That’s going to change.
“For all practical purposes, I’m going to say that even when it comes to life support, saving is just a little dead,” said Preston Cooper of the conservative American College of Enterprise (AEI).
This month, the U.S. Department of Education announced that on August 1, savings borrowers will see their balance increase again – interested. However, since savings plans are still banned, the borrower does not need to make payments. However, Cooper said many borrowers, rather than watching their loan balloons, may want to take a different plan.
Roxanne Garza, director of higher education policy at liberal Edtrust, is worried that the relative last-minute announcement on interest will cause problems for the education sector, which will cause the Trump administration to lay off about half of its employees.
“I think what’s possible now is that you’re seeing a lot of people trying to take action, and that could create a bigger backlog,” Garza said.
Under a Large Billing Act, borrowers in Sava will have to change plans by July 1, 2028, when they will officially close their savings. If they wait, although they are not required to make payments at the moment, they will see their interest in loans explode.
But two new plans created by the law will not be ready for a year, and the department’s own website is designed to help borrowers browse their repayment options and does not reflect this confusing new landscape, except that the banner says: “The loan simulator will be updated later to reflect recent legislative changes.”
Starting July 1, 2026, new loans will be subject to new borrowing restrictions
Undergraduates will not see any changes in their loan limits. But this is a very different story for graduate students and parents.
For graduate students, the new restrictions will make it more difficult for low- and middle-income borrowers to attend higher-priced graduate programs. The current Grad Plus loan allows students to borrow fees for their graduate programs, but Republicans will close next year.
After that, the borrowing of graduate students will be $20,500 per year, and the lifelong graduate student loan limit is $100,000, down from the upper limit of $138,500.
How big is this? Cooper of AEI has been working on the numbers and said: “Less than 20% of master’s students borrow the proposed limit.”
Borrowers dedicated to professional graduate degrees (i.e., medical or law schools) will be borrowed at $50,000 a year, with a lifetime limit of $138,500 to $200,000.
Parents and caregivers who use Parent Plus Loans to help students pay for college will also see new loan limits. They will cap each year at $20,000, totaling $65,000 per child.
Cooper said only one-third of parents plus borrowers with dependent children currently earn more than the new annual loan cap.
The law also sets $257,500 per person for new lifetime restrictions on undergraduate and graduate loans combined.
Borrower repayment options are changing dramatically
Republicans are reducing new borrowers from the current seven plans to two new ones. The new plan is:
1. Standard Plan
Depending on the size of the debt, the new borrower will be allocated a 10-25-year repayment window and will be paid in the same monthly payment (such as a mortgage for the house).
Under this plan, borrowers with higher debt will be eligible to extend their repayment period:
- Owe less than $25,000 and repay it for 10 years.
- Owe $25,000 or more but less than $50,000? The repayment has been expanded to 15 years.
- Owe $50,000 or more, but less than $100,000: repayment within 20 years.
- Anyone who owes $100,000 or more will be repaid within 25 years.
2. Repayment Assistance Program (RAP)
Republicans have also created a repayment assistance program (RAP) for borrowers’ concerns that their income is not enough to cover the monthly payments of the new standard program.
With regard to RAP, payments will be based primarily on the borrower’s total adjusted gross income (AGI).
- Borrowers who earn no more than $10,000 pay $10 per month.
- Earn over $10,000 but not over $20,000 and your payment will be based on 1% of AGI.
- More than $20,000, but not more than $30,000, that would be 2% of AGI, and so on.
- Borrowers earn $100,000 or more each year also account for 10% of AGI.
Current borrowers also have access to this new rap program, as well as some older ones.
RAP is the latest news in a long list of income-based repayment plans. How compared to previous plans?
Many monthly payments for middle-income borrowers about rap will be reduce According to several experts, compared to earlier plans. But rap is not as generous as the Biden-era preservation plan, which is eliminated again.
RAP will require even the lowest income borrowers to pay $10 a month, ending the previously planned $0 option and making those borrowers even more expensive.
Jason Delisle said the new $10 minimum payment would not have a significant impact on the government’s warehouses, speaking with NPR while studying student loan policy at Urban Institute in May. Delisle has since been appointed to the Trump administration.
Delisle said the purpose of RAP’s new minimum payments could be “Emerging research requires people to make monthly payments is good because it keeps them in touch with the loan and is less likely to default.. ”
But some borrower advocates fear that the new minimum payment could have the opposite effect.
For the lowest income borrowers, asking for $120 per year is “important”, Edtrust’s Garza told NPR in May. “I think this is the required minimum payment that could cause more borrowers to default.”
However, rap also brings some new benefits that borrowers may appreciate.
Rap will waive any interest left by the borrower after monthly payments.
If their monthly payment is $50, but they owe $75 per month interest, the government will give up the remaining $25.
Result: Borrowers will no longer see their loan GrowThis is a common disadvantage of previous income-driven repayment plans.
Rap borrowers will also see their balance down Every month.
The government will hit $50 to ensure low-income borrowers see their main balance shrink.
For example, a borrower who pays monthly will only cause $30 in his principal, which will result in an additional $20 per month deduction for the government.
Borrowers whose monthly payments have reduced their principal balance by at least $50 will not receive additional help from the government.
“It’s a form of monthly loan forgiveness,” Delisle said. “It’s a drip, drip loan forgiveness, rather than waiting for a big sum at the end of 20 years.”
Loan forgiveness mathematics will change.
While previous plans offer forgiveness after 20 or 25 years, rap will expand it to 360 qualified payments or 30 years. Cooper of AEI said that’s a big difference.
Borrowers with typical debt levels “typical income at a degree level will almost always pay off before they reach 30 years of grades,” Cooper said. “So if you’re going to rap, I wouldn’t consider forgiveness because you might pay it off 30 years ago.”
In short, the days of what DeLisle calls “big payments” are over.
But wait! Current borrowers have another loan forgiveness option (one).
In addition to rap, borrowers will also be offered an older plan called income-based repayment (IBR) to borrow loans by July 1, 2026.
Part of the reason IBR still exists is that unlike other income-driven repayment programs, IBR was not created by the education department. It was created by Congress and codified in the regulations.
How does IBR work? For borrowers who have loaned more than July 2014, their payment limit is 15% of their disposable income. Payment limit for young loans is 10%.
Delisle said that with savings plans in the Biden era being cut, most low-income borrowers may make lower monthly payments compared to IBR.
However, if the borrower has paid back for nearly 20 or 25 years, borrowers with older loans may still want to join the IBR, so they can qualify for loan forgiveness.
That’s because on IBR, loans before 2014 are eligible for forgiveness after 25 years. For newer loans, it’s only 20 years old, all much shorter than Rap’s 30-year schedule.
A big warning to all this: According to a statement by Ellen Keast, deputy press secretary of the Ministry of Education, the education department has temporarily stopped processing all loan forgiveness from IBR borrowers.
Keast said the Biden-era rule explains that “salvation” “provides “the authority to authorize the tolerance of forgiveness for Ibrahimovic” and that since the rule has been frozen by the court, the department cannot accurately determine loan forgiveness under the IBR. “Once the department can determine the correct payment count, emissions will be restored immediately,” Keast said. ”
The department told NPR that any borrower who pays after eligible for forgiveness will eventually receive a refund.
