Latest news with #Income-BasedRepaymentPlan
Time of India
21 hours ago
- Business
- Time of India
Why student loan bills are doubling for millions as the SAVE plan ends this August
Millions must switch repayment plans as SAVE student loan relief expires. (AI Image) Millions of federal student loan borrowers across the US are expected to see their monthly repayments double as the Biden-era SAVE (Saving on a Valuable Education) plan comes to an end. The plan, which allowed interest-free forbearance on repayments, is now effectively defunct following recent policy changes announced by the Trump administration. The SAVE plan had enrolled nearly 7.7 million borrowers, according to the US Department of Education. Many of these borrowers are now required to transition to new repayment plans, most of which result in significantly higher monthly bills. The end of the SAVE programme will particularly affect borrowers who are unable to make payments that cover accruing interest, which resumes from August 1, as announced earlier this month. SAVE plan allowed reduced repayments for millions Under the SAVE plan, introduced during President Biden's term, borrowers were allowed to make payments based on just 5% of their discretionary income. This plan was described as 'incredibly generous' by Scott Buchanan, Executive Director of the Student Loan Servicing Alliance, a trade group for federal loan servicers, as reported by NBC News. While legal challenges to the SAVE plan were underway, the Biden administration placed enrolled borrowers in forbearance, which paused mandatory payments and interest accumulation. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Bangladesh: Dubai Villa Prices Might Be Cheaper Than You Think Villas Dubai | Search Ads Undo However, with the programme now defunct, this interest-free period is set to expire, and borrowers who do not switch to a new plan will begin to see their loan balances grow again. Borrowers advised to switch to income-based repayment plans US Secretary of Education Linda McMahon stated in a press release, as reported by NBC News, that borrowers in the SAVE programme should 'quickly transition to a legally compliant repayment plan — such as the Income-Based Repayment Plan.' According to NBC News, Buchanan explained that the IBR plan is now the most viable option for most former SAVE enrollees. The IBR plan calculates repayments at 10% of a borrower's discretionary income, a substantial increase from the 5% calculation under SAVE. For some borrowers with older loans, the share could rise to 15%. Higher repayment burdens under IBR plans The end of the SAVE plan is likely to impose financial pressure on many borrowers. Nancy Nierman, Assistant Director of the Education Debt Consumer Assistance Program in New York City, told NBC News that many federal student loan borrowers 'simply won't be able to afford the payments under IBR.' Other income-driven repayment plans created by Congress in the 1990s are also expected to be phased out under what President Donald Trump has referred to as his 'big beautiful bill,' as reported by NBC News. These plans typically cap monthly payments at a percentage of discretionary income and cancel remaining debt after 20 or 25 years. TOI Education is on WhatsApp now. Follow us here . Ready to navigate global policies? Secure your overseas future. Get expert guidance now!
Hindustan Times
6 days ago
- Business
- Hindustan Times
What is student loan forgiveness under IBR? What other plans have been paused
President Donald Trump's Department of Education, headed by WWE co-founder Linda McMahon, has suspended student loan forgiveness under Income-Based Repayment Plan (IBR). IBR has been suspended by the Department of Education(AP) This is the only current plan not subject to any legal challenge or court injunction. How IBR works? Student loan forgiveness under IBR works with a formula that is tied to a borrower's income and family size. This is used to determine how much the borrower needs to pay back monthly. Then, payments are recalculated every 12 months. Borrowers who do not pay back their entire student loans by the end of their repayment term – which is 25 years, for borrowings prior to July 1, 2014, and 20 years for anything borrowed after that – would then be entitled to student loan forgiveness. What other plans have been paused? Some of the other plans are paused due to court rulings. These include – Pay As You Earn (PAYE) Plan - As per the US Federal Student Aid site, 'the PAYE Plan is an income-driven repayment plan with monthly payments that are generally equal to 10% of your discretionary income, divided by 12, but never more than the 10-year Standard Repayment amount.' Saving on a Valuable Education (SAVE) Plan - This plan replaced the Revised Pay As You Earn (REPAYE) Plan. Borrowers on the latter plan were automatically switched to the SAVE plan. The Department of Education describes this to be like any other income-driven repayment plans (IDR). It calculates monthly payment amount based on your income and family size. There are some advantages of opting for the SAVE plan, as highlighted by the Education dept. These include: keeping the balance in check while making required repayments, having more of the income protected for basic needs, seeing the remaining balance forgiven after as few as 10 years of payments, and having payments for undergraduate loans cut in half from July 2024. Income-Contingent Repayment (ICR) Plan - The US Federal Student Aid site defines ICR as 'a repayment plan with monthly payments that are the lesser of (1) what you would pay on a repayment plan with a fixed monthly payment over 12 years, adjusted based on your income or (2) 20% of your discretionary income, divided by 12.'
NBC News
19-07-2025
- Business
- NBC News
Student loan bills could double for some borrowers as Biden-era relief expires
As a Biden-era relief measure for federal student loan borrowers comes to an end, some people could see their bills more than double. Earlier this month, the Trump administration announced that the so-called SAVE interest-free payment pause will expire on Aug. 1, and that enrollees' education debts will begin to grow again if they don't make payments large enough to cover the accruing interest. The Biden administration had moved people who enrolled in its SAVE plan into forbearance — a period during which federal student loan borrowers are excused from making payments — while the legal challenges against its program played out. The SAVE, or Saving on a Valuable Education, plan, is now essentially defunct. While borrowers can remain in the SAVE forbearance for the time being, they'll face interest charges again starting next month if they do. But those who look to move into another repayment plan will likely face a much larger monthly bill. 'SAVE was incredibly generous,' said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers. The 'best plan' for former SAVE borrowers Nearly 7.7 million federal student borrowers enrolled in the SAVE, plan, the Education Department said in its press release earlier this month. Secretary of Education Linda McMahon said in a statement that borrowers in SAVE should 'quickly transition to a legally compliant repayment plan — such as the Income-Based Repayment Plan.' Borrowers who wanted to be in the SAVE plan but now can't be should probably switch into the IBR plan, Buchanan said: 'That's the best plan for almost everyone.' There are a few reasons for that. One is that other income-driven repayment plans will eventually be phased out under President Donald Trump 's 'big beautiful bill.' (Congress created income-driven repayment plans back in the 1990s to make student loan borrowers' bills more affordable. The plans cap borrowers' monthly payments at a share of their discretionary income and cancel any remaining debt after a certain period, typically 20 years or 25 years.) End of SAVE means bigger student loan bills But borrowers could see their monthly bills double under IBR, compared with on SAVE. That's because the SAVE plan calculated payments based on 5% of a borrower's discretionary income. IBR takes 10% — and that share rises to 15% for certain borrowers with older loans. Many federal student loan borrowers simply won't be able to afford the payments under IBR, said Nancy Nierman, assistant director of the Education Debt Consumer Assistance Program in New York City. 'In severe cases, it could result in people being forced to move, or they will just resign themselves to default and involuntary collections,' Nierman said. In the new legislation passed by Republicans, borrowers will have access to another income-driven repayment plan, called the 'Repayment Assistance Plan,' or RAP, by July 1, 2026. However, it's uncertain whether a borrower will have a lower monthly payment on RAP than IBR. 'It's going to range dramatically based on your income,' Buchanan said. There are tools available online to help you determine how much your monthly bill would be under different plans. Carolina Rodriguez, director of the Education Debt Consumer Assistance Program, said she's working with one partner in a married couple, both with federal student loans, who are facing a nearly $4,000 monthly combined student loan payment under IBR. 'My client said that these payments would mean no extracurricular activities and other opportunities for his children, which might set them back in comparison to their peers,' Rodriguez said. Under SAVE, the family's student loan bill would have been around $2,400, she said. Borrowers who can't afford to make a monthly payment on their student debt under the current repayment options can pursue deferment and forbearance options. Those who've taken out loans before July 1, 2027, will maintain access, for example, to the economic hardship deferment and the unemployment deferment, under the new law.
CNBC
19-07-2025
- Business
- CNBC
Student loan bills could double for some borrowers as Biden-era relief expires
As a Biden-era relief measure for federal student loan borrowers comes to an end, some people could see their bills more than double. Earlier this month, the Trump administration announced that the so-called SAVE interest-free payment pause will expire on Aug. 1, and that enrollees' education debts will begin to grow again if they don't make payments large enough to cover the accruing interest. The Biden administration had moved people who enrolled in its SAVE plan into forbearance — a period during which federal student loan borrowers are excused from making payments — while the legal challenges against its program played out. The SAVE, or Saving on a Valuable Education, plan, is now essentially defunct. While borrowers can remain in the SAVE forbearance for the time being, they'll face interest charges again starting next month if they do. But those who look to move into another repayment plan will likely face a much larger monthly bill. "SAVE was incredibly generous," said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers. Nearly 7.7 million federal student borrowers enrolled in the SAVE, plan, the Education Department said in its press release earlier this month. Secretary of Education Linda McMahon said in a statement that borrowers in SAVE should "quickly transition to a legally compliant repayment plan — such as the Income-Based Repayment Plan." More from Personal Finance:Trump's 'big beautiful bill' caps student loans. What it means for youWhy 22 million people may see a 'sharp' increase in health premiums in 2026Trump's 'big beautiful bill' cuts SNAP for millions of families: Report Borrowers who wanted to be in the SAVE plan but now can't be should probably switch into the IBR plan, Buchanan said: "That's the best plan for almost everyone." There are a few reasons for that. One is that other income-driven repayment plans will eventually be phased out under President Donald Trump's "big beautiful bill." (Congress created income-driven repayment plans back in the 1990s to make student loan borrowers' bills more affordable. The plans cap borrowers' monthly payments at a share of their discretionary income and cancel any remaining debt after a certain period, typically 20 years or 25 years.) But borrowers could see their monthly bills double under IBR, compared with on SAVE. That's because the SAVE plan calculated payments based on 5% of a borrower's discretionary income. IBR takes 10% — and that share rises to 15% for certain borrowers with older loans. Many federal student loan borrowers simply won't be able to afford the payments under IBR, said Nancy Nierman, assistant director of the Education Debt Consumer Assistance Program in New York City. "In severe cases, it could result in people being forced to move, or they will just resign themselves to default and involuntary collections," Nierman said. In the new legislation passed by Republicans, borrowers will have access to another income-driven repayment plan, called the "Repayment Assistance Plan," or RAP, by July 1, 2026. However, it's uncertain whether a borrower will have a lower monthly payment on RAP than IBR. "It's going to range dramatically based on your income," Buchanan said. There are tools available online to help you determine how much your monthly bill would be under different plans. Carolina Rodriguez, director of the Education Debt Consumer Assistance Program, said she's working with one partner in a married couple, both with federal student loans, who are facing a nearly $4,000 monthly combined student loan payment under IBR. "My client said that these payments would mean no extracurricular activities and other opportunities for his children, which might set them back in comparison to their peers," Rodriguez said. Under SAVE, the family's student loan bill would have been around $2,400, she said. Borrowers who can't afford to make a monthly payment on their student debt under the current repayment options can pursue deferment and forbearance options. Those who've taken out loans before July 1, 2027, will maintain access, for example, to the economic hardship deferment and the unemployment deferment, under the new law.
CNBC
17-07-2025
- Business
- CNBC
Student loan borrowers may be left with 'no affordable options' under Trump plan changes, advocate says
As the Trump administration overhauls the federal student loan repayment system, borrowers may soon find it difficult to keep up with their monthly payments, consumer advocates said. The SAVE, or Saving on a Valuable Education, plan, touted by the Biden administration as the most affordable repayment program ever, is now defunct. President Donald Trump's "big beautiful bill" phases out several other income-driven repayment plans, which were aimed at making payments manageable for student loan holders. "In many instances, borrowers will be left with no affordable options, increasing the risk of default," said Nancy Nierman, assistant director of the Education Debt Consumer Assistance Program in New York City. The U.S. Department of Education did not immediately respond to a request for comment. Here are the biggest changes to federal student loan repayment under Trump, so far. The Biden administration rolled out the SAVE plan in summer 2023. The repayment plan's terms were the most generous to date; under the program's rules, many borrowers' monthly bills would have dropped by as much as half. But just as many of the plan's benefits were going into effect, Republican-led legal challenges blocked the program. Unlike the Biden administration, Trump officials have not fought in the courts to preserve SAVE, and recently Congress repealed the plan altogether. More from Personal Finance:Trump's 'big beautiful bill' slashes CFPB funding78% say Trump's tariffs will make it harder to deal with debtTax changes under Trump's 'big beautiful bill' — in one chart The Education Department announced on July 9 that the interest-free payment pause that the Biden administration had enrolled SAVE borrowers in during the legal challenges will expire on Aug.1. Secretary of Education Linda McMahon said in a statement that borrowers in SAVE should "quickly transition to a legally compliant repayment plan — such as the Income-Based Repayment Plan." But under the other existing repayment plans, borrowers will see their bills "jump up unexpectedly," said Malissa Giles, a consumer bankruptcy attorney in Virginia. "I cannot imagine the stress that will be put on folks," she said. Higher education expert Mark Kantrowitz said, "We can expect payments under IBR to be more than double payments under SAVE." Under Trump's "big beautiful bill," borrowers who take out federal student loans after July 1, 2026, will have just two repayment plans to choose from, compared with roughly a dozen options now. Existing borrowers will maintain access to other repayment options. New student loan borrowers could enroll in either a standard repayment plan with fixed payments or a single income-based repayment plan: the "Repayment Assistance Plan," or RAP. Preston Cooper, a senior fellow at the conservative policy research organization American Enterprise Institute, wrote in a recent blog post that "scheduled monthly payments under RAP are significantly higher than those under the Biden administration's SAVE plan for borrowers of the same income levels." Cooper provided an example of a borrower who earns $80,000 per year: their monthly bill under RAP will be $533, whereas it would be $179 with SAVE, he wrote. "The student borrowers for whom the SAVE plan was the only affordable option will be severely impacted by these changes," said Nierman, of the Education Debt Consumer Assistance Program.
