Latest news with #studentloans
Washington Post
an hour ago
- Business
- Washington Post
Enrolled in this student loan repayment plan? It's time to consider an exit.
If you're one of the 7.7 million people enrolled in the student loan repayment plan known as Save, it is time to consider an exit. In less than a week, the Education Department will resume applying interest on loans being repaid through the Biden-era program. And in less than three years, the program will cease to exist, which could happen sooner if Republicans succeed in abolishing the plan through the courts. The Save saga has spanned two administrations and left millions of borrowers in a state of uncertainty. The income-driven program, which President Joe Biden introduced in 2023, offers low monthly payments and a faster path to loan forgiveness. In two separate legal challenges last year, Republican-led states accused Biden of exceeding his legal authority by creating a multibillion-dollar program without congressional approval. An injunction in one of those cases has left Save in legal limbo since last summer and led the Education Department to postpone payments for enrollees through an interest-free forbearance. But the department will return to adding interest to loan balances on Aug. 1, weeks after the tax law that President Donald Trump signed this month ended Save and gave enrollees until 2028 to leave the plan. 'If you're on Save, you better start looking at options and figuring out which one best fits you,' said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for loan servicers. 'Sitting on the sidelines is not a good strategy because we definitely know it's going away.' There are as many moving parts as there are options for borrowers. Here's what we know. It's going away. Earlier this month, the Education Department said it would resume applying interest on Aug. 1 to the loans held by borrowers enrolled in Save. Those borrowers have benefited from an interest-free forbearance that postponed their payments since last summer amid the ongoing lawsuit. The department said ending the subsidy is necessary to comply with the court injunction that put Save on hold, but a borrower affected by the decision is petitioning the court to stop the agency. Unless the court intervenes, interest will restart soon. The Education Department is encouraging Save enrollees to switch to another plan, but borrowers can continue to postpone their payments and remain in the Save forbearance. Yet they will soon see interest accrue on their loans. 'The forbearance isn't ending. So people have time. They don't have to do anything right this second, and what they should do sort of depends on their long-term student loan strategy,' said Betsy Mayotte, president and founder of the Institute of Student Loan Advisors. Both cases are still in play. First, a refresher. Republican-led states filed separate lawsuits in Kansas and Missouri last year to strike down Save. District judges in both cases imposed temporary injunctions on components of the plan, such as capping monthly payments at 5 percent of a borrower's discretionary income. The U.S. Court of Appeals for the 10th Circuit decided last June to stay the injunction in Kansas, letting the Education Department move forward, but the case in Missouri brought everything to a halt. Dissatisfied with the partial injunction, Missouri Attorney General Andrew Bailey petitioned the U.S. Court of Appeals for the 8th Circuit to halt the Save plan in its entirety amid ongoing litigation. The court agreed and later expanded the injunction. So where do things stand now? The courts have yet to rule on the merits of the lawsuits against Save, even though the injunction has put payments on hold since last summer. The Trump administration could decide to stop defending the Save plan in court, especially now that congressional Republicans have used the savings from eliminating the program to offset the cost of extending tax cuts. The Education Department did not immediately respond to inquiries about the fate of the lawsuits. If the courts decide to rule on the merits of either lawsuit this year, it could bring the Save plan to an end sooner than the tax bill dictates. As it stands, the tax law gives current Save enrollees until July 1, 2028, to change plans. The tax law that Trump signed into law this month gets rid of Save. The plan will cease to exist for new borrowers beginning July 1, 2026, while people who are currently enrolled in Save will have until July 1, 2028, to switch out of the plan. Instead of seven repayment options, congressional Republicans have whittled the choices down to two new plans. The new standard plan will stretch monthly payments out from 10 to 25 years, depending on the size of the debt. People with larger debts, say more than $100,000, will be in repayment for up to 25 years, while those who owe less than $25,000 will repay for no more than 10 years. Meanwhile, payments on the new income-driven repayment plan, dubbed the Repayment Assistance Plan, are based on a borrower's total adjusted gross income, ranging from 1 to 10 percent depending on earnings. Borrowers would have to make a minimum monthly payment of $10, ending the zero-dollar payment option for low-wage borrowers. People who are keeping up with their bills but not making progress on paying down the principal will have their principal reduced by up to $50 a month. The government will also waive any interest that is left over after a borrower makes a monthly payment. Say your payment is $60 but you owe $80 a month in interest, the Education Department will waive the remaining $20. The RAP plan offers small monthly loan forgiveness, but instead of forgiving the remaining balance after 20 or 25 years of payments as custom under other IDR plans, the new one extends the term to 30 years. These two plans will be the only options afforded to new borrowers after July 1, 2026. Current borrowers have a few options. They can choose either of the new plans or migrate over to an older plan known as Income-Based Repayment, which was created by Congress in 2007. That plan caps monthly payments at 15 percent of discretionary income for people who took out loans before July 2014. For those who borrowed after that date, payments are capped at 10 percent. 'Borrowers who have been paying for a while feel exhausted and confused, [and] should take heart that Congress has finally stepped in to provide clarity, because absent that, the executive branch and courts have made it unbearably confusing,' said Alex Ricci, president of the National Council of Higher Education Resources, which represents private lenders, loan servicers, debt collectors and loan guaranty agencies. Switching to IBR could appeal to borrowers who are close to hitting the mark to receive loan forgiveness. Rather than contend with the 30-year schedule under the new RAP, borrowers with pre-2014 loans qualify for debt cancellation after 25 years under IBR and those with newer loans can have their remaining balances erased after 20 years. Yes, the remaining three IDR plans — Income-Based Repayment, Pay As You Earn and the Income-Contingent Repayment — are still open to borrowers, at least for now. After July 1, 2028, only the IBR plan will remain an option for current borrowers because of changes in the tax bill. For now, borrowers can enroll in the three plans and accrue qualifying payments toward loan forgiveness, said Kyra Taylor, a staff attorney at the National Consumer Law Center. Borrowers in Save can make payments on their loans, but they will not count toward debt cancellation. The other IDR plans have different terms depending on when you borrowed and whether you have loans for undergraduate or graduate school. The loan simulator on can help borrowers determine which plan is most affordable for them, but Taylor said that some borrowers have complained of not getting accurate calculations. Education Department officials said they are not aware of any problems with the simulator and noted borrowers can also contact their loan servicer — the companies that manage the federal portfolio — for help. Servicers are contending with a backlog of 1.5 million IDR applications dating back to last year. Buchanan at the servicing alliance said a big portion of the backlog is people who selected the lowest monthly payment option on an older version of the application that included Save. The Education Department revised the application earlier this year to comply with the Save injunction and is encouraging anyone who applied between July 2024 and April 2025 before the update to resubmit. Getting through the process should also be easier now that the department has re-enabled a function that allows borrowers to consent to have their tax data imported from the IRS. Persis Yu, deputy executive director at the Student Borrower Protection Center, cautions borrowers to take into consideration that their payments change if their financial situation has changed since submitting a prior application. 'If your income has changed, it may mean that you're going to get bumped up to a higher payment amount. That is something that people should be aware of,' Yu said. Save enrollees working toward Public Service Loan Forgiveness — which cancels loans of government and nonprofit employees after 10 years of service and 120 monthly debt payments — have a couple of options. They can switch to another IDR plan, as many have already done. Yu said that while other plans will cost more than Save, for borrowers who are nearing the forgiveness threshold, it may be worth the momentary sacrifice. Public servants can also remain in the Save forbearance, though those months will not count toward cancellation. But they could take advantage of a PSLF buyback initiative to retroactively make a lump-sum payment to get credit for the forbearance period. 'The people that are closer to the 120 now are more content with the idea of buyback than the people who maybe still have eight years in front of them,' Mayotte said. 'Some people have other financial priorities right now and would rather suck it up down the road and pay the lump sum.'
Yahoo
a day ago
- Business
- Yahoo
I Asked ChatGPT How Trump's Tax Cuts Could Impact My Family Budget — Here's the Breakdown
President Donald Trump's One Big Beautiful Bill Act, which he signed on July 4, will impact millions of households, from their student loan repayments to their access to Medicaid and other social safety net programs. I, however, was most concerned with how the legislation's sweeping changes to U.S. tax law might impact my obligations to the IRS. Since my tax attorney charges by the quarter-hour for phone calls, I went with the next-best thing — ChatGPT. I asked the AI platform how Trump's tax cuts could impact my family budget. Here's what it told me. Find Out: Read Next: Many Households — Including Mine — Will Save Money The AI platform began with a bulleted list of benefits that will help many families lower their tax bill. It relied on sources such as the Bipartisan Policy Center and the Tax Policy Center to generate the section, which it titled, 'What You'll Likely Save.' This is its word-for-word synopsis of the potential savings for my family and others. Extended 2017 TCJA benefits — no major tax increases that were scheduled to take effect in 2026. Higher standard deduction — receives a $2,000 extra (married) or $1,000 (single) until 2028 on top of inflation adjustment. (CTC) — boosted to $2,500 per child through 2028, then reverts to $2,000. New tax benefits — exemption from federal tax on tips and overtime income (under $160K), a $40K state-and-local-tax (SALT) cap and a one-time $1K 'Trump account' per child. Learn More: Have a Little, Get a Little; Have a Lot, Get a Lot Next, my unofficial AI accountant used a Tax Policy Center analysis and a CBS News report to surmise that most families would see at least some benefit, with an average household tax bill reduction of $2,900 in 2026. However, it generated the following bulleted list, cited here verbatim, which showed that the 'haves' stand to gain more than the 'have-nots.' Bottom quintile households (≤ $35K income): ~$150 saved (~0.8% of income) Top quintile (≥ $217K income): ~$12,540 saved (~2.5%). Middle-income families fall in between, likely saving several hundred to a few thousand dollars annually. Taxes Aren't the Only Thing That Impact Family Budgets The platform then outlined how what it called the 'offsetting effects' of the tax cuts could shake up my family's — or anyone's — finances. This, too, is in ChatGPT's own words. Cuts to Medicaid, food stamps (SNAP) — billions in savings, but may reduce public benefits your family relies on. Reduced social safety nets — tougher work requirements; lower-income families could see net income decline despite tax cuts. Growing deficit — adds $3-$5 trillion to federal debt over 10 years, increasing future borrowing costs and potential for inflation/higher interest rates. Which Provisions Impact Which Families the Most? It included the following table to break down how different aspects of the legislation will impact different income groups. Income Level Estimated Annual Savings Key New Provisions Watch-Outs Low Income ~$150 Child Tax Credit, tip/overtime exemption Less SNAP/Medicaid Middle Income (~$50K-$100K) $500-$1,500 Standard SALT deduction bump, CTC, SALT cap Social cuts, inflation High Income (>$200K) $5K-$12K+ All above, plus SALT/ deduction benefits Future tax, interest pressure Make Your Situation as Big and Beautiful as Possible It concluded with a numbered list titled 'How To Maximize Benefits,' which outlined steps that my family and others can take to get the most out of the new changes. Use enhanced standard deduction — reduces taxable income directly. Claim full child tax credit if eligible — $2,500 per child. Take advantage of tip/overtime deductions — especially if you receive a lot of tips or extra hours. Monitor public benefits changes — if your household receives Medicaid or SNAP, check whether new work requirements or eligibility changes impact your budget. More From GOBankingRates Mark Cuban Warns of 'Red Rural Recession' -- 4 States That Could Get Hit Hard 10 Genius Things Warren Buffett Says To Do With Your Money 6 Big Shakeups Coming to Social Security in 2025 This article originally appeared on I Asked ChatGPT How Trump's Tax Cuts Could Impact My Family Budget — Here's the Breakdown
New York Times
a day ago
- Business
- New York Times
Your Questions About Education
In a recent newsletter, we asked for your questions about education. You wondered about student loans, the Columbia settlement and international students, among other topics. Today, The Times's expert beat reporters answer. (Got a question for us? Submit it here.) Student debt More than anything else, readers wondered about how they'd pay for college. Tara Siegel Bernard, who covers personal finance, fields these questions: How will the passage of the federal policy bill change Pell Grants and access to higher education for students from low-income families? Karen Stanish, Keene, N.H. Many people may find that pursuing higher education is more difficult or more expensive. Students who rely on their parents to take out loans will face new borrowing limits, as will graduate students. And new work requirements for Medicaid could make it harder to balance school with a job. On the other hand, students will be able to use Pell Grants for nondegree programs, like job training. But if students get other types of grants that fully cover the cost of attendance — from the school, from a state government, from a local scholarship — they can no longer get a Pell. Not enough has been said about the federal loan cap on graduate education (medical school, law school, etc.) from the policy bill. What is the change, and how will schools adjust? Matt Kleinman, Washington, D.C. Loans for professional schools will have a cap of $50,000 per year, with a $200,000 total limit, starting in July 2026. That is far less than the cost of training to be, say, a dentist or a doctor, as my colleague Roni Caryn Rabin reported. Some students might turn to private lenders. Average cost of public higher education in the U.S. $30,000 $24,920 for the 2024–25 school year $20,000 $10,000 1980-81 '90-91 '00-01 '10-11 '20-21 $30,000 $24,920 for the 2024–25 school year $20,000 $10,000 1980-81 '90-91 '00-01 '10-11 '20-21 Note: Data is in-state tuition and cost of room and board in 2024 dollars. Source: College Board By The New York Times Government action The Trump administration has accused several universities of fostering antisemitism and practicing discrimination through diversity programs; it has held back billions in government grants. Readers have watched these battles, sometimes with confusion. Michael C. Bender, who covers the president's domestic policy agenda, answers queries about them. Does the president have the power to demand concessions from our research universities and colleges, and, if so, why? Ruth D. Sundberg President Trump may make any demands he likes, but he cannot simply compel colleges to implement them. He's bound by federal law and the government's own rules. A lawsuit from Harvard, for instance, hinges largely on an argument that the government skipped specific fact-finding procedures before it imposed penalties. Still, the executive branch holds immense power, and receiving government contracts has always required some willingness to comply with an administration's priorities. Columbia University will pay $200 million to settle government investigations. Where does that money go? Ina Fried, Schenectady, N.Y. That money will go to the U.S. Treasury. But one senior White House official told reporters that Trump hoped Congress (which wields the constitutional power of the purse) would spend it on trade schools, apprenticeships or other work force training programs. My daughter is transferring to an H.B.C.U. in the fall. Has the Trump administration indicated any intent to go after historically Black colleges and universities in any way? Curtis Morgan, Strasburg, Va. No, not in the same broad way that the administration has targeted Ivy League schools. But historically Black colleges have not been immune from changes, either. Howard University lost some funding. Under the Trump administration, Tennessee State University lost a significant portion of its research budget and grants to cover tuition and housing for agricultural students. Funding Many of you sent questions about how the schools bear up in these conflicts. Alan Blinder, who has written about how universities spend their money, answers. Are public and private universities equally susceptible to challenges from the Trump administration? Charles Wain-Nye, Florida The government's pressure tactics may vary from school to school, but it doesn't seem to discriminate between public and private universities. Harvard is a major target, but so is the University of Virginia for its diversity policies. Three of the 10 schools that a government antisemitism task force identified for scrutiny are public institutions. These are all in places that voted for Kamala Harris, but the red-blue binary isn't absolute, either. In March, for example, the Education Department announced an investigation into the University of Alabama at Birmingham for 'race-based scholarships and race-based segregation.' Big universities have used their vast financial resources to absorb the impact of disputes with the administration. How are Trump's policies affecting smaller colleges? Chris Watson, Fenwick Island, Del. Researchers at schools of all sizes, even community colleges, have seen grants evaporate. And it's not just about research money. The administration wants schools to end D.E.I. programs, and the policy bill included changes for some financial aid programs. Many administrators, given the political climate, are thinking hard about which courses to offer and how to describe them. Some colleges are exploring ways to reduce their reliance on federal funding. Can they realistically sustain themselves without it? Anna Westbrook, Rochester, N.Y. Big research institutions depend on federal research funding: About 11 percent of Harvard's revenue is from federally sponsored research, though that kind of money also flows to much smaller schools. Private philanthropy and corporate giving could plug some of the gaps, but it's hard to imagine how American universities can find a combined $60 billion in recurring annual revenue. Say you were able to assemble a bunch of companies and individuals to create a privately run research endowment. If you doled out 5 percent each year — a common standard to ensure an endowment's long-term endurance — you'd need a fund with about $1.2 trillion. International students Many universities depend on students who need a special visa to attend. Anemona Hartocollis, who covers higher education, answers your questions about them. Should international students applying to U.S. universities be worried? How will the new developments affect them? Susie Cochin de Billy, Britain Nine out of 10 institutions still consider international recruitment a priority because it brings in a lot of money and talent. But the administration has tried to deport some students for their activism. In late March and early April, the government revoked visas or terminated legal status for more than 1,000 international students. A trade group has sued Marco Rubio, the secretary of state, over 'ideological deportation.' Admitted students, too, seem to be having a harder time getting visas, said a lawyer behind the suit. Government officials appear to be reviewing the social media feeds of applicants in search of pro-Palestinian sentiment or criticism of Trump. If fewer international students come here, will that lift the acceptance rate for U.S. citizens? Stef Morgan, Boulder, Colo. In theory, that could open up seats. But international students often pay full tuition, which subsidizes financial aid for American applicants. Losing these paying students would mean a financial blow, and universities could react by admitting fewer students overall. Share of international students Among full-time undergraduate and graduate students at 193 U.S. colleges 15% of students Covid 10% 5% 2000 2005 2010 2015 2023 15% of students Covid 10% 5% 2000 2005 2010 2015 2023 2020 Based on fall enrollment at schools that offer bachelor's degrees and above, with at least 1,000 students. Source: National Center for Education Statistics, Carnegie Classification By The New York Times More on higher ed: Harvard is said to be open to spending as much as $500 million to end its dispute with Trump. Manhattan Shooting A gunman with an assault rifle killed four people, and then himself, in a Manhattan office building last night. What happened? The man drove from Nevada and double parked in front of the skyscraper. In the lobby, he shot and killed a police officer, a woman trying to hide behind a pillar and a security guard behind a desk. He let a woman leaving an elevator go unharmed, then he rode it to the offices of a real-estate firm on the 33rd floor. There, he fatally shot a final victim and killed himself. Why did he do it? The motive isn't clear. The skyscraper was near the site of another high-profile Midtown attack: the killing of a health insurance executive. More details: The police officer killed was an immigrant from Bangladesh, with two children. His wife is pregnant with their third. Read about Officer Didarul Islam here. Employees at Blackstone, an investment company in the building, barricaded the doors using office furniture, The New York Post reports. War in Gaza Trump said that children in Gaza 'look very hungry' and spoke of 'real starvation' in the enclave, breaking from Israeli officials who have denied that people are starving there. Britain may recognize a Palestinian state, two senior government officials said, joining France and alienating Israel. Two of Israel's best-known human rights groups said Israel was committing genocide against Palestinians in Gaza. Most Israelis still support the war in Gaza, but dissent is growing louder. In March, Israel ended a truce with Hamas, hoping for a final victory. It didn't work, Patrick Kingsley writes. War in Ukraine Trump said he would give Russia 10 to 12 days to end the war in Ukraine or else face further sanctions. He previously spoke of a 50-day deadline. Russia has countered Ukrainian drones by imposing unpredictable internet blackouts on Russian cellphone networks. More International News Colombia convicted a former president, Álvaro Uribe, of bribery. Heavy rains in and around Beijing left at least 38 people dead. Flooding and landslides trapped villagers. After a five-year drought and decades of mismanagement, Iran risks running out of water within weeks. Finland's summers are short, precious and plagued by geese. They poop all over beaches. Economy Tariffs on Europe could make drugs like Ozempic more expensive. The French government opposes the E.U.'s trade deal with the United States, calling instead for tariff retaliation. A 'monster week' of economic news could help clarify how the U.S. is performing. Politics Instant Pot wanted to produce Trump-themed appliances. But it didn't have permission, and the Trump Organization's lawyers stopped it. Senate Democrats demanded all recordings and transcripts from last week's Justice Department interviews with Ghislaine Maxwell, Jeffrey Epstein's longtime partner, who is in prison for sex trafficking. (Late night hosts covered Epstein last night.) Other Big Stories Sending monthly checks to poor parents did not improve their children's well-being, new research shows. Most liver cancer is preventable, researchers found. The disease is linked to alcohol consumption. Exercise, eat well, challenge your brain and spend time with people. You've heard this advice from doctors for years. But a large new study published yesterday is a reminder that these habits really do work. People at risk for dementia — those with sedentary lifestyles and suboptimal diets — were urged to eat healthy, socialize, work out and train their minds with computer games. Cognitive scores shot up. Read more about the results here. — Pam Belluck, who covers neuroscience and brain health Zohran Mamdani won New York City's Democratic primary for mayor in part by listening to small businesses. Mainstream Democrats should follow his example, writes Lina Khan, a former chair of the Federal Trade Commission. Here's a column by Thomas Edsall on Trump and crypto. The 36 who fought back: Read about women in Guatemala who sought justice, years after they were raped in war. Claw grip: Women are showing off how much they can hold without a purse. Your pick: The most-clicked story in The Morning yesterday was about whether bread in Europe is healthier. Trending: People were searching online for Ryne Sandberg, a Hall of Fame second baseman whose Chicago Cubs career earned him a statue outside Wrigley Field. He died at 65 of prostate cancer. M.L.B.: The Cleveland Guardians pitcher Emmanuel Clase was placed on paid leave as the league investigates sports betting. W.N.B.A.: A Texas man received a two-and-a-half-year prison sentence for harassing and stalking Caitlin Clark. Astronomer — the tech company whose executives featured in the Coldplay camera debacle — got creative with its crisis management. It hired Gwyneth Paltrow, the ex-wife of the band's frontman Chris Martin, to answer questions on video as a 'temporary spokesperson.' The first question onscreen: 'OMG! What the actual f' See the video here. More on culture: An American Eagle ad featuring Sydney Sweeney and claiming she has 'great jeans' is facing accusations about eugenics, The Washington Post reports. Toss cucumber and avocado to make a delicious salad. Get more out of your appliances, including your dryer and garbage disposal, with these tricks. Become a D.J. Even reality stars are doing it as a side hustle. Here is today's Spelling Bee. Yesterday's pangrams were workman and workwoman. And here are today's Mini Crossword, Wordle, Connections, Sports Connections and Strands. Thanks for spending part of your morning with The Times. See you tomorrow. Sign up here to get this newsletter in your inbox. Reach our team at themorning@
Forbes
a day ago
- Business
- Forbes
Private Student Loan Rates: July 29, 2025 - Loan Rates Edge Up
Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations. Rates on 10-year fixed-rate private student loans moved up last week. If you're interested in picking up a private student loan, you can still get a relatively low rate. From July 21 to July 26, the average fixed interest rate on a 10-year private student loan was 6.75% for borrowers with a credit score of 720 or higher who prequalified on student loan marketplace. On a five-year variable-rate loan, the average interest rate was 9.21% among the same population, according to These rates are accurate as of the week of July 21, 2025. Related: Best Private Student Loans Last week, the average fixed rate on a 10-year loan jumped by 0.08 percentage point to 6.75%. The average stood at 6.67% the week prior. Borrowers currently in the market for a private student loan will receive a lower rate than they would have at this time last year. At this time last year, the average fixed rate on a 10-year loan was 7.62%, 0.87 percentage point higher than today's rate. A borrower who finances $20,000 in private student loans at today's average fixed rate would pay around $230 per month and approximately $7,558 in total interest over 10 years, according to Forbes Advisor's student loan calculator. Last week, rates on variable five-year student loans moved up, reaching 9.21% from 7.54% the week prior. In contrast to fixed rates, variable interest rates fluctuate over the course of a loan term. Variable rates may start lower than fixed rates, especially during periods when rates are low overall, but they can rise over time. Private lenders often offer borrowers the option to choose between fixed and variable interest rates. Fixed rates may be the safer bet for the average student, but if your income is stable and you plan to pay off your loan quickly, it could be beneficial to choose a variable loan. If you were to finance a $20,000 five-year loan at a variable interest rate of 9.21%, you'd pay approximately $417 on average per month. In total interest over the life of the loan, you'd pay around $5,033. Of course, since the interest rate is variable, it could fluctuate up or down from month to month. Private student loans may be a good option if you reach the annual borrowing limits for federal student loans or if you're otherwise ineligible for them. You should consider a federal student loan as your first option, as interest rates are generally lower and you'll enjoy more liberal repayment and forgiveness options than with a private loan. When shopping for a private student loan, you'll generally need to apply directly through a non-federal lender. This includes banks, credit unions, nonprofit organizations, state agencies, colleges and online entities. Keep in mind that undergraduates with limited credit history often need a co-signer who can meet the lender's borrowing requirements. Here's what to consider when applying for a private student loan: Make sure you qualify. Private student loans are credit-based, and lenders typically require a credit score in the high 600s. This is why having a co-signer can be particularly beneficial. Private student loans are credit-based, and lenders typically require a credit score in the high 600s. This is why having a co-signer can be particularly beneficial. Apply directly through lenders. You can apply directly on the lender's website, via mail or over the phone. You can apply directly on the lender's website, via mail or over the phone. Compare your options. Look at what each lender offers and compare the interest rate, term, future monthly payment, origination fee and late fee. Also, check to see if the lender offers a co-signer release so that the co-borrower can eventually come off of the loan. When looking for the best private student loan option, take a close look at the overall cost of the loan, including the interest rate and fees. It's also important to consider the type of help the lender offers if you can't afford your payments. Keep in mind that the best rates are only available to those with good or excellent credit. How much should you borrow? Experts generally recommend borrowing no more than you'll earn in your first year out of college. How much can you borrow? Some lenders cap the amount you can borrow each year, while others don't. When you're shopping around for a loan, talk to lenders about how the loan is disbursed and what costs it will cover. If you need to borrow for school, federal student loans are generally the best option. This is because federal loans offer various borrower protections, such as access to income-driven repayment plans and student loan forgiveness programs. Additionally, most federal loans don't require a credit check or co-signer. The rate you receive depends on whether you're getting a fixed or variable loan. Rates, in part, are based on your credit profile. Those with higher credit scores often get the lowest rates. But your rate is based on other factors as well. Income and even the degree you're working on and your career can play a part. It's generally a good idea to max out your eligibility for federal financial aid before borrowing private student loans, but private loans have some benefits. For one thing, they don't have the same annual borrowing limits as federal loans. Many lenders let you borrow up to your cost of attendance minus any other financial aid you've already received. Plus, you can usually apply throughout the year with a fast, easy online application. For instance, you can apply for a private loan if you need funds halfway through the semester. Some lenders can fund your loan in a week or two, though others take longer. Private lenders can also offer competitive interest rates, especially to borrowers with excellent credit. Some private loans don't have any fees, so you don't have to worry about origination fees, administrative fees or even late fees in some cases. You also may not have to make payments on your private student loan while you're in school or for six to nine months after you graduate, depending on the lender. Some lenders offer additional perks to borrowers, such as forbearance and deferment, the option to skip a payment or career counseling services. Some private lenders offer loans to international students. International students are not eligible for federal student loans from the U.S. Department of Education, so a private student loan can provide the funds they need for college or graduate school in the U.S.
The Guardian
a day ago
- Business
- The Guardian
‘It would destroy me': fear of student loan default haunts US borrowers
When David* logs into the online portal for his federal student loans, he sees some big numbers staring back at him: he owes more than $27,000 in his own name, plus about $63,000 in loans that are co-signed with his father but that he pays off himself. 'It's sort of an inconceivable amount to think about paying off anytime soon,' says David, a 26-year-old in Seattle who graduated as a political science major in 2021, and now works for a non-profit. 'You almost never see yourself paying it off.' The worst part for David is that, next to information about his debts, it says in large red letters: 'PAST DUE.' David says right now repayments of about $500 a month are needed for his loan debts, which 'feels crushing' after rent and utilities of about $1,500 a month in Seattle. He missed loan repayments for the month of June. About 5.8 million federal student loan borrowers – roughly 31% – were 90 days or more past due on their payments as of April 2025, according to analysis from TransUnion, as delinquency and default rates soar in the wake of pandemic-era repayment relief ending. US federal student loan debt is worth almost $1.7tn, with 42.7 million people owing some form of federal loan debt. And in May, the Trump administration resumed collecting on defaulted student loans after a five-year pause started during the pandemic. About 1.8 million borrowers are at risk of falling into default – which occurs once they are 270 days past due – making them subject to wage garnishment and other collection actions by the Department of Education, and having a ruinous impact on people's credit scores. While the $27,000 loans in David's name are currently in forbearance, it is those co-signed by his father that are not – and past due. He says when he missed a payment it caused friction in their relationship. 'My dad's credit score dropped by like 50 points,' David says. 'It's difficult to navigate that. He was angry.' Michael James, a 26-year-old in Sioux City, Iowa, studied at Iowa State University and then the University of South Dakota. But, before graduating, he was forced to stop full-time studying and take on full-time work for financial reasons. Five years on from leaving his studies unfinished, James owes almost $18,500 in federal student loan debt. Even though his loan is currently in forbearance – which means he's not paying anything towards it, but interest keeps climbing – he's 'immensely' worried about defaulting. 'A default would absolutely destroy me for the next 10 years of my life, there's no amount of hard-working that's going to remove a default from a credit file,' he says. Barbara, a 62-year-old in Auburn, Maine, has found that even paying hundreds of dollars a month for more than two decades hasn't stopped the debt hanging over her due to eye-watering interest. Barbara borrowed about $60,000 in federal student loans for a master's program in psychiatric nursing at New York University, graduating in 2001. She paid off at least $66,000 over 20 years, but due to interest, she still owes nearly $61,700, according to documents shared with the Guardian. Barbara said her husband would like to retire, and she's trying to put money towards retirement, too, but the debt is stopping her. One of her loans even has an estimated repayment year of 2054. 'I'll be 91,' she says. Federal student loans cannot typically be discharged in bankruptcy court, unlike other forms of loan, which Barbara and other borrowers want to see changed. Barbara says she's currently putting two kids through college and trying, as far as possible, to help them do it without federal student loans. 'I don't want them to get caught with that noose around their necks,' she says. Over the Fourth of July weekend, Sean Redmond's wife and children – an eight-year-old son and three-year-old twins – traveled from their home in Perkasie, Pennsylvania, to upstate New York to see family. But Redmond, 46, stayed behind, working overtime at his job in pharmaceutical manufacturing. He has federal student loan debt of $61,696, and after a period of forbearance which ends on 30 August, he'll need to pay $806 a month. 'I know I have the ability to get extra hours to get the money to pay it, it's just more of an annoyance, a hassle,' Redmond says. It means more evenings and weekends sacrificed to working overtime, less time spent with his family. 'I had hopes for Trump when he got elected and he talked about dismantling the Department of Education and stuff,' Redmond says. He thought this might have meant federal student loans being able to be canceled on the same terms as other loans in bankruptcy court. But Redmond found it 'disappointing' that the Trump administration later said what remains of the department will continue to govern student debt. Peter is a 31-year-old museum worker in Washington state. After graduating with a fine arts degree in 2016, he has nearly $22,000 to repay in federal loans. He says education in the US is 'unnecessarily expensive', and that even with the relative security of full-time work, it's a financial struggle as 'the cost of living is becoming more and more extreme'. Peter is not currently at risk of default, because he's implemented an income-driven repayment plan. But he said the idea of paying off the loans seems far-fetched. It's 'a very important thing for our society' to have people working in the arts, he said, 'and I push back on the idea that, 'Well, you should have just got a degree in something else' – that minimizes the value of the arts'. Peter, however, says he can't imagine a future in which he's free from debt: 'It's like a staple of American life, that you're in debt in some way, shape or form.' *Some names changed
