new Tiered Standard Plan, created by Republicans, offers varying repayment periods based on debt size.
Graduated Repayment Plan: Payments start low and increase every two years over 10 years. Payments can double over time.
Extended Repayment Plan: Payments can be fixed or graduated, with a 25-year term, resulting in smaller monthly payments but higher interest over time.
Income-Based Repayment (IBR): Payments are 15% of discretionary income for loans before July 1, 2014, and 10% for newer loans, spread over 25 years with forgiveness.
Income-Contingent Repayment (ICR): 20% of discretionary income over 25 years, with higher monthly payments and no forgiveness.
Pay As You Earn (PAYE): 10% of discretionary income over 20 years, with forgiveness. PAYE is being phased out by 2028.
Repayment Assistance Plan (RAP): Based on adjusted-gross income, with lower monthly payments and principal-matching for lower-income borrowers. Borrowers must repay for 30 years before forgiveness.
New Borrowers and Loan Limits
Borrowers taking out loans after July 1 will be limited to the RAP or Tiered Standard Plan. Grad students face stricter lending limits, with a maximum of $20,500 annually and $100,000 in total, except for specific professional degrees.
Short-Term Job Training
The Pell Grant is expanded to include short-term workforce training, providing federal assistance for programs lasting 8-15 weeks. Students must fill out the FAFSA to qualify, but many current programs may not meet the criteria.
Public Service Loan Forgiveness (PSLF)
PSLF remains available, forgiving debt for those working in public service for 10 years. Income-driven plans like IBR, ICR, PAYE, and RAP qualify. However, the Trump administration's rule change may exclude workers with employers engaging in illegal activities.
Parent PLUS Program Changes
Parent PLUS loans have new limits of $20,000 annually and $65,000 per dependent. Borrowers can only use the Tiered Standard Plan, losing access to income-driven plans and forgiveness.
This article provides a comprehensive overview of the changes, but borrowers should use resources like the Loan Simulator to find the best plan for their situation.
