Beginning July 1, significant changes are coming for millions of student loan borrowers due to newly implemented repayment options. The Trump administration is making sweeping modifications to the system in response to legislative changes introduced last summer.
“There’s a lot of anxiety out there,” said Betsy Mayotte, president of The Institute of Student Loan Advisors.
Borrowers currently enrolled in the Biden-era repayment plan called SAVE, short for Saving for a Valuable Education, will need to transition to new plans. Approximately seven million people benefiting from the SAVE plan must select another option, as their payments have been paused for nearly two years due to legal challenges. Notices will soon be sent by federal loan servicers to remind SAVE enrollees about the deadlines for choosing a new plan.
These changes come amid rising costs and inflation. Borrowers face higher monthly payments as utility bills, gas prices, and health care expenses are also on the rise.
Besides SAVE enrollees, other borrowers will experience effects from these adjustments. Two new repayment programs will be introduced and several existing ones will be phased out by 2028. Understanding and choosing the appropriate repayment plan is crucial for borrowers to manage their finances effectively.
Monthly Payments Under Each Repayment Plan
For example, a borrower with $60,000 in student debt, a 6.8 percent interest rate, and a household size of two:
- $30,001 adjusted gross income: $690 under Standard, $25 under RAP, and $148 under ICR.
- $50,001 adjusted gross income: $690 under Standard, $158 under RAP, and $481 under ICR.
- $70,001 adjusted gross income: $690 under Standard, $358 under RAP, and $611 under ICR.
- $90,001 adjusted gross income: $690 under Standard, $625 under RAP, and $611 under ICR.
- $110,001 adjusted gross income: $690 under Standard, $867 under RAP, and $611 under ICR.
The Pay as You Earn (PAYE) and Income-Contingent Repayment (ICR) plans will no longer be available after July 2028.
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