Latest news with #SavingonaValuableEducation
Newsweek
4 hours ago
- Business
- Newsweek
Nearly Half a Million Student Loan Repayment Plans at Risk: Report
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. The Department of Education plans to deny 460,000 federal student loan borrowers from accessing lower repayment plans, according to a Politico report citing internal department documents. The affected students had selected the Saving on a Valuable Education (SAVE) Plan, a Biden-era policy that generally came with the lowest monthly payments and which the Education Department functionally abolished earlier this month. Newsweek has contacted the Department of Education for comment outside regular hours. Why It Matters The amendments to the SAVE Plan and the decision to deny lower-income students access is in line with the steps taken by President Donald Trump's administration to phase out educational policies and financial support systems enacted under his predecessor. While the Education Department has said it will support students transitioning to alternative plans, experts have said this could result in hundreds of dollars being tacked onto their monthly payments. What Was the SAVE Plan? The SAVE Plan was introduced in 2023, replacing the Revised Pay As You Earn (REPAYE) Program. Intended as a more generous income-driven option, undergraduates enrolled in the plan had payments capped at 5 percent of their discretionary income, rising to 10 percent for graduate borrowers, per Politico. According to the Department of Education, there are almost 7.7 million borrowers enrolled in SAVE. Amid a string of legal disputes and a court injunction blocking elements of SAVE in June 2024, enrollees have been in legal limbo and their loans placed in general forbearance with a zero percent interest rate since then. What To Know In early July, the Education Department announced that it would recommence interest accrual on loans in the "illegal" SAVE Plan. The change is set to take effect on August 1. An Education Department spokesperson told Politico that the reason for the 460,000 applications being denied was because loan servicers were now unable to process these "as SAVE is no longer an option, as it is illegal." In the place of SAVE, the department is rolling out two alternatives as part of the One Big Beautiful Bill Act, a budget package that Trump signed into law on July 4. These include a revised 10-year standard repayment plan and a new Repayment Assistance Plan. Education Secretary Linda McMahon testifies before the Senate Appropriations Committee's Labor, Health and Human Services, and Education Subcommittee in the Dirksen Senate Office Building on Capitol Hill in Washington, D.C., on June 3. Education Secretary Linda McMahon testifies before the Senate Appropriations Committee's Labor, Health and Human Services, and Education Subcommittee in the Dirksen Senate Office Building on Capitol Hill in Washington, D.C., on June its early July news release, the Education Department said it would "support borrowers in selecting a new, legal repayment plan that best fits their needs and helps them get on a sustainable financial path while protecting American taxpayers." The department has also begun outreach to the almost 8 million borrowers enrolled in SAVE, advising them on how to switch to a new plan. However, the new plans are "generally less generous than SAVE, requiring borrowers to pay more," according to Robert Kelchen, the head of the Department of Educational Leadership and Policy Studies at the University of Tennessee, Knoxville. According to the Student Borrower Protection Center, the decision to resume interest payments on SAVE debts could also force borrowers to pay more than $3,500 annually, or $300 per month, in additional fees. What People Are Saying Education Secretary Linda McMahon said in a news release on July 9: "Since day one of the Trump Administration, we've focused on strengthening the student loan portfolio and simplifying repayment to better serve borrowers. As part of this effort, the Department urges all borrowers in the SAVE Plan to quickly transition to a legally compliant repayment plan—such as the Income-Based Repayment Plan. Borrowers in SAVE cannot access important loan benefits and cannot make progress toward loan discharge programs authorized by Congress." Robert Kelchen, the head of the Department of Educational Leadership and Policy Studies at the University of Tennessee, Knoxville, told Newsweek: "The Department of Education fundamentally disagrees with the SAVE Plan and wants to quickly move to the new repayment options passed in the recent budget reconciliation bill. The fate of the 460,000 borrowers currently in SAVE will likely end up in court again, and the Trump administration will likely win based on other recent Supreme Court decisions in favor of [the Education Department]." What Happens Next The department has said interest will not be added retroactively to those previously enrolled on the SAVE Plan. It has urged borrowers to visit the government's Loan Simulator to assess monthly repayment options.
NBC News
3 days ago
- 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
3 days ago
- 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.
Time of India
3 days ago
- Business
- Time of India
460k student loan borrowers face application denials as feds overhaul repayment plans
Tired of too many ads? Remove Ads The data and the drama 460,000 applications denied: These borrowers will not be able to enter IDR programs through the now-invalidated SAVE application process. 1.98 million applications in limbo: Court filings and Education Department data show nearly 2 million student loan borrowers remain stuck in a backlog, waiting for decisions on more affordable repayment options. Processing at a snail's pace: In April alone, the government managed to review just about 79,350 applications, meaning at this rate, it would take more than two years to clear today's backlog. Trump administration's overhaul: Out with the old, in with…? What borrowers are saying What should borrowers do? Tired of too many ads? Remove Ads A seismic jolt hit the student loan world this week as roughly 460,000 borrowers learned their applications for income-driven repayment (IDR) plans will be denied, thanks to a sweeping overhaul by the Trump administration, reported Politico. The Department of Education dropped the bombshell, confirming that applications cannot be processed since the embattled SAVE repayment program is now officially off the table — and illegal under current hoping for relief through the SAVE (Saving on a Valuable Education) program — a hallmark of the Biden era — are now left in suspense. "Loan servicers cannot process these applications as SAVE is no longer an option, as it is illegal," the Department declared in a statement. While SAVE borrowers are stuck in a kind of repayment purgatory (forbearance) while courts debate the program's fate, officials have confirmed their eventual transition to alternative plans later this denials are part of a massive shake-up spurred by President Trump's reconciliation legislation. The administration described SAVE as too costly for taxpayers, and has called for 'simplifying the loan repayment process' with new options that have yet to be unveiled. In a move reminiscent of a reality show reboot, the Department is scrapping its complex matrix of repayment plans, including those built in recent years, and preparing to introduce two new types.'There's a bit of a struggle to understand if borrowers intended to apply for the Biden-era program that's currently on hold,' said Scott Buchanan of the Student Loan Servicing Alliance. Many simply selected what looked like the lowest payment — but didn't know that was SAVE, now illegal. With the application paused, Buchanan suggests borrowers will need to reapply for repayment plans under the new rules when remain worried. 'If their income has shifted in the last year, it's going to result in a higher payment,' warned Persis Yu from the Student Borrower Protection Center. The months spent in SAVE forbearance won't count towards loan cancellation or forgiveness — potentially forcing borrowers to pay more over the life of their advocates and unions have blasted the chaotic process. 'Applications for loan relief have been essentially disappearing into a black hole,' said Winston Berkman-Breen of the Student Borrower Protection Center. Randi Weingarten, President of the American Federation of Teachers, called it 'outrageous and unacceptable,' blasting the administration for locking millions out of affordable payment options and delaying pathways to loan forgiveness For now, borrowers are advised to wait for the Education Department's promised new repayment plans later this year. Meanwhile, those holding out for relief are stuck in a classic bureaucratic limbo, caught between changing administrations and courtroom showdowns.
Time of India
3 days ago
- Business
- Time of India
460,000 student loan borrowers to be kicked off from repayment plan? Know the big changes from August 1
Student loan borrowers to be denied repayment plan? Live Events Student loan payments to change from August 1 (You can now subscribe to our (You can now subscribe to our Economic Times WhatsApp channel President Donald Trump has dismantled the Department of Education and this is having significant consequences for millions of borrowers and the broader education system. The department which oversaw federal student loan programs, distributed financial aid and enforces policies meant to protect borrowers from predatory lending eliminating the Department of Education (DOE) means uncertainty into loan servicing, possibly delaying repayments, altering forgiveness programs or making it harder for students to access federal aid. The department will reject nearly a half-million applications from people seeking to make lower payments on their student loans , reports Politico citing internal report suggests that the department will reject applications of 460,000 federal student loan borrowers who selected the lowest monthly option for a payment plan based on their income. They make up about 31 percent of a 1.5 million application backlog for borrowers who are seeking Income-Driven Repayment, one of many options typically available for borrowers having difficulty paying back their loans.A spokesperson for the Education Department told Politico that the SAVE Plan — introduced during the Biden administration — offers the lowest monthly payment option, capping payments at 5% of a borrower's discretionary income for undergraduate loans and 10% for graduate loans. However, the plan has been blocked by the courts since June 2024.'Loan servicers cannot process these applications as SAVE is no longer an option, as it is illegal,' a department spokesperson wrote in a statement to August 1, the Trump administration will resume interest charges on the accounts of around 8 million borrowers, who had previously been granted an interest-free forbearance period under the Biden administration's Saving on a Valuable Education (SAVE) Plan, reports Trump administration said bringing back the accrual of interest rate on loans was to "comply with a federal court injunction that has blocked implementation of the SAVE Plan, including the Department's action to put SAVE borrowers in a zero percent interest rate status."The Trump administration has deemed the SAVE plan "illegal," saying it intends to bring back "fiscal responsibility to the federal student loan portfolio." "For years, the Biden Administration used so-called 'loan forgiveness' promises to win votes, but federal courts repeatedly ruled that those actions were unlawful," McMahon said."Congress designed these programs to ensure that borrowers repay their loans, yet the Biden Administration tried to illegally force taxpayers to foot the bill instead," she put it in simple terms, it means the change will see borrowers being charged more than $27 billion in interest over the next 12 months, which will have wide repercussions on the lives of March, Trump signed an executive order calling for the dismantling of the U.S. Education Department, advancing a campaign promise to take apart an agency that's been a longtime target of conservatives. Trump has derided the Education Department as wasteful and polluted by liberal order says the education secretary will, 'to the maximum extent appropriate and permitted by law, take all necessary steps to facilitate the closure of the Department of Education and return authority over education to the States and local communities.'
