Latest news with #SameerGadkaree
Forbes
20 hours ago
- 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.'
CNBC
18-06-2025
- Business
- CNBC
Senate's budget proposal offers student loan borrowers fewer repayment options, loan limits for grad school
The U.S. Senate has released details about its version of the budget reconciliation package known as President Donald Trump's "One Big Beautiful Bill Act." The House passed its version of the bill on May 22, which included a number of proposals to reform the current federal student loan landscape, including the elimination of existing repayment plans and new limits on federal borrowing. The Senate's version — released by the Health, Education, Labor and Pensions committee on June 10 — keeps most of those proposals in place, but takes out other regulations, like a loan limit on undergraduate borrowers. Critics say the bill removes important protections for vulnerable student loan borrowers, such as affordable repayment plans and recourse when students are harmed by their institution. "While the Senate has pared back or rejected many of the most harmful changes proposed by the House, the bill still harms the lowest-income loan borrowers and students to pay for tax cuts," Sameer Gadkaree, president of The Institute for College Access & Success, said in a statement on June 11. Proponents, however, say the bill addresses some of the major contributing factors to the student loan crisis and puts the onus on borrowers to repay their debts, rather than taxpayers. "While [former President Joe] Biden and Democrats unfairly attempted to shift student debt onto taxpayers that chose not to go to college, Republicans are taking on the root causes of the student debt crisis to lower the cost of tuition and improve Americans' access to opportunities that set them up for success," Sen. Bill Cassidy (R-La.), who chairs the HELP committee, said in a statement on June 10. Republicans hope to move the bill forward by July 4, but some provisions, namely cuts to Medicaid, are raising concerns about whether it will pass the Senate as is. But if the Senate's provisions remain in place, here's what it would mean for student loan borrowers. Both the House and Senate versions of the bill aim to streamline the repayment options for federal student loan borrowers. Borrowers currently have at least three different income-driven repayment plans available, as well as the standard repayment plan, to pay back their loans on timelines ranging from 10 to 25 years. If passed as proposed, borrowers whose loans are disbursed on or after July 1, 2026 will only have two options: a standard fixed-payment plan and a new income-driven repayment plan lawmakers have coined the Repayment Assistance Plan. Existing borrowers will be able to stay on older plans or switch into one of the new repayment plans. The new standard repayment plan will have borrowers paying back their loans for 10 to 25 years, depending on how much they borrow. Currently, the standard repayment plan calculates monthly payments to have the debt repaid in 10 years. RAP, the new income-driven repayment plan, will calculate monthly payments as between 1% and 10% of a borrower's discretionary income, down from the current offerings that set payments at 10%, 15% or 20% of a borrower's income, depending on the plan and when the loans were disbursed. On RAP, borrowers would be eligible to have their remaining balances forgiven after 30 years, up from the current 20 or 25 years. The House's proposal includes a stipulation that borrowers who enroll in RAP will not be able to switch out of the plan later, but the Senate's did not include that rule. The Senate's version of the bill maintains the House's goal of limiting the amount of loans students and their families can take out, but with different thresholds. Under the Senate's proposal, graduate borrowers would have a lifetime borrowing limit of $100,000, and up to $200,000 for students in professional programs, like medical school. Parents would have a borrowing limit of $65,000 per undergraduate student. Undergraduate borrowers would maintain the current aggregate limit of $31,000 for dependent students and $57,500 for independent borrowers. The House's version would impose a $50,000 lifetime borrowing limit for undergraduate students and eliminate subsidized loans that don't accrue interest while students are in school. That version also caps lifetime graduate borrowing at $100,000 or $150,000 for professional programs, and parent PLUS loans at $50,000 per parent. Currently, borrowers have a $138,500 lifetime limit for graduate loans, including any amount borrowed for undergraduate studies. Parents can borrow up to the cost of their student's attendance after any federal aid. Both bills eliminate grad PLUS loans, which have a higher interest rate than unsubsidized loans, but allow grad students to borrow up to their entire cost of attendance minus any federal aid. Both versions of the bill roll back regulations put in place to help borrowers who didn't get the full benefit of the education they went into debt for. The House and Senate proposals both eliminate borrower defense to repayment and closed school discharge rules, which allow borrowers to have their federal debt discharged if they prove they were defrauded by their academic institution or if their school wound up closing. The House version of the bill went a step further, eliminating the 90/10 and gainful employment rules, which aim to hold schools accountable for ensuring borrowers are getting the education necessary to land well-paying jobs. Both versions of the bill also eliminate deferment options that currently allow qualifying borrowers to pause payments when dealing with the economic hardship and unemployment.
CNBC
15-06-2025
- Business
- CNBC
Senate Republican education plan may trigger 'avalanche of student loan defaults,' expert says
Senate Republicans' proposal to overhaul student loan repayment could trigger a surge in defaults, one expert said. The Senate GOP reconciliation bill's higher education provisions "would cause widespread harm to American families," Sameer Gadkaree, the president of The Institute for College Access & Success, said in a statement. The proposals do so by "making student debt much harder to repay" and "unleashing an avalanche of student loan defaults," he wrote. The Senate Committee on Health, Education, Labor and Pensions introduced bill text on June 10 that would change how millions of new borrowers pay down their debt. The proposal made only minor tweaks to the repayment terms in the legislation House Republicans advanced in May. More from Personal Finance:Experts weigh pros and cons of $1,000 Trump baby bonusHow Trump spending bill may curb low-income tax creditWhy millions would lose health insurance under House spending bill With control of Congress, Republicans can pass their legislation using "budget reconciliation," which needs only a simple majority in the Senate. Gadkaree and other consumer advocates have expressed concerns about how the new terms would imperil many borrowers' ability to meet their monthly bills — and to ever get out of their debt. More than 42 million Americans hold student loans, and collectively, outstanding federal education debt exceeds $1.6 trillion. More than 5 million borrowers were in default as of late April, and that total could swell to roughly 10 million borrowers within a few months, according to the Trump administration. Currently, borrowers have about a dozen plan options to repay their student debt, according to higher education expert Mark Kantrowitz. But under the Senate Republican proposal, there would be just two repayment plan choices for those who borrow federal student loans after July 1, 2026. (Current borrowers should maintain access to other existing repayment plans.) As of now, borrowers who enroll in the standard repayment plan typically get their debt divided into 120 fixed payments, over 10 years. But the Republicans' new standard plan would provide borrowers fixed payments over a period between 10 years and 25 years, depending on how much they owe. For example, those with a balance exceeding $50,000 would be in repayment for 15 years; if you owe over $100,000, your fixed payments will last for 25 years. Borrowers would also have an option of enrolling in an income-based repayment plan, known as the "Repayment Assistance Plan," or RAP. Monthly bills for borrowers on RAP would be set as a share of their income. Payments would typically range from 1% to 10% of a borrower's income; the more they earn, the bigger their required payment. There would be a minimum payment of $10 a month for all borrowers. While IDR plans now conclude in loan forgiveness after 20 years or 25 years, RAP wouldn't lead to debt erasure until 30 years. The plan would offer borrowers some new perks, including a $50 reduction in the required monthly payment per dependent. Still, Kantrowitz said: "Many low-income borrowers will be in repayment under RAP for the full 30-year duration." A typical student loan borrower with a college degree could pay an extra $2,929 per year if the Senate GOP proposal of RAP is enacted, compared to the Biden administration's now blocked SAVE plan, according to a recent analysis by the Student Borrower Protection Center. The Center included the calculations in a June 11 letter to the Senate Committee on Health, Education, Labor and Pensions. "As the Committee considers this legislation, it is clear that a vote for this bill is a vote to saddle millions of borrowers across the country with more student loan debt, at the same moment that a slowing economy, a reckless trade war, and spiraling costs of living squeeze working families from every direction," Mike Pierce, the executive director of the Center, wrote in the letter. Sen. Bill Cassidy, R-La., chair of the Senate Health, Education, Labor, and Pensions Committee, said the proposal would stop requiring that taxpayers who didn't go to college foot the loan payments for those with degrees. "Biden and Democrats unfairly attempted to shift student debt onto taxpayers that chose not to go to college," Cassidy said in a statement. Cassidy said his party's legislation would save taxpayers at least $300 billion.
Yahoo
20-03-2025
- Politics
- Yahoo
Trump signs order to eliminate Department of Education 'once and for all'
Following through on a longstanding campaign promise, President Trump signed an executive order Thursday ordering the Department of Education to wind down its operations so that it can eventually be closed. The order, while light on details, comes just one week after the agency announced plans for mass layoffs that would cut its workforce in half and leaves in question the fate of federal programs that touch on almost every aspect of American education, from distributing billions of dollars to K-12 schools to managing the government's massive student loan operation. During a ceremony in which he was surrounded by children seated at school desks, Trump said his administration was 'returning education to the states where it belongs.' He noted that key programs including Title I funding for schools that serve low-income communities, resources for disabled and special needs students, and Pell Grants for undergraduates would be 'preserved in full and redistributed to other agencies.' 'Beyond these core necessities, this administration will take all lawful steps to shut down the department,' he said. 'We're going to shut it down and shut it down as quickly as possible. It's doing us no good.' Education advocates have widely decried Trump's action, arguing that dismantling the department would sow chaos through the country's education system and hurt learners. 'Without the department, fewer students would be able to go to college, student loan borrowers would default in droves, and fraudulent colleges would prey on students with impunity,' Sameer Gadkaree, head of The Institute for College Access & Success, said in a statement. Conservatives argue those concerns are overblown, however. Frederick Hess, director of the Education Policy Studies Program at the American Enterprise Institute, noted that the administration is not planning to cut major funding streams for education, but rather is looking to change who manages them. 'Whatever happens to the department and the size of its bureaucratic staff, the impact on students, families, and colleges goers is likely to be pretty limited,' he said. What Trump wants to do Because the Education Department was created by statute, fully eliminating it would require an act of Congress. But it is widely expected that the administration will try to hollow out its operations by eliminating programs that aren't mandated by law and moving some of its core functions to other agencies. The order instructs Secretary of Education Linda McMahon to take 'all necessary steps to facilitate the closure of the Department of Education' to 'the maximum extent' permitted by law, while 'ensuring uninterrupted delivery of services, programs, and benefits on which Americans rely." Trump has previously said he wants to move federal student lending to another department, possibly the Treasury or Small Business Administration. Right-leaning experts have also suggested that the department's civil rights responsibilities could be reassigned to the Department of Justice, while funding for K-12 could be moved to the Department of Health and Human Services. Is any of this legal? It's not clear how much legal authority, if any, Trump has to scatter the Department of Education's responsibilities throughout the federal government. For instance, the Higher Education Act appears to state plainly that Federal Student Aid — the office that runs the Pell grant and student loan programs — must be established inside the agency, and that the Secretary of Education 'shall maintain responsibility' for creating the policies and regulations governing its operations. 'The law says it's the US Department of Education's Office of Student Aid, and I don't know how you get past that,' said Mike Pierce, director of the Student Borrower Protection Center. Federal law does allow agencies to run 'joint' projects together, and some conservatives have argued that language would let McMahon begin moving programs over to other departments. But transferring oversight of something the size and scope of federal student lending would be effectively unheard of and could prove tricky. Will it mess up my loans? Moving the student loan program would also risk major disruptions for borrowers, some former officials warned. If the transition were done sloppily, the government could end up losing track of information like how many payments individuals have made toward loan forgiveness. 'It's extraordinarily difficult to move loans across systems, even within the Department of Education,' said Julie Margetta Morgan, a former deputy undersecretary for education. 'The idea of moving them to another agency is just a massive, massive undertaking.' Much of the student loan program is already in a state of limbo, after the administration blocked access to its income-driven repayment plans — a decision many have criticized as an unnecessary overreaction to a federal court ruling. When it comes to higher education, much of the department's job involves managing giant contractors that handle tasks like servicing loans and processing student aid applications. Many of the department's key online systems and databases are built and run by those private companies. In theory, another agency could supervise those contractors, but it would require much of the same expertise and staffing that currently exists in the education department. At least some responsibilities could be handed off to other agencies with relative ease, former officials said. For instance, the Treasury Department already handles debt collection for much of the federal government and could probably take on that task for student loans. But one major concern is that the Trump administration will try to continue running programs like student lending without the oversight staff who make sure schools and servicers obey federal rules meant to protect students and borrowers. 'It's on the department to explain how it's going to work, to make the case that it's on top of oversight, and has a gameplan and has a plan for addressing those concerns,' said AEI's Hess. 'At this point, I don't think the department has made its case very fully.' Jordan Weissmann is a senior reporter at Yahoo Finance. Sign in to access your portfolio
