Ep. 51 Your Student Loan Payment Could Triple!!! Do This First...

Millions of borrowers just got a notice about a change to their student loan account... with no plain-English explanation of what it means for their monthly payment. This episode is that explanation.

In this episode, Jim walks through the Repayment Assistance Plan (RAP) that's replacing most income-driven repayment options, and how to figure out exactly where you land.

• What RAP is and how it differs from the legacy and SAVE plans
• How your payment is now calculated from your full adjusted gross income, with a $10 minimum
• Why the same change can raise one borrower's payment and lower another's
• The $50-per-dependent credit and how to check if it applies to you
• The default trap, and the simple steps to confirm your enrollment and protect your credit

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Net Wealth Nest is an educational platform. We do not provide financial, tax, or investment advice. All financial decisions should be made in consultation with a qualified professional who understands your unique circumstances.

#StudentLoans #RepaymentAssistancePlan #RAP #StudentLoanForgiveness #StudentLoanDebt #PersonalFinance #StudentLoanRepayment #FinancialLiteracy #DebtFreeJourney #NetWealthNest

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Transcript

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Millions of people just got a mailer that hit like a gut punch. You saw something come through the mail, and now there's a change on the student loan program and your student loan account. And quite honestly, you might have no idea what it means for your payments. I can totally understand the confusion. Most of the time, when these rules change, they change on kind of a whims notice, and nobody handed you a plain English guide on what to do or how it's changing or how your payment will change. By the end of this episode, you're gonna know exactly what the changes are, what we are defined as the wrap, and whether it affects you, and the one thing you can do this week to make sure you don't fall behind. Welcome to the Net Wealth Nest Podcast. So the system changed, it got more complicated, and that's not because of anything you did. You're just you're along for the ride, quite honestly. This isn't one of those moments where you just freak out, especially if you're not sure what this change means for you. It's the moment where you take time and take a breath and then look at and understand the changes. The other thing is look at this as a time to protect your financial future, not a time to go off the deep end. You don't need to understand every single nuance and every single rule in these student loan changes. You just need to understand the three that apply to you. So let's find yours. Okay, so let's start with what the wrap is. It's the new repayment assistant plan that is replacing most of the existing income-driven repayment plan options that are out there for borrowers. And it actually started on July 1st of 2026. The payments, they're gonna be calculated on adjusted gross income ranging from 1% to 10% of your total earnings with a minimum of a $10 payment for everyone. Now, we'll get into some of the differences in a moment here, and I'll show you the breakout. But that is different than what the save was, where it was adjusted based on discretionary income, meaning it took a bunch of expenses uh and lowered that dollar amount and that threshold, which for a lot of people, probably most people that were on that plan was beneficial and they are likely bound to end up paying more than what they were. Not everybody, but most. Now, for those that are on the legacy plan, the plan that was there before save, they might fall in either of those categories. Technically, if they didn't move the save plan, which may might have saved them money from their legacy plan, they could end up paying less on this new app plan or a little bit more. It just depends on where they were, and that's why we always say look at what your situation is. Personal finance is exactly that. It's personal, and so your situation is not necessarily the same as your neighbors or your friends or anybody else's. And that's why it's important to not freak out. Let's do the research first and figure out where you're at. The other thing is the forgiveness timeline extends to 30 years, longer than the previous 20 to 25 years under the save plan. Your first move, log in and confirm what plan you are currently on, and then whether you need to change or you are being moved to the new plan. The other number you should know or pull your AGI or your adjusted gross income from last year's tax return, so that you can estimate what your wrap payment is gonna be before it actually hits. Quick pause for a second. If anything I've shared so far has hit a nerve, if you're carrying debt you can't seem to shake it, or if you haven't started investing yet, or you're just not sure where you actually stand financially, I built something specifically for that. It's called the financial pulse jacket. It's two minutes, it's seven questions, and it'll tell you exactly which money habit is costing you the most right now and what to do about it first. It's free. It's at netwealthness.com backslash pulse. Or you can just head over to our website, netwealthness.com, and you'll see the floating bubble. And I'll drop the link in the show notes for you too. But just take it before you forget one more time. That's at netwealthness.com backslash repulse. All right, let's keep going. So let's flip over and I'll show you the differences between the plans, and then we'll show you an example of what the different payments would be under these plans. Okay, so let's look at the math here on this. And just before we go into an actual example, just give you a breakdown of kind of how the three plans differ. So if we look at this, we look at the legacy save and then the wrap. We looked at the payment. The payment in the legacy was just fixed over 10 years. Whatever the amount was plus the interest, divide that by 10 years, and then divide that by 12 for payments each month, and that's what it became, right? And you just paid that, and in 10 years you were done. Okay, so then you have the save, which took your discretionary income, which basically pulled out the poverty line. So it ended up pulling out a significant portion of cash to then charge you five to ten percent of whatever your discretionary income was in a payment. The wrap, when you look at how it judges what your payment's gonna be, it's going to look at what your adjusted gross income is. So what the IRS recognizes is your income is, and it's gonna, depending on where you fall on that, it's gonna be a sliding scale of anywhere from one to ten percent of that adjusted gross income, and it's gonna be at a minimum of ten dollars. The other two, when you looked at the minimum payment, the legacy it varied because it was just fixed over 10 years, and then the save act, if you fell under the income portion of it, it would sometimes go down to zero dollars as a minimum payment, and then dependents adjust that. And so for the legacy one, it just adjusted where the the poverty line was and had minimal adjustment for your payment. Save act it allows you to cap out at 225% of the poverty line, and then for wrap, it's every dependent is a $50 discount. And then the last thing is kind of important is the forgiveness piece of it. For the legacy, there was no forgiveness. You just figured out how to pay it off over the 10 years, and for save, depending on how much you had, what type of loan it was, all of that, there was forgiveness anywhere from 10 to 25 years. If you hadn't paid it off in the time frame where you qualify for forgiveness, they would just forgive the rest of the loan. And for the wrap, that actually still sticks around, it just gets longer, so it ends up being 30 years. Okay, so we're gonna start off with just some of the basics. So let's say we have somebody that is single, no dependents, they have $28,000 in loans. They're making $55,000 a year in income, and the interest rate on the loans is six and a half percent. Okay, so we'll show you the different payments across the board on what that's going to look like. So with the legacy plan, remember it's just 10 years, you divide it out. So at that loan with the interest, your payments end up being about $318 a month, and that will be paid off in 10 years, and you're good to go. It's the fastest way to pay it off, it's also uh quite honestly the most expensive. And so then you had the save plan which came, and that basically took off the poverty rate off of your income, which so for 2026 it's 16,000 roughly, and so that lowers it, and then there was a sliding scale. But for this person, based on the save rates with $28,000 in loan, $55,000, no dependence, any of that, the interest rate where it is, the monthly payment was about $83 a month, so significantly lower than the legacy plan. And then under the ramp plan, because it is gonna go off of your AGI, we're just using kind of the standard deduction here and all of those things, and then the sliding scale that the wrap has, your payment is going to be $229 a month. So you can see for those individuals that had the original legacy plan and moved to the save, there's a huge savings each month, and it potentially they might have not paid it off, especially if you had the penance or any of that, they might not paid it off in the forgiveness time, and they could have gotten some of that potentially wiped away. And the save, obviously, the lowest of the plans out there in this specific scenario, again, everybody's scenario is different, but just to kind of show you what it looks like. That is a huge discount for a lot of student loan borrowers. And now, as we switch over to the wrap plan, and those individuals where the save plan is end, and they're now gonna move to the wrap plan, the same person with no dependence or any of that is gonna pay this $229. So definitely almost a three-fold increase, not as bad as the legacy plan, but for those that never experienced the legacy plan, it is a huge jump to go from $83 to $229 a month. Now, the one caveat here is under this new plan, if you have any dependents, it's a $50 credit per dependent. So if you have two kids in this situation now, you could actually only pay $129 because you get $50 off for each child. So just something to keep in mind, but it's definitely going to be different for individuals that are moving from one plan to another. Okay, so now you understand a little bit about how all this is working. One thing to keep in mind is the stakes are real. If your plan is going up, the key is to figure out how not to default. About 2.6 million borrowers were pushed into default in the first quarter of 2026 as some of the pandemic era protections had ended and they needed to start paying. That default, it's not all just stress. That's real credit scores taking a dip. And the problem with that is then it affects every other financial and loan decision you have to make in the future. Things like a house, a car, any other regular loan, an apartment. The wealthy people they reframe this and they financially savvy treat a loan service change like any other vendor. They read through all the documentation, they look at what their situation is and how it applies, they confirm their enrollment in what they need to be in in writing or email, and they never assume that silence means everything is okay. So, with that, as you go through these changes, set a calendar reminder to check your loan status monthly for at least three or four months as the transition goes all the way through and make sure that your payments are being made and everything looks tip top so you don't get a hit without understanding it. Make sure you run the math before you panic and before you just ignore it. In fact, don't ignore it. Do all these steps. Now, for those individuals where the wrap potentially lowers your monthly payment, which could happen, especially if you have dependence. This is the moment where those freed up dollars are an actual decision, not a windfall to absorb into just standard spending. Even $50 reduced payment towards that and put towards an emergency fund as a buffer or into investment funds, that is a big move that compounds month in and month out, year in and year out. Now, if your payment does increase, then redoing your budget, it's honestly just the key next step that you want to do. You want to make sure that you can pay this bill and keep the other things that you might be already working towards, things like investments, or if you're building your emergency fund, long-term savings plans around a house or a car, whatever those things are, you want to keep those things rowing. But that might mean you have to carve out some space on those want types of things. Things like subscriptions or eating out less. Or you might even have to think about bigger decisions like housing and transportation and what you might need to do there to limit some of those expenses. Those things, if your bill goes up, is the exact moment accountability matters. On paper, it's easy, but sticking and redirecting for six, 12 months, 18 months is where most people slip up. So have a plan, think about your plan, and then execute the plan. If you're struggling with that plan, this is where Net Wealth Nest can step in and help you out. I would encourage you to take a moment, go to our website and look at our coaching options as keeping you on the plan and keeping you going and helping you build your net wealth is what we do in our coaching program. Okay, so going back to the recap, first and foremost, confirm your current plan and your adjusted gross income, your AGI. The second step, watch out for that default trap and confirm your enrollment either through writing or an email, and then either redirect any freed up cash or rework your budget if you're ending up to pay more. Again, our goal here is to teach you the rules of the game. And this is one of the times where the actual rules are changing in the game itself. So understanding this and acknowledging that it can be confusing, but that you're willing to do a little bit of legwork and understand the changes and how they apply to you is how people get wealthy and how they keep themselves out of financial pitfalls to build their financial future. Thanks for joining today. As always, if this was helpful, please subscribe, share with somebody, like our channel, whether it's on YouTube or whether you're listening on audio on things like Apple or Spotify, and leave us a review and/or comments. We'd love to hear from you. We respond to everything on there, and it also helps us curate episodes as we continue to put them out. For NetWealth Nest Podcast, my name's Jim. Bye everybody. NetWealth Nest LLC and Podcast is an educational platform committed to providing resources and information to empower individuals on their financial journey. Please note we do not provide financial tax or investment advice. All financial decisions should be made in consultation with a qualified professional who understands your unique circumstances. Seeking personalized advice is a smart and necessary step before making any major financial commitments. Thanks so much for joining us today. If you found value in this episode, please like and subscribe to our YouTube channel, NetWealth Nest, and leave us a review on your favorite podcast platform. We read every comment and they help us improve and guide what topics we dive into next. And hey, if something you heard today resonated with you, don't keep it to yourself. Share it with a friend, a family member, a coworker, your barber, your barista, even a stranger in line. You never know who might need this message. Remember, building net wealth is a journey, but you don't have to do it alone. Stick with us, and together, let's grow your net wealth nest.