Student Loan Changes You Cannot Ignore

We break down the major student loan repayment changes after the SAVE plan ends and explain what borrowers need to do within the 90-day decision window to avoid default. We share practical ways to choose a plan, reduce stress, and protect your budget, whether you are already repaying or planning for college.

• SAVE plan basics and what changes after June 30 
• 90-day timeline to choose a new repayment plan 
• Repayment Assistance Plan payments tied to income 
• Income Based Repayment and long-term forgiveness rules 
• Standard repayment and tiered standard options 
• Why doing nothing leads to default risk 
• What default can trigger for taxes wages and credit 
• Public Service Loan Forgiveness eligibility and payment requirements 
• Deferment versus forbearance and interest impacts 
• How to find your servicer on studentaid.gov 
• Advice for future students to borrow only what you need 
• Grad PLUS changes and updated borrowing limits 
• Parent PLUS borrowing caps and planning for cost of attendance 
• Steps after graduation including exit counseling and record keeping 
• Options for borrowers squeezed by rent insurance and basic bills 

Stay on track with your financial journey, subscribe to the Money Matters Podcast, and visit neighborsfcu.org slash financial wellness for more tools to help you build a strong financial future.

Transcript

Welcome And Why This Matters

SPEAKER_00 0:02

Welcome to Money Matters, the podcast that focuses on how to use the money you have, make the money you need, and save the money you want. Now, here is your host, Miss Kim Chapman.

SPEAKER_02 0:14

Welcome to another edition of Money Matters. I'm your host, Kim Chapman. If you have student loans, or if you know somebody that has student loans, if you have kids that will be going to college soon, you really want to stay tuned to this edition because there are some changes that are coming to student loans that you really want to go and you really want to know about. Joining me again is Ms. Deborah Paul, our resident expert on student loans. Hi, Deborah. How are you? Good morning, Kim. How are you doing? I am doing well, but I tell you what, our listeners, I don't know so much about them after they hear some of the changes and the information that you're going to share with us about the upcoming changes.

SPEAKER_01 0:53

There are several. There are several. Buckle up and right on.

SPEAKER_02 0:58

All right. So where should we start?

SAVE Plan Ends And The Clock Starts

SPEAKER_02 1:00

Should we start with the Save Act? That's the one that's coming to an end very soon.

SPEAKER_01 1:06

Right. Save has been discontinued. So it was discontinued on June 30th. So July 1st, new plans come into existence. But students have 90, student loan borrowers have 90 days to make a decision as to which plan they'll transition to because they can no longer stay on the save plan.

SPEAKER_02 1:26

All right. So for somebody that's listening, they may be like, I don't even know if I have a save plan or what the save plan is. Can you give us a little information on what that save plan was?

SPEAKER_01 1:35

The save plan was really a safety net for student loan borrowers. It was based on your income, household size, and so forth. So some students actually pay zero dollars because they qualified for the minimum payment during that transition period. But now the new plans that'll take uh place uh once kind of similar, but students will have to start making uh payments on that. The Biden administration uh was the um authors of the save plan. But uh when the one big beautiful bill passed, it eliminated the save plan and then put students into different categories for uh other student loan program repayments.

SPEAKER_02 2:12

All right. So for somebody that was taking advantage of the SAVE plan, like you said, it ended June 30th, which was just not that long ago. Right. Um, what do they need to know? What should they expect?

SPEAKER_01 2:23

Uh they will hear from the Department of Education about their remaining student loan balance, whoever their servicer is, will contact them to uh help them determine what plan is the best for them. So there are a lot of options if we want to start talking about those uh that students can use now that the uh SAVE plan is uh no longer available um uh for them. Okay. All right. Okay, so the first one is the repayment assistance uh plan wrap.

unknown 2:50

Okay.

SPEAKER_01 2:51

So that's a new income-driven plan uh with monthly payments set at 1 to 10% of the income depending on your earnings. So again, you know, with the 1%, that would give students a lower payment, borrowers a lower payment if they qualify if they want to go with that route.

SPEAKER_02 3:07

Okay, but they have to qualify.

SPEAKER_01 3:08

They have to qualify. So of course they'd have to turn in tax returns, uh household size, and that kind of information to determine if they uh will be at the 1% or 10%, depending on their earnings. So that would help some students, some borrowers in that uh situation. Um, another one is the income-based repayment plan, IBR. Uh, that's an existing plan that survives under the new law. So it's payments are based on your income and family size, and you can get your loans forgiven after paying 20 or 25 years. Almost sounds like a mortgage.

SPEAKER_02 3:41

Or 25 years. You would think that if you've paid on it for 20 or 25 years, you'd be done anyway, but that's the minimum to qualify. Do you know how would they know if they would qualify for that?

SPEAKER_01 3:52

Again, working with their servicer of their student loans to see and turning in the documentation to determine. So again, we mentioned earlier you have 90 days to figure out which plan. But some of them, some borrowers who may have done a lot of research in advance may have already decided I want to go with this plan because it works best for my situation, my household, my income, and that sort of thing.

SPEAKER_02 4:13

Now, if somebody's just hearing

New Repayment Options And Deadlines

SPEAKER_02 4:15

this and they're like, wait, 90 days, maybe it's it's a past the 90 days. What happens if they miss that deadline?

SPEAKER_01 4:21

Well, if they don't pick uh a plan in 90 days, then that loan would go into being on the road to default. And you don't want that to happen because if your loan defaults, um a lot of things coming for you. They're coming for you, right? They're coming for your tax returns, it could even end up in garnishment of your current wages. So they don't want to go the default route. So you have 90 days, which is you know, three months to make a decision of where you want to go. And you know, it really is difficult for some borrowers because when uh COVID happened in 2020, they paused all of that. Yes, no payments. No payments, and students were jumping, uh borrowers were yelling and gone on vacation and using the extra money maybe to pay off other debt. And so that lasted for a while. And but now it's you know back.

SPEAKER_02 5:09

We can be an adjustment to try and figure out how am I gonna fit this student loan payment into my budget now that this pause is over.

SPEAKER_01 5:16

Because it's real, and you know, that's something you can't um get away from. Yeah, nothing in life certain but death, taxes, and student loans. And student loans. Unless you die and you don't want that alternative, right? So if you die, they're forgiven, but you won't be here to realize that forgiveness. You won't get to enjoy it, right? Exactly. Another one is the standard repayment plan, and that's a fixed monthly plan for 10 years, regardless of income. And that's the original loan plan. Uh, you know, back in the um 90s and 2000s and early 2000s when students borrowed, you had a standard 10-year plan, and it was based on how much you borrowed, and then they gave you 10 years to pay that off. And, you know, just for example, my daughter went to college in 2008, and she had a standard 10-year plan. Okay. Uh, and then it was paused during uh COVID. So she's back in repayment, and then now she's down to like less than $800 to repay. So she had to get back into a plan after that time period. And you know, they work with you to make sure because nobody wants to see uh a borrower going to default because there are just so many bad implications against your credit score and that sort of thing. So they work with you for that. But standard is the 10-year, but there's so many other options. You know, you have consolidation. A lot of times uh one borrower might marry another borrower and they combine their debt so they can consolidate those loans and that kind of thing. So it just depends on your individual situation.

SPEAKER_02 6:46

Okay, I didn't know that. That's something definitely new. I didn't know that married couples could do that. What is the biggest mistake that a borrower can do right now?

SPEAKER_01 6:54

Nothing. Nothing. Doing nothing doing nothing is a mistake because you know, the federal government has every tool at its disposal to find you, you know, employment records. If you're working, they'll find out where you're working. Um, you know, they don't take um any solace in saying, oh, I'm gonna put you in default. So doing nothing is the worst thing that you can do. So just be proactive, you know, ask questions, call your servicer now with all of the um AI tools that we have. You can go to Chad GPT and Google is your friend. I tell that to people that work all the time. Google is your friend. See what they say, and you know, find

How Default Hits Your Life

SPEAKER_01 7:35

an option, even going back to your college where you borrowed the money from. Uh, one thing that's big that student uh borrowers don't remember is the public service forgiveness program. Okay. And that's real, you have to pay on your loan. So if you've done a standard 10-year repayment, it probably would not help. But if you did something like consolidation or an extended repayment, once you work 10, once you pay on your loan for 10 years, actually pay, not in deferment, not in forbearance, but you pay for 10 years. 10 consistent years. Well, 10 years. Oh, 10 years. You could, yeah, for instance, you know, COVID pause some people. So that wasn't a period where you just missed, it was an official pause. Okay. So if you paid for 10 years, then you can get the rest of your loan balance forgiven. So if you're working as a federal, state, or city, you know, uh employee, if you're working for uh a school district, if you're working for a nonprofit organization, if you're working um in the um first responder category, police officer, fireman, state trooper, all of those jobs qualify for student loan forgiveness, but you have to pay for 10 years. So say you borrowed and now you're a professor at a university. So you borrowed for undergraduate study, your master's, and then your PhD. So that could be a a lot of money. A lot of money. So you might have you may have chosen, because of all of that, consolidating all of those loans, say a 30-year repayment program. So once you pay for 10 years, the rest of it is, you know, and I've talked to and spoken with several students who just say, Oh, I got a raise. And it's like, how'd you get a raise? Oh, I paid off my student loans through public service forgiveness. So people who work at, you know, colleges and universities, schools, preschools, um, you know, all of those nonprofit organizations qualify for forgiveness. Notice you said nonprofit and not for-profit, right? Exactly, exactly. It has to be a nonprofit organization, and there are many out there, and people are looking at that as a way, uh, you know, but if you just did a 10-year repayment plan, you're gonna get you're

Public Service Loan Forgiveness Explained

SPEAKER_01 9:45

gonna pay 10 years. So I know during the Biden administration, there was a proposal out there to forgive $10,000 off of student loans. And that would have been a great help because many people, like my daughter, would have, you know, she only had $2,000 at that time, but she's been, oh, I'm done. So that didn't happen, and people put a lot of stock into that. But here we are now. Another plan that's would save going out is the tiered uh standard plan. It's a new fixed plan with terms of 10, 15, 20, or 25 years. And depends on your loan balance. Uh, larger balances qualify for longer terms and lower monthly payments. So you can go up to that tiered standard um plan. So it just depends on you know what you borrowed. Are you going back to school for more education and training, or do you want to just get rid of the balance as quickly as you can? All right.

SPEAKER_02 10:42

And student loans are still gonna be in deferment if you're a full-time student in school.

SPEAKER_01 10:46

Correct. As long as you're enrolled at least full-time, uh pursuing another degree or training, workforce, that sort of thing, uh, you can uh still apply for deferment. And then forbearance is still available if you've there's you know, you had a layoff or a big um cut in pay, or maybe you're staying home now to care for uh a child or a spouse or a relative and you're not working. So you can still qualify for forbearance. But during forbearance, you're just uh they're gonna still add interest onto your loan. You're just forgiven for not making payments during that period of forbearance. But deferments, you know, you're you're in school, uh, borrowers who go into the military can qualify for deferments and you know that sort of thing.

SPEAKER_02 11:32

So for the borrowers that don't even know who their student loan provider is, where can they find that information?

SPEAKER_01 11:38

They can go to the uh studentaid.gov website and look for that information. Uh they can sign on to their account and it would their um student loan history once they sign in should be available to them going that route. But first start looking

Deferment Forbearance And Finding Servicers

SPEAKER_01 11:55

at studentaid.gov. Okay.

SPEAKER_02 11:57

And this doesn't just apply, of course, to students that have already graduated. How does this impact students that are getting ready to go to college? What do they need to know?

SPEAKER_01 12:07

Borrow uh sparingly. Don't borrow the max if you don't need the max. Look at other ways to finance your education. And that even goes back to say you're from Baton Rouge and you're going to one of the local college or universities here. You may not want to stay at home, but when you look at what it costs for a meal plan, what it costs for the dormitory, you could save a lot of money by staying at home. Particularly if you're going to a community college, that might be a route to stay home. And then you could save some money and then move on to campus or an apartment uh at a you know four-year university if you're gonna go to junior college route, community college route initially. So just borrow only what you need. You know, back in the day when I was in school in the 80s, you know, people borrowed the Macs, and

Borrow Less Before College Starts

SPEAKER_01 12:55

when they got their refund checks, you know, Bar Marche Mall was still open.

SPEAKER_02 12:58

Bar Marche Mall, yeah.

SPEAKER_01 13:01

Those, you know, oh, we they gone, you know, you saw new jewelry, gold chains were popular at that time, watches and you know, polo shirts and all.

SPEAKER_02 13:09

Today it's just iPhones, same thing.

SPEAKER_01 13:11

Today, same right, just a different gadget. Right. So, you know, people use their refund checks, and then you know, it's like it all has to be paid back. And so you just need to look at it from that standpoint. Borrow only for what you need and only for what you would consider school-related expenses. Yes, you have to have clothes to go to school. Yes, you need transportation, but do you need the used, um, can you survive on a used um Honda Accord as opposed to a brand new Lexus?

unknown 13:38

Right.

SPEAKER_01 13:39

You know, so yeah. Depends on who you ask, huh? Depends on exactly who you ask. Or can you just invest in a really good bicycle if you live close to campus and you can two for one, you get the exercise and a cheaper mode of transportation. Either gonna sacrifice now or you're gonna sacrifice later, right? Just pick when you want to do it.

SPEAKER_02 13:59

So we're talking about these loans and the ability to get all of this money and students staying in school because that's one

Grad PLUS And Parent PLUS Limits

SPEAKER_02 14:05

way to not have to pay. But there's an elimination of the grad plus loan. What does that mean for graduate students?

SPEAKER_01 14:11

Well, the grad plus loan, there are a lot of changes that are going on with that one. And so grad students need to be very careful. Um, the amounts are different based on what you're pursuing as a graduate degree because the current administration did uh remove uh professional degrees from some of those um programs. So now they're going back to adding the medical, because at one point they had removed anything in nurse practitioner, that whole area. Wow. And we know a lot of students are going into that. So um you have to really look at which program you're going into and see how much you can borrow because the amounts do vary based on those different programs. Um, parents can borrow for their students, but it's really um the new limits apply starting July 1st of this year. So it depends on whether your child qualifies for the limited exception. So the child qualifies, you can continue borrowing up to the cost of attendance minus any other aid received. So this is the plus loan. So if your child qualifies, you can continue borrowing. If your child doesn't qualify, the maximum amount that you can borrow is $20,000 in academic year and up to $65,000 over the course of your child's undergraduate study. So regardless, you're gonna need to see if you how you figure in that. Before plus, you could borrow up to the cost. So you had some parents borrowing a whole lot of money and then not being able to pay it back, which caused defaults. They passed a credit check and so forth, but that just varied. So um a plus loan, you can use it for tuition, fees, housing, uh, food for on-campus students. Uh you can also satisfy uh education-related uh charges that parents can use for that. So it just depends on which program you're going to. So if you're a graduate or professional student, um, starting July 1st, direct plus loans are no longer available to graduate and professional students unless they qualify for the limited exception. To qualify, they have to be enrolled in a program as as of June 30th, 2026. Uh, borrowed a direct loan prior to July 1st and remain enroll in the same program. So unsubsidized loans, those are the ones where the interests you're responsible for, they remain available to eligible graduate and professional students with updated loan amount limits. So graduate students who've been in professional school students can borrow up to $20,500 a year with a $100,000 aggregate limit. Graduate students who previously have been professional students can borrow up to $20,000 per year with a $200,000 aggregate limit less any amount borrowed as a professional student. So professional students can borrow up to $50,000 a year with a $200,000 aggregate limit and any amount as a graduate student. So those depends on some programs were removed from professional students. So if you're a doctor, that's a professional student. But uh maybe uh some other programs are not considered professional, and that puts you in the lower limit. And I think it was based on the fact that some professional programs over the lifetime earnings are higher than some that are not professional. So maybe that's why the difference was put into place uh that way.

SPEAKER_02 17:31

This sounds like it can be really, really overwhelming for a student because we're really talking about young people that have maybe just graduated from college. They're just getting into the world on their own. Where who where can they go to just really talk to somebody or get information to figure out what's gonna be the best program

Exit Counseling And Planning Your Budget

SPEAKER_02 17:50

for them?

SPEAKER_01 17:51

Well, when students graduate or exit the school, they're required to do exit counseling. So that's the first step. You know, I know you're excited about commencement. You know, where's the party gonna be? How much money am I gonna get? Let's just have a good time. But go to exit counseling, ask questions, ask for referrals for additional information because you do have a six-month grace period. Once the um once you graduate, you have six months to figure it out. So during that time, you may start your job immediately. So start saving money because repayment is coming. Uh, but just look at that, look at your loan documents. Ask the financial aid counselor at the school you attended for your documents. Make sure you have an accurate history of how much you borrowed. You know, maybe you borrowed and then uh you got a scholarship after that. So the loan amount was returned because you had a scholarship. So make sure that initially you may have borrowed $5,000, but it ended up being $3,500. So make sure all of that is accurate. So when you go into repayment, you know how much money you've borrowed, and then you can decide, well, I've borrowed, you know, $30,000 for my undergraduate degree. And I think I with the job that I have, I can pay it off in 10 years. So you may want to just choose a standard repayment period. But maybe you're looking at going to do um working at a nonprofit, like um some of the programs like City Year, because you just have a desire to serve and help. And those jobs pay minimum, but you can also uh defer your loans while you're working in that area. And then while you're working with them, you can also save money that will go back towards your student loan balances. So look at all of that. You know, what are your goals? What do you plan to do in five, 10, 15 years? If you're starting out and you say, you know, in 10 years, I want to buy my first property, whether it's a condo or a house, apartment complex, whatever. So look at what your goals are and what you plan to do, and then you base your repayment based on that. If you want to hurry up and get rid of your student loan debt so that you can have more available income for a house, then maybe you want to go that route. Or if you want to, if you're gonna be in a lower-paying job, but in a couple of years you decide to go back to school to earn maybe a master's or professional degree, then you may want to, you know, borrow sparingly or maybe work and save money so you don't borrow as much money during your graduate programs. So it just differs to every student, but I would say start off with the exit counseling and then go from there and make sure you have an accurate record of uh where you borrowed and who your services

Help For Low Income Borrowers

SPEAKER_01 20:25

will be as you go uh into repayment.

SPEAKER_02 20:28

Any information or advice that you would say for the working poor. And what I mean by that is on paper, the government says you can afford to pay your student loan. But when you look at your rent, your car payment, your car insurance, you've got to be able to eat and keep that cell phone. You just don't have that money left at the end of the day, and I can't make that payment would exist for those individuals.

SPEAKER_01 20:49

Well, they may want to they may want to look at the repayment assistance program. So it requires a minimum payment of $10. It scales upwards to 10% of your adjusted gross income for the prior tax year divided by 12. So that may be something, for example, 10% of $120,000 AGI means $1,000 per month. But you when you look at that, so that how that works. So if you have a lower income, you can deduct from that. So you can deduct um for dependence claimed on your tax return to lower your payment. So that's one area to look at the repayment assistance program for students, uh borrowers that are going into um don't feel like they can afford to make the payments at that point.

SPEAKER_02 21:32

So yeah, I just kind of fear that in the coming months, as this unfolds, that we're gonna see an influx of individuals that just will not have the resources to be able to pay the student loan. So, again, what is your best advice for our listeners now that have student loans that may be a little bit apprehensive about what program to sign up for? Can they afford anything so that they're not staying up at night pulling hair out of their hair wondering how they're gonna get out of this situation?

SPEAKER_01 22:02

Borrow only what you need, keep good records, and then when you go into repayment, choose what you think works best for you. You can always change midstream. You don't have to stick with one plan. If you find out that the repayment assistance program is not working for you, look at income-driven uh payment where it's based on your income initially and it changes. So there are other plans that you can go to if you're um if you don't feel like the one that you're currently in is working. So that's the thing I would advise students to do is you know keep good records and don't do not don't do anything if you fall behind. Call your uh servicer, make arrangements for temporary forbearance till you can get your feet solid again. But just doing nothing just puts you into default because after six months of uh not paying on your loan, you're uh can be considered in default, which has uh you know far more serious uh consequences than uh not being able to pay the full amount. Maybe you can go down to a plan where you can do a minimum of $50 a month just to keep it going till you can get back to where you need

Key Takeaways And Next Steps

SPEAKER_01 23:10

to be.

SPEAKER_02 23:10

Okay, so there you have it. New plans exist. Go to student aid, find out who your service are, find out which program or what plan works best for you, and go ahead and get those student loans repaid. Dore, thank you again for coming and sharing that information. I know it's a lot constantly changing, and I imagine as changes continue, we'll be able to do that, we'll be able to have you come back and we'll do another session.

SPEAKER_01 23:36

Great. And I think in the next couple of months, once it gets settles in, there'll be more information and assistance for borers to be able to uh look out for. All right, thanks again.

SPEAKER_00 23:47

Stay on track with your financial journey, subscribe to the Money Matters Podcast, and visit neighborsfcu.org slash financial wellness for more tools to help you build a strong financial future.