Do You Have a Federal Student Loan or Plan to Apply for One? Learn About the New Changes
· Telemundo McAllen (KTLM)
Changes to federal student loans in the United States, expected to affect millions of borrowers, went into effect on July 1. These changes, part of President Donald Trump's 'big, beautiful bill,' mark the end of certain repayment plans and new limits on graduate student loans. With the termination of President Joe Biden's SAVE plan, these changes are likely to result in increased payment amounts for millions of borrowers. 'What is concerning is the affordability of monthly payments. I believe many will experience a significant increase in their payments, forcing them to stretch their budgets or simply not be able to make them,' said Michele Zampini, associate vice president of The Institute for College Access & Success, a nonprofit advocacy group working to make higher education more affordable. Approximately 9 million Americans have been delinquent on their federal student loans since June, according to the Department of Education. Hundreds of thousands more are overdue on payments and at risk of defaulting this year. Earlier this month, Education Department officials indicated that borrowers enrolled in automatic payment will be eligible for a 1% reduction in the interest rate starting July 1. However, those already using this system receive a 0.25% discount, meaning the new reduction only represents a 0.75% decrease. For all borrowers, the rate reduction will be temporary and will last until June 2028. If you received a student loan, here are some key points to know: The SAVE plan is ending. The SAVE plan (an acronym for Saving on a Valuable Education) was a repayment option with some of the most lenient terms ever offered by the government. Shortly after its launch, it was challenged in court, leaving millions of student loan borrowers in limbo. Earlier this year, the Eighth Circuit Court of Appeals struck down the SAVE plan, which has now ended. There are about 7.5 million borrowers in the SAVE plan, and servicers have already begun sending them official notices, said Lindsay Vail Clark, a senior borrower advocate at Savi, a student debt assistance platform. Borrowers enrolled in the SAVE plan will be notified that they have 90 days to enroll in another income-driven repayment plan. Vail Clark recommends that borrowers start checking their options as soon as possible, as processing delays are likely. If they do not enroll in another plan before the 90-day deadline, the Department of Education will automatically enroll them in one of the standard options, she added. However, there is no specific deadline for all borrowers enrolled in the SAVE plan to find another plan, as notices will be sent continuously, Zampini noted. Changes to graduate loan limits. Trump's 'big, beautiful bill' changed the amounts that graduate students can borrow for various programs, but his administration recently updated that plan, according to a judge's order. Under the new regulation, programs classified as professional degrees face federal student loan limits of $200,000, while other graduate programs have a limit of $100,000. Previously, graduate students could obtain federal loans that covered the full cost of their degree. For now, the updated government plan restores eligibility for graduate students in nursing, physical therapy, and other fields to obtain higher amounts of federal student loans. The initial rule had kept them at lower limits. Changes to Parent PLUS loans. Parent PLUS loans have had fewer repayment options, but these are now being further reduced, Zampini noted. The new limits on Parent PLUS loans restrict them to $20,000 per student and $65,000 per family. Additionally, Parent PLUS borrowers who apply for new loans starting July 1 will not have access to any income-driven repayment plan, only to a new standard graduated repayment plan. 'From now on, they will only have the standard repayment option, and there will be no exception or safety net to adjust it based on income, if they have low income or experience income fluctuations or any other type of hardship,' Zampini warned. Parent PLUS borrowers who consolidated their loans into a direct consolidation loan before July 1 can pay them through the income-contingent repayment plan until June 30, 2028. After that date, borrowers will be transitioned to the income-driven repayment plan. Enrollment in income-driven repayment plans. Current borrowers can apply for the following income-driven repayment plans: income-based repayment plan, pay-as-you-earn plan, and income-contingent repayment plan. The payment amount under income-driven repayment plans is a percentage of the borrower's discretionary income, and the percentage varies by plan. However, students who take out loans starting in July will only be able to enroll in one income-driven repayment plan: the payment assistance plan. Borrowers can also use the graduated standard plan, a repayment plan with a fixed amount that ensures loans are paid off within 10 to 25 years. You can find out which repayment plan might suit you best by logging into the Department of Education's loan simulator. If you want public service loan forgiveness. There are no changes to the Public Service Loan Forgiveness Program, despite a plan from the Trump administration announced last year to change eligibility requirements for participating nonprofit organizations. The policy sought to disqualify nonprofit workers if their work was deemed to have a 'substantial illegal purpose.' The Trump administration asserted that it was necessary to prevent taxpayer money from going to lawbreakers, while critics argue that it turns the program into a tool for political retaliation. Two federal judges recently overturned the new rules, one day before they were set to take effect. If your student loans are in default. Federal student loan collections remain suspended. The Trump administration previously announced this year that it is postponing plans to garnish wages of student loan borrowers who default on their payments. Federal student loan debtors can have their wages garnished and their federal tax refunds withheld if they default on their loans. Borrowers are considered in default when they are at least 270 days late on payments. If your student loans are in default, you can contact your loan holder to request a loan rehabilitation program. Through this program, borrowers enroll in a reduced payment plan, and after making five successful payments, wage garnishment ends. Borrowers can find more information about loan rehabilitation here. If you want to consolidate your loan. The online application for loan consolidation is available at studentaid.gov/loan-consolidation. If you have multiple federal student loans, you can combine them into a single loan with a fixed interest rate and one monthly payment. The consolidation process typically takes about 60 days to complete. You can only consolidate your loans once. This story was translated from English by an AP editor with the help of a generative artificial intelligence tool. A Telemundo Digital editor reviewed the translation.
AI summary · Source: Telemundo McAllen (KTLM) →
