Student loan payments might spike as changes under President Trump’s expansive new bill take effect. Borrowers, especially those who have been relying on temporary measures, are likely to feel the squeeze next summer.
As the proposed budget awaits approval, an analysis by the Research Nonprofit Student Borrower Conservation Center suggests that a typical borrower could see their monthly payments rise by several hundred dollars. This could be a significant shift for many.
Erica Sandberg, a consumer finance expert, mentioned an influx of worried communications she’s receiving. “People are really scared,” she said, emphasizing the panic among individuals reaching out to her.
The biggest impact comes from the potential end of the save plans that many low- and middle-income borrowers rely on. These plans typically set monthly payments based on a percentage of discretionary income.
In contrast, the repayment support plan from the Trump era calculates payments as just 1%-10% of discretionary income, which might sound better at first glance. However, it lacks payment caps, which could mean higher expenses for some borrowers.
Sandberg noted that there’s a misconception about who benefits from low-income plans. Her sister, a university professor, used the save plan but now faces uncertainty as changes loom.
If the GOP bill passes, borrowers will primarily be left with the existing standard plan, which will see some adjustments. Borrowers will be required to commit to fixed monthly repayments over a term of 10 to 25 years, depending on loan size.
Currently, the standard plan operates on a 10-year term for all loans, regardless of amount.
Sandberg advised borrowers to choose wisely. “What seems like the easiest option might not actually be the best for your finances. Are you ready to potentially owe much more later?” she cautioned.
One downside is that borrowers will no longer have the option to request cancellation of their loan balance after 25 years under the new plan.
As these changes remain uncertain, the recent budget passed slightly in the Senate and now heads to the House. Borrowers should focus on maintaining their accounts in good standing, Sandberg recommended. This includes communicating with lenders if they can’t make timely payments.
For those feeling stressed about their loans, she suggested utilizing government loan simulators available at StudentAid.gov to help navigate their budgets and identify the most feasible repayment plans.
