ADRIAN MA, HOST:
If you have got student loans or are hoping to take out student loans in the next few years, you may want to listen extra close to this next segment. That's because among the many changes in the big spending package President Trump recently signed into law, there's also a complete overhaul of the federal student loan system. It places new limits on loans for many borrowers, and it ends most current repayment plans. So for more on what these changes mean, we are joined by NPR education correspondent Cory Turner. Thanks for being here.
CORY TURNER, BYLINE: Thank you, Adrian.
MA: Let's start off talking about new borrowers, folks who may be taking out their student loans next year. What do they need to know?
TURNER: Yeah. So for anyone taking out loans after July 1, 2026, they need to know that this law includes a handful of new limits on how much money certain borrowers can actually take out from the government. The good news for undergrads is those limits aren't changing. For graduate students, though, it's a different story. There will be new, stricter limits. Also for parents and caregivers who take out what are called parent plus loans to help their kids pay for college, new strict limits, as well. And I will say, one fear I heard from borrower advocates is that these new limits could drive some lower-income borrowers into the private loan market, where there really aren't as many consumer protections.
MA: So for these newer borrowers, what kind of options will they have when it comes to repaying their loans?
TURNER: Sure. Well, this new Republican law is shifting the system from at least seven loan repayment plans down to two. And again, this is for new loans starting next summer. There is an updated version of a standard plan, which is - your repayment window is based on how much debt you have, and your monthly payments are all the same like a home mortgage. The other option is a little more complicated. It's something Republicans are calling their repayment assistance plan - or RAP - and it bases monthly payments on borrowers' income. It waives interest that a borrower's monthly payment does not cover, so loans aren't going to be ballooning over time. It also comes with a new idea, Adrian. It's a matching principal payment, basically for folks whose monthly payments barely make a dent in their principal balance. Here's one explanation from Roxanne Garza. She's director of higher ed policy at the liberal-leaning EdTrust.
ROXANNE GARZA: If your monthly payment does not reduce your principal by at least $50, the federal government will essentially top you off to reduce that principal by $50.
TURNER: Think of it as like small-scale loan forgiveness on a monthly basis, and it will even mean the lowest-income borrowers actually see their balances go down, which is a big deal. One more change I need to mention here is the RAP plan will require even those lowest-income borrowers to make at least a $10 monthly payment.
MA: What about the bigger kind of loan forgiveness? Does this RAP plan offer anything like that?
TURNER: It does, but not for 30 years. Here's Preston Cooper at the conservative-leaning American Enterprise Institute. He's been crunching the numbers on this.
PRESTON COOPER: Borrowers who have typical levels of debt and typical incomes for their degree level are almost always going to pay off well before they hit that 30-year mark. So going into RAP, I wouldn't be thinking about forgiveness because you're probably going to pay it off before you hit 30 years.
TURNER: A few caveats, though, Adrian. Borrowers can still qualify for public service loan forgiveness. That program has not gone away. There is also one loan forgiveness option, but it's only available to current borrowers, not new borrowers.
MA: What about people with loans right now? What do they need to know?
TURNER: Current borrowers, legacy borrowers, will have several options from older plans that are not going away. Before I get to those, though, I want to call out one plan in particular - the Biden-era SAVE Plan. Eight million people are enrolled in it. It was the subject of lawsuits. Those borrowers are currently in a really weird legal limbo where they're not required to make payments, but we know the Education Department just announced their loans will once again be accruing interest as of August 1. So this law winds the SAVE Plan down by 2028. So these borrowers are going to need to find an alternative repayment plan.
Now, the extra options that are available to these legacy borrowers, one of them that might make a lot of sense to folks - including some of these SAVE borrowers - is something called IBR. It stands for income-based repayment. It's just an older income plan compared to the new RAP plan, and it does still promise loan forgiveness after 20 or 25 years. So it might be a good option for folks on SAVE or even other legacy borrowers who are trying to figure what plan makes sense for them.
MA: One last question for you, Cory. President Trump has been talking a lot about trying to close the Education Department. So who would actually make all these huge changes to the loan programs?
TURNER: We know the Trump administration is exploring moving student loans either to the Small Business Administration or to Treasury, and at the same time, they're pushing really deep staffing cuts. The Education Department, and specifically the Office of Federal Student Aid - or FSA, which oversees student loans - their staffing levels have been cut roughly in half. And so department staff are really in this kind of surreal liminal space right now, where earlier this week, the Supreme Court just gave President Trump the green light to keep gutting the Education Department at the same time that Congress has just passed this new law, essentially telling these same department workers, boy, do we have a job for you.
MA: NPR's education correspondent Cory Turner, thanks for your reporting.
TURNER: Thanks for having me, Adrian.
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