Your Student Loan Just Got Harder. Here's the One Decision That Actually Matters.

Derek Wu: July 1st is nine days away. If you have federal student loans, this episode is not background noise. It is a decision you need to make. Here's what's happening. The SAVE plan is done. The U.S. Department of Education is notifying all 7.5 million borrowers still enrolled that they have roughly 90 days to pick a new repayment plan or the government picks for them. And the automatic option is usually the more expensive one. one. Today, we're going to walk through exactly what that means for your wallet and for your forgiveness timeline if you work in public service. Three things on the agenda. First, what actually changed and why the repayment menu looks nothing like it did two years ago? Two new plans launched and some older ones are on a sunset timeline. NPR covered the full picture in a guide earlier this month. The short version is New borrowers are now limited to just two options and existing borrowers have a narrower window than most people realize. Second, how to actually choose. I've got a three question framework that cuts through the noise. RAP versus IBR versus the Tiered Standard Plan, they each make sense for a different type of borrower and we'll find out which one is yours. Third and this one is urgent, the system is not working the way it should be. CNBC reported this week that borrowers who should qualify for PAYE are logging into studentaid.gov and it's simply not appearing as an option. Advocates are calling it a glitch, and there's a specific hidden risk for anyone chasing Public Service Loan Forgiveness that most people don't know about yet. The boring answer is usually the right answer, and in this case the boring answer is: read your servicer notice, pick a plan before the deadline, and don't let the government pick for you. Let's start with the news. Nine days out, here's exactly what changed and why it matters to you. Picture this. You've had student loans sitting in limbo for almost two years. No payments, no decisions. Then July 1st hits and your servicer sends a notice. Suddenly, it's real. SAVE the Saving on a Valuable Education Plan was ended by a federal court on March 10th. According to the U.S. Department of Education, 7.5 million borrowers are affected. Starting July 1st, Services begin sending those formal 90-day notices. You have 90 days to pick a new plan. Miss that window and you get auto-enrolled into one that could cost you hundreds more per month. Let's think about this from a borrower perspective. Nearly half of say 7.5 million participants qualified for $0 monthly payments. Zero. The new default you land in, that's not income driven at all. It's based on your loan balance. So what are the new options? NPR published a solid breakdown earlier this month. The menu just changed. For new borrowers, anyone taking out loans on or after July 1st, you get exactly two choices. RAP, which is the new Repayment Assistance Plan, and the Tiered Standard Plan, which is fixed payments over 10 to 25 years depending on Speaker 2: your income. Derek Wu: depending on your balance. That's it. Existing borrowers have a bit more room. The Department of Education confirmed you could still access IBR, income-based repayment, as long as you don't take out new loans after July 1st. But PAYE and ICR stop accepting new enrollees and sunset entirely by 2028. So if you pick one of those now, you're signing up for a second move in two years. The important thing to understand is that the plan you land on also affects your loan forgiveness clock. CNBC reported this week that borrowers and advocacy groups are already flagging technical glitches and misinformation when trying to access repayment options on servicer sites, so the system isn't exactly making this easy. If you work in public service, teaching, government, nonprofits, this is the group where inaction is genuinely dangerous. The SAVE forbearance period didn't count toward your 120 payment clock, not a single month. And if the auto enrollment drops you into the wrong plan, the clock stays frozen. Log in to studentaid.gov this week. Confirm which plan you're on, because the next question isn't whether you need to act, it's which plan actually fits your situation. So the real question now is which plan do you actually pick? Think of it like a decision tree with three questions. Answer them in order and a plan practically picks itself. Question one, are you going for loan forgiveness through a government or non-profit job, meaning PSLF? If the answer is yes, you need a qualifying income-driven plan. RAP does qualify. IBR qualifies. The Tiered Standard Plan does not. So for PSLF borrowers, your options are RAP or IBR, and we'll come back to why that distinction matters enormously in a minute. Question two, is your income low or variable? IBR protects a chunk of your income before calculating your payment. It uses discretionary income, which is your AGI minus a poverty-level buffer. RAP skips that buffer entirely. It takes a straight percentage of your full AGI. Starting at one percent for incomes up to twenty thousand dollars, scaling up to ten percent above one hundred thousand dollars. For lower earners, IBR often wins on monthly payment. According to NPR's coverage of the July changes, IBR is still available to existing borrowers who don't take out new loans after July first, so if you borrowed before then it's still on the table. RAP also adds a $50 principal credit per month for qualifying borrowers and cancels any unpaid interest monthly. That prevents your balance from growing. Upside. The downside, forgiveness on RAP takes 30 years. IBR gets you there in 20 or 25, depending on when you first borrowed. Think of RAP versus IBR like two landlords calculating your rent differently. One looks at your whole paycheck. The other says. will ignore the first chunk. You only pay on what's above the poverty line. Same apartment, very different bill. Question 3. Do you just want to pay this off and be done? No forgiveness, no income adjustments, just a finish line. That's the Tiered Standard Plan. Fixed payments. No forgiveness component. CNBC reported the tiers. Under $25,000 in debt gets you 10 years. $25,000 to $49,000 is 15 years. $50,000 to $99,000 is 20 years. $100,000 or more is 25 years. Your balance actually goes to zero for borrowers who can afford it. That's a genuinely clean outcome. One warning flag before you make any moves. According to GetOutOfDebt.org, consolidating loans after July 1st is a one-way door. Loans consolidated after that date lose IBR access completely and reset any IDR forgiveness clock to zero. If you're close to a forgiveness milestone, that's not a casual decision. That's a decision you don't get to undo. Before you pick anything, run the Loan Simulator at studentaid.gov. Fair warning: it may not show SAVE estimates yet, but it will show IBR and the Tiered Standard Plan numbers side by side. That's your starting point. Now, I mentioned PSLF borrowers need to pick carefully between SAVE and IBR. There's one more piece to this I didn't flag yet, and if you work for a government agency or a non-profit, Speaker 2: you need to pick carefully between SAVE and IBR. Derek Wu: It matters a lot. So Public Service borrowers, this one's specifically for you. We just walked through the plan decision tree, but if you work for a government agency, a school, a hospital, or a non-profit, your choice of plan carries a consequence that doesn't apply to anyone else. Miss the 90-day window, get auto-enrolled into the Tiered Standard Plan, and your PSLF clock stops. Full stop. The Tiered Standard Plan does not qualify for Public Service Loan Forgiveness. Not one tier of it. As GetOutOfDebt dot org put it, every month you sit in that plan is a month that doesn't count toward your one hundred and twenty qualifying payments, and nobody sends you a warning letter about that specific wrinkle. Who does this hit hardest? Nurses, teachers, social workers, the exact people PSLF was built for, also the people most likely to be too slammed with actual work to log into studentaid dot gov this week. To put this in perspective, you wouldn't just be paying more—you'd be paying more and earning zero forgiveness credit simultaneously. That's the dangerous version of inaction. There's a second piece here, and I'll be brief, because it's still being fought out in court. Starting July one, the Education Secretary gets new authority to disqualify employers deemed to have a "substantial illegal purpose. NPR reported in June that cities like Boston and Chicago have already sued over this rule. Most traditional public service employers aren't in scope, and the Department of Education projects fewer than ten employers a year would be affected. Past credit is protected either way, but if your non profit's mission touches immigration services or contested advocacy, submit an employment certification form now. Now, before the rule takes effect, lock in what you've earned. The call to action for public service borrowers is the clearest one in this whole episode: enroll in RAP or IBR. Do not let auto-enrollment happen to you. The system should catch you, but the system right now has some real problems, and that's exactly what we need to talk about next. Okay, so the system itself is fighting you. That's worth naming. CNBC reported this week that PAYE, a plan that caps payments at 10% of discretionary income, isn't showing up as an option for some eligible borrowers on studentaid.gov. You log in, you don't see it, and you assume you're out of luck. You're not. The website is wrong. Part of why this is happening, CNBC also reported that the Trump administration terminated nearly half the Education Department staff last year, including many of the people who helped borrowers navigate this stuff. That's not speculation. That's on the record. And there's a backlog. Over 530,000 IDR applications were still pending as of April, according to court filings. Applying now is better than applying when your notice lands. Lance. So, three things to do this week. First, log in to studentaid.gov and confirm which plan you're actually on. A lot of people guess wrong. Second, update your contact information so your servicer notice actually reaches you. Third, if a plan you should qualify for isn't showing up, call your servicer directly. Don't assume the website is the final word. One more thing: if you see a company charging you to manage this process, that's a scam. The Loan Simulator is free. Studentaid.gov is free. NPR and CNBC both have guides on this right now. Use them. The website may be glitchy. The deadline isn't. Do something this week. All right, that was a lot. Let's bring it down. The core of what we cover today: 7.5 million saved borrowers have a 90-day window from July 1 to pick a new repayment plan. Miss that window and the system picks for you. And what it picks is almost certainly going to cost you more. The moment that stuck with me putting this together: nearly half of those borrowers were paying $0 a month. Zero. And now they're staring down balance-based payments. It's not a small adjustment. That's a shock to a household budget. And if you're in public service, the stakes are even higher. The wrong auto enrollment plan doesn't just raise your payment, it freezes your PSLF clock. Every month in the wrong plan is a month that doesn't count toward that 120-payment finish line. So here's what I want you to walk away with. There is a decision tree here. Three questions answer them in order and a plan practically picks itself: Are you in public service? Are you chasing forgiveness? Did you take out new loans after July one? Your answers funnel you into RAP, IBR, or the Tiered Standard Plan. That's the framework. And the landlord analogy for RAP versus IBR: one looks at your whole paycheck, the other ignores the first chunk, and only charges you on income above the poverty line. That distinction matters depending on where your income sits. One more thing. CNBC reported this week that Studentaid.gov has glitches right now. PAYE isn't showing up for borrowers who qualify. So if the site isn't giving you the full menu, call your servicer directly. Don't assume what you're seeing is what you're entitled to. The main takeaway? Don't wait for the system to make this call for you. Log in, check your options, and make the move before September. If this helps you figure out where you stand, subscribe, so you don't miss the next one. And if you've got a money decision you're sitting on and can't figure out which way to go, drop it in the reviews. I might just flip a coin on it next week. Thanks for listening to Coin Flip, I'm Derek Wu. Go make the call.