Student Loan Borrowers Gain Two New Repayment Options Starting July 1 Millions of federal student loan borrowers will have access to two new repayment plans beginning on July 1, as part of changes introduced by the One Big Beautiful Bill Act. These updates replace some existing repayment options, offering borrowers more flexibility but also requiring careful consideration to choose the most suitable plan. The Repayment Assistance Plan (RAP), a new income-driven repayment (IDR) option, sets monthly payments as a percentage of a borrower’s income, with rates ranging from 1% to 10% of earnings. Unlike previous IDR plans, RAP does not shield a portion of income from calculations and instead uses adjusted gross income (AGI), which is total earnings before taxes minus certain deductions. Borrowers will also face a minimum monthly payment of $10, a change from some current IDR plans that allow certain low-income borrowers to pay $0. RAP also offers a $50 monthly discount for each qualifying dependent and may provide subsidies to those who are making payments but not reducing principal. Additionally, payments under RAP count toward the Public Service Loan Forgiveness (PSLF) program’s 10-year timeline, which benefits not-for-profit and government employees. The Tiered Standard Plan, the second new option, replaces the traditional Standard Plan by offering fixed payments spread over four different repayment periods, depending on the borrower’s total debt. Borrowers with balances up to $24,999 will still repay over 10 years, while those with $25,000 to $49,999 will have a 15-year term, $50,000 to $99,999 will take 20 years, and those with over $100,000 will repay over 25 years. This structure allows for tailored repayment timelines based on debt size.#repayment_assistance_plan #one_big_beautiful_bill_act #tiered_standard_plan #income_based_repayment #public_service_loan_forgiveness
Education Department Tells 7.5 Million Student Loan Borrowers in "Illegal" SAVE Plan to Prepare for Repayment More than 7 million student loan borrowers enrolled in the SAVE repayment plan will receive notices starting Friday, instructing them to transition to a new repayment plan, the Education Department announced. The SAVE plan, which was invalidated by a federal court earlier this month, has been in forbearance since July 2024 as legal challenges unfolded. Starting July 1, loan servicers will begin sending borrowers notices giving them 90 days to select an alternative repayment plan. The available options will likely result in higher monthly payments for most borrowers. The Education Department described the SAVE plan as "illegal," stating it was based on "the false promise of student loan forgiveness and artificially low monthly payments." Under Secretary of Education Nicholas Kent emphasized in a statement that the Biden administration’s approach to student debt relief was being "put to rest," asserting that borrowers must "pay back loans they took out." The department’s guidance, which will be sent to all borrowers enrolled in the defunct plan, aims to end what Kent called the "illegal student loan bailout agenda." Borrowers enrolled in the SAVE plan have faced uncertainty as legal battles progressed. While the plan was in effect, they were not required to make payments, but interest on their loans began accruing after a court blocked its implementation last summer. This has led to increased debt balances for some students. Alexis Arredondo, a first-generation college graduate with $40,000 in student debt, described the situation as a "very difficult" choice between higher monthly payments or a longer repayment period that would result in more interest.#save_plan #nicholas_kent #education_department #repayment_assistance_plan #student_borrower_protection_center
