Your Student Loan Repayment Plan Is Changing. Here's What to Do.

Becca Hartwell: Welcome back to Money Unlocked. I'm here with Maya and, okay, we have a big one today. Maya: Hey, Becca Hartwell. And yeah, big is putting it mildly. Becca Hartwell: So here's the situation. According to CNBC and the U.S. Department of Education, seven point five million borrowers are still sitting in the SAVE plan right now. The plan that's officially dead, the very one, and starting July first, formal 90 day notices go out. Go out! do nothing! Maya: Wow! Becca Hartwell: You get auto enrolled into a higher payment plan. Maya: Oh, and not the fun kind of surprise. Becca Hartwell: Definitely not! So this episode is basically "Here's what's happening, here's what it costs you to ignore it, and here's what to actually do." a k a the episode your past self needed two years ago. Right? Okay, so get this: we're also going to walk through the difference between between IBR and the brand new Repayment Assistance Plan, or RAP, because one of them is not automatically better for everyone. Maya: That's the part that tripped me up too, honestly, like, new plan sounds better, but wait for it. Exactly. And there's a separate deadline that Parent PLUS borrowers need to know about, June 30th, which is coming Becca Hartwell: Wow. Maya: up fast. That one is urgent. We're not glossing over it. And we close with a three-step action plan you can do this week, like literally this week. StudentAid.gov is about to become your best friend. Let's get into it. Segment one, right now. Becca Hartwell: Okay, so here's the thing. If you've been on the SAVE plan, you've probably been on autopilot since, what, summer 2024? Payments paused, zero dollars leaving your account every month. Life goes on. Maya: And honestly, same energy as me hitting remind me later on a software update for two years. Becca Hartwell: But this time, remind me later has a price tag. So here's where we are right now. According to CNBC and the U.S. Department of Education, And 7.5 million borrowers are still enrolled in the SAVE plan. And starting July 1, loan servicers begin sending out 90-day notices telling those borrowers to pick a new repayment plan. Maya: Wait, so a letter is just arriving? Becca Hartwell: Yeah, July 1 is when the clock officially starts. Your servicer sends a notice. You get 90 days to choose a new plan. The Department of Education confirmed this in March. Maya: OK, but wait, wait, wait. Let's say someone just doesn't, like they see the email, assume it'll sort itself out. What actually happens? Becca Hartwell: That is exactly the wrong move. And that's kind of the whole episode, because doing nothing is not neutral. The Department of Education said it directly, borrowers who don't act within that 90-day window get auto-enrolled, either into the Standard or the new Tiered Standard. STANDARD PLAN Maya: Auto-enrolled, Becca Hartwell: Yeah. Maya: so you don't get to opt out of having a payment? Becca Hartwell: Nope, you just get a new one, and for a lot of people that means going from near zero payments under SAVE to a fixed monthly number that does not care about what you earn. Maya: Hmm, so the people who, like, did everything right, built their budget around a SAVE payment, a zero dollar payment, and now they have to start from scratch? That's the person I want listening right now. You follow the rules. Becca Hartwell: Right. Maya: The rules changed, and your servicer's notice is coming whether you're ready for it or not. So the question is, what does not being ready actually cost you? Yeah, and that number is going to be pretty specific. And pretty uncomfortable for a lot of people. So here's where the I'll deal with it later instinct actually has a price tag. Yeah, and I'll be honest, my gut says payments are paused, nothing's due, so why rush? Right. That is exactly the trap. So here's what's actually happening. According to Student Loan Borrowers of Assistance, borrowers in SAVE have been in forbearance since summer 2024. No bills, zero payments required. Which sounds fine. Sounds fine. But none of those months count towards forgiveness. Not a single one. Becca Hartwell: Wait, wait, wait. So two years of sitting tight and the forgiveness clock didn't move? Didn't budge. And interest has been accruing again since August 2025, so some balances are actually higher now than when the pause started. Maya: Okay, That's the gut punch. Becca Hartwell: Here's the other one. If you miss your 90-day window after your servicers notice, you land in either the Standard 10-year plan or the new Tiered Standard. Neither one looks at what you earn. Maya: So what does that actually cost, like in real dollars? Becca Hartwell: Okay, here's the scenario. Say you've got $35,000 in loans and you're making $48,000 a year. Under SAVE, you were paying close to nothing. On the Standard 10-year plan, you're looking at around $360 a month, maybe more. Maya: Whoa, that's a car payment. That's a car payment, Becca Hartwell: Yeah. Maya: and the system gets to pick that number for you if you don't act. And I think that's the thing—people aren't being lazy about this. Two years of legal chaos, conflicting notices, servicer websites that barely worked-the confusion is real. Completely real. This is inaction born from not knowing what to do, not from not caring. But the price of waiting is now very concrete. Becca Hartwell: So what's the first move, like the one thing you do this week? Log in to StudentAid.gov. Just confirm which plan you're actually on right now. That's it. Because once you know where you're standing, we can talk about where to go. And that is exactly where we're headed. And there are actually some real options, IBR being the biggest one worth knowing. So now the real question: you know you need to move off SAVE, but where do you actually go? Maya: Right. And I think a lot of people are going to search for something that feels like SAVE, but with a different name. Becca Hartwell: Yeah, and here's the thing: the honest answer for most people is IBR income-based repayment. It's available right now at at studentaid.gov. Maya: Okay, so is IBR basically SAVE with a different label? Becca Hartwell: Good question. Short answer, no. Here's the formula difference. SAVE shielded your income up to 225% of the federal poverty line before calculating your payment. IBR only shields up to 150%. Maya: So more of your income is exposed. Becca Hartwell: Exactly. For a single borrower making $50,000 a year, that gap works out to roughly $200 to $250 more per month compared to what SAVE would have charged, Maya: Wow. Becca Hartwell: according to multiple repayment calculators using the current 2026 poverty guidelines. Maya: OK, that stings, but I'm guessing IBR still beats the standard plan by a lot. Becca Hartwell: Way more affordable than standard. And your payment is capped. Capped, it can never go above the ten year standard amount, even if your income climbs. Maya: What about forgiveness progress? Like the switching erase everything you built up? Becca Hartwell: This is where it gets good: no reset. Tateesq.com confirmed this: every qualifying month you paid under any income driven plan carries over-you don't lose a single month. Oh, that's huge! So if you've been in repayment for, say, eight years across different plans, eight years of credit. Still eight years. You just pick up where you stopped. Okay, so then what about PAYE and ICR? I keep hearing those names too. They exist, but here's why I'm not recommending them. Both plans disappear July 1st, 2028. You'd have to switch again in two years. Maya: So you'd be enrolling in a plan just to re-enroll in a plan. in a plan. Pretty much. Unless you have a very specific reason, like PAYE is giving you a lower payment right now, skip it. And the big IBR advantage nobody says out loud, it's permanent. IBR has its own statutory authority. SAVE got struck down. PAYE and ICR are sunsetting. IBR stays open. So it's the plan that can't be pulled out from under you. Becca Hartwell: That's the one. And your action this week, if IBR fits your situation, apply today at StudentAid.gov. Don't wait for July 1st, because by then you could still be frozen and losing time. Every month counts. Now, there is one more plan coming, and it opens July 1. Maya: Mm-hmm. Becca Hartwell: Some of you are going to want to hear about it before you decide anything. Maya: Yeah. So IBR is the safe landing spot right now, but there's a new plan coming, and I know people are already asking about it. Becca Hartwell: Yes, RAP, the Repayment Assistance Plan, opens July 1st, 2026, and I need to be upfront. It sounds great on the surface. Maya: Okay, sell me on it. Becca Hartwell: So, according to NerdWallet and the Library of Congress, RAP charges 1% to 10% of your total adjusted gross... Gross income on a sliding scale, no poverty line math. If you earn $30,000, you're paying roughly 2% of AGI, which comes out to around $50 a month. Maya: That's pretty low. Becca Hartwell: And here's the part people love. RAP cancels any interest your payment doesn't cover, so your balance cannot grow while you're making payments. Maya: Wow. Okay, that's genuinely good. That was the nightmare with older plans. The balance just kept climbing. Becca Hartwell: Right. And on top of that, the Department of Education kicks in up to $50 a month toward your principal, even if your payment doesn't fully cover it. Maya: Sweet, so the government is just chipping in? Becca Hartwell: Basically, as long as you're paying on time. Now, here's the catch. Maya: Ah, there it is. Becca Hartwell: RAP forgiveness takes 30 years. IBR can get you there in 20 or 25, depending on when you borrowed. road. Maya: Thirty? So you're adding up to a decade. Becca Hartwell: Yeah, yeah. And the forgiven amount at the end, taxable income, unlike PSLF forgiveness, which stays tax-free. Maya: Hmm, so you could get a surprise tax bill after thirty years. Becca Hartwell: Exactly. That's what some people call the tax bomb. So the mistake people make is assuming RAP is automatically better than IBR because it's newer. That's not always true. So who actually helps RAP? Maya: Hmm. Becca Hartwell: Borrowers with dependents. Here's a number I love. RAP knocks $50 off your payment for every dependent you claim on your taxes. Two kids? That's $100 off. Three? You see where this goes. Maya: Okay, that is specific and actually useful. Becca Hartwell: Also, anyone whose priority is keeping their balance from growing. allowing. Period. Maya: And we can't even apply yet. Becca Hartwell: Right. Not until July First. So the move right now is get on IBR today. It's available at StudentAid.gov. And once SAVE opens, run the numbers side by side before you switch. Don't just jump to the newest thing. Exactly. Newer is not always better here. Oh, and one more thing before we move on. Maya: What? Becca Hartwell: If your parents took out loans to help pay for your school, that situation is completely different. and the deadline is actually earlier. Maya: Earlier than July? Becca Hartwell: Earlier than July. Maya: Okay, real quick: if your parents took out Parent PLUS loans for your education, I need you to stop whatever you're doing right now. Wait, I thought all federal student loans basically play by the same rules. That is the mistake. Speaker 3: Hmm. Maya: Parent PLUS loans are a completely different animal. RAP doesn't cover them. IBR, not automatically available. Seriously? So everything we just talked about in the last three segments does not apply to Parent PLUS. Becca Hartwell: The only path to income driven repayment for these loans is consolidating into a direct consolidation loan first. Okay, okay, and the deadline for that consolidation is . . . June thirtieth. And here's the part that matters: according to sources including Tateesq dot com and Student Loan Planner, this is a disbursement deadline. The loan has to be fully processed and issued by June thirtieth, not just applied for. Oh no! Yeah, processing takes four to eight weeks. The Department of Education was recommending recommending people apply by April one, which has already passed. So if someone applies today, they need to apply today and check processing times immediately. There's no guarantee, but waiting another week makes it worse. And what happens if they miss it? Permanently locked out of income driven repayment. The only option left is the standard plan. On a sixty thousand dollar balance, that's six hundred thirty dollars a month or more, fixed, with no income adjustment ever. That's not a repayment plan. That's the second mortgage. Right? And RAP doesn't cover Parent PLUS loans either, according to Yahoo Finance. So it's not like there's a fallback coming in July. This is the common mistake, isn't it? People just assume because it says federal loan on the label, all the same rules apply. Federal loan, same rules. Nope. Nope. Parent PLUS has always had fewer protections. This deadline makes that permanent. So if you're listening and your parents have these loans, the action right now is... Is text or call them tonight. Ask if they've started consolidation. If the answer is no or they don't know, go to studentaid.gov together and start the application. Do not wait. And we're going to pull everything together for every borrower type in the next segment. Yeah, your three-step game plan is coming up. Maya: So the Parent PLUS clock is ticking. Now let's land this plane. Three steps. That's it. Okay, I'm ready. Give me step one. Log in to studentaid.gov. Find your repayment plan. If it says SAVE anywhere on that screen, you have not moved yet. And July 1 is when the 90-day notices start rolling out, so the clock literally starts then. Exactly. Step two, run the loan simulator. also at StudentAid.gov. It shows your estimated monthly payment under IBR and most other plans side by side. Does it show RAP? Not yet. RAP opens July 1, so the federal simulator hasn't caught up. But ED-CAP has a repayment calculator that estimates RAP payments now. We'll link it. That is genuinely useful. Okay, step three. If you want income-driven repayment right now and you'd And you don't want to wait for RAP; apply for IBR today. You lock in your progress. And here's the thing: you can always switch to RAP later without losing your forgiveness credit. Wait, wait, wait. So there's no penalty for choosing IBR first and switching after RAP opens? None. Speaker 3: Wow. Maya: The one thing you genuinely cannot do is nothing. Nothing. The gift that keeps on taking. Right? And look, I want to say something before we wrap this topic. This system has been genuinely chaotic for two years. Court orders, freezes, conflicting notices. Yeah, borrowers who did everything right are still having to make another decision they didn't ask for. That's not on them. It's not. So if you're confused, you're not behind. Speaker 4: Mm-hmm. Maya: You're just paying attention to something that... that actually kept changing. And the fact that you're still here, 40 minutes into a student loan episode? That is something. You showed up, you listened, now go do the thing. studentaid.gov, check your plan, run the numbers, apply if you're ready. That's your whole homework assignment. And text your parents about those Parent PLUS loans. Oh, yes. Do that tonight. Don't wait until March. We don't wait until March on this show. Okay, so that's a wrap on a big one. If you've got student loans, this episode was basically a fire drill. A useful one, right? And honestly, the confusion borrowers are feeling right now? So justified. Two years of system chaos and now a July 1st deadline landing in your inbox. That line we kept coming back to, you followed the rules, the rules changed. That's the whole thing. nodding So here's what we want you to walk away with. Log into studentaid.gov, run the loan simulator, and if IBR makes sense, apply now. Don't wait for the servicer notice. Speaker 5: Seriously, don't be the person who waits until March. Maya: Laughing. We said what we said. Speaker 5: With warmth, if this episode answered something you'd been putting off, send it to someone in the same boat. New episodes drop every Tuesday. Maya: Follow wherever you listen so you don't miss one. One. Thanks for being here. Speaker 5: Warmly. We'll see you next week.