It’s about to change.
“For all practical purposes, I would say that safeguard is just a kind of dead at this stage, even if it is technically on support for life,” Preston Cooper told American Enterprise Institute (AEI), conservation.
This month, the US education department announced that on August 1, borrowers except see, once again, their balances develop – with interest. Because the safeguard plan is still prohibited, borrowers will not yet be required to make payments. However, Cooper said that many borrowers, rather than watching for their loan ball, will likely want to move on to a different plan.
Roxanne Garza, director of the higher education policy at the Liberal EDTRUST, fears that the last minute announcement on the execution of interests leads to problems for the Department of Education, which has seen about half of its staff reduced by the Trump administration.
“I think what will probably happen now is that you will see a rush of people trying to act which, once again, will probably create an even larger backlog,” said Garza.
Under the Big Beautiful Bill Law, the borrowers in safeguard will have to modify plans by July 1, 2028, when the backup is officially closed. If they wait, although they cannot currently be required to pay, they will see their loans explode with interest.
But the two new plans created by law will not be ready for a year, and the ministry’s own website, intended to help borrowers navigate in their reimbursement options, does not reflect this new confusing landscape, with the exception of a banner that says: “The loan simulator will be updated on a later date to reflect recent legislative changes.”
From July 1, 2026, new loans will be subject to new borrowing limits
The undergraduate students will not see any change within their loan limits. But it is a very different story for students and graduate parents.
For graduate students, new limits will make borrowers with lower and average income more difficult to attend more expensive higher education programs. The more current grade loan allows students to borrow the cost of their higher education program, but the Republicans are closing it this time next year.
After that, loans from graduate students will be capped at $ 20,500 per year with a lifelong loan limit from the $ 100,000 higher school, a sharp drop compared to the previous ceiling of $ 138,500.
What will be the size of a business? Cooper d’Aei hung the figures and said: “just under 20% of master’s students borrow above the proposed limits.”
Borrowers working towards a professional study diploma (i.e. the medical or law faculty) will have their borrowing capped at $ 50,000 per year and their life ceiling increased from $ 138,500 to $ 200,000.
Parents and caregivers who use more parenting loans to help students pay for college will also see new loan limits. They will be capped at $ 20,000 per year and, in general, at $ 65,000 per child.
Cooper says that only a third of parents and borrowers with dependent children are currently taking more than this new annual loan ceiling.
The law also sets a new life limit, for undergraduate loans and combined graduates, at $ 257,500 per person.
Refund options for borrowers change spectacularly
The Republicans reduce the reimbursement options for new borrowers from the current seven plans to two new plans. The new plans are:
1. The standard plan
The new borrowers will be awarded a reimbursement window between 10 and 25 years old, depending on the size of their debt, with equal monthly payments as a domestic mortgage.
Under this plan, borrowers with larger debts would qualify for a longer reimbursement period:
- Owes less than $ 25,000 and reimburse more than 10 years.
- Do you owe $ 25,000 or more than $ 50,000? The reimbursement extends at 15 years.
- Duty $ 50,000 or more but less than $ 100,000: reimburse more than 20 years.
- Anyone who owed $ 100,000 or more would reimburse for a period of 25 years.
2. The reimbursement assistance plan (RAP)
In order for the borrowers to fear not winning enough to cover the inflexible monthly payments of the new standard plan, the Republicans have also created the reimbursement assistance plan (RAP).
On rap, payments would be largely based on total gross income (AG) of borrowers.
- Borrowers who do not earn more than $ 10,000 would be invited to pay $ 10 per month.
- Win more than $ 10,000 but not more than $ 20,000, and your payment will be based on 1% AG.
- More than $ 20,000 but not more than $ 30,000, it would be 2% AG, and so on the income scale.
- The reimbursement consists of 10% AG for borrowers earning $ 100,000 per year or more.
Current borrowers will also have access to this new rap plan, as well as certain older plans.
Rap is the last of a long line of income -based reimbursement plans. How does he compare himself to the previous plans?
Monthly payments for many intermediate income borrowers on rap will be lower Compared to previous plans, according to several experts. But rap is not as generous as the backup plan for the Biden era, which, once again, is being eliminated.
RAP will require that even the least low income borrowers to make a minimum monthly payment of $ 10, ending the $ 0 option from previous plans and making it more expensive for these borrowers.
This new minimum payment of $ 10 would not make a big difference in government chests, said Jason Delisle, who spoke with NPR in May, while studying student loan policy at the Urban Institute. Delisle has since been appointed to a position in the Trump administration.
Delisle said that the objective of the new minimum payment of $ 10 of rap probably comes from “emerging research that obliges people to make a payment each month is good because it maintains them connected to the loan and makes it less likely that they should not be lacking. “”
But some defenders of the borrower fear that this new minimum payment may have the opposite effect.
For the lowest income borrowers, requesting $ 120 per year is “important”, Garza d’Edtrust said in May at NPR. “I think that having a minimum required payment probably pushes more default borrowers.”
But rap is also delivered with a few new advantages that borrowers will likely appreciate.
The rap will give up any interest which remains after a borrower has made his monthly payment.
If their monthly payment is $ 50 but they owe $ 75 a month, the government will renounce the remaining $ 25.
The result: borrowers will no longer see their loans to growThis was a disadvantage common to the old reimbursement plans focused on income.
Borrowers on rap will also see their sales down every month.
The government will intervene up to $ 50 to ensure that low -income borrowers see their main sales shrinking.
For example, a borrower whose monthly payment is only a bunch of $ 30 in its director would see the government eliminate $ 20 more per month.
Borrowers whose monthly payments already reduce their main balance of at least $ 50 would not obtain any additional government aid.
“It is a form of monthly forgiveness on the loan,” said Delisle. “It’s a drop, a drop, a drop of forgiveness on loan, rather than waiting for the big payment after 20 years.”
The math of forgiveness of the loan change.
While the previous plans offered forgiveness after 20 or 25 years, the rap would extend this to 360 eligible payments, or 30 years. It’s a big difference, said Cooper d’Aei.
Borrowers with typical debt levels “and typical income for their level of diploma will almost always be well paid long before they reach this 30 -year brand,” said Cooper. “So, if you go to rap, I wouldn’t think of forgiveness because you will probably reimburse him before hitting 30 years.”
In short, the days of what Delisle called “big payment” is over.
But wait! Current borrowers have another loan of forgiveness to the loan (in a way).
In addition to rap, an older plan known as the income -based reimbursement (IBR) will always be available for borrowers who contract their loans before July 1, 2026.
Part of the reason why IBR remains is that, unlike other reimbursement plans focused on income, IBR was not created by the Department of Education. It was created by Congress and is codified in Status.
How does IBR work? For borrowers with loans from more than July 2014, their payments are capped at 15% of discretionary income. Payments on young loans are capped at 10%.
The current Biden era backup plan said Delisle, most of the lower and intermediate income borrowers, would likely have lower monthly payments on the new RAP compared to IBR.
But, said Delisle, borrowers with older loans could always want to register for IBR if they have been in reimbursement for almost 20 or 25 years, so that they can be eligible for forgiveness of loans.
This is because, on IBR, loans before 2014 are eligible for forgiveness after 25 years. For more recent loans, it is only 20 years – both considerably shorter than the calendar of 30 years of rap.
A great warning to all this: the Department of Education has temporarily ceased to treat all the forgiveness of the loan for borrowers on IBR because of the legal actions surrounding the safeguard plan, according to a press release from the deputy press secretary of the Department of Education Ellen Keast.
Keast said that the Biden era rule explained to save “has provided authority to count anti -ulutions in IBR for loans of loans” and, because this rule has been frozen by the courts, the ministry cannot precisely determine the pardon of the loan under the IBR. “The landfills will resume as soon as the ministry is able to establish the correct number of payment,” said Keast.
The department has declared to NPR that all the borrowers who make payments after being eligible for forgiveness would eventually obtain a refund.
