NEW YORK (AP) — It's been a confusing time for people with student loans. Collections restarted, then were put on hold. At the same time, borrowers had to stay on top of changes to key forgiveness plans. Last year, the long-contested SAVE plan introduced by the Biden administration ended with a settlement agreement. President Donald Trump’s “Big Beautiful Bill” introduced new borrowing limits for graduates and raised challenges to the Public Service Loan Forgiveness program. While several changes for stud ...

Core Viewpoint - The proposed settlement by President Donald Trump's administration aims to eliminate the SAVE plan, which has raised concerns among student-loan borrowers about significantly higher monthly payments and financial strain [2][6]. Group 1: Impact on Borrowers - Borrowers like David Chatman are facing a drastic increase in monthly payments, projected to rise from $86 to $689, leading some to consider bankruptcy as a viable option [1][5]. - The SAVE plan, initiated under former President Joe Biden, was designed to offer borrowers lower payments and a quicker path to debt relief, but its future remains uncertain due to legal challenges [2][3]. - Over 7 million borrowers enrolled in the SAVE plan were placed on forbearance in the summer of 2024, and the restart of interest charges has further complicated their financial situations [3]. Group 2: Government Position - Nicholas Kent, the undersecretary of education, emphasized the necessity for borrowers to repay their loans, asserting that taxpayers should not bear the burden of what he termed "illegal and irresponsible student loan policies" [4]. - The proposed settlement to end the SAVE plan reflects a shift in policy that prioritizes loan repayment over borrower relief, which may lead to increased financial pressure on borrowers [2][4].

Core Insights - Major changes to the federal student loan system will take effect on July 1, 2026, primarily due to the Trump administration's One Big Beautiful Bill Act (OBBBA) [1] Group 1: Repayment Plans - New repayment options will be limited to two plans for loans disbursed after July 1, 2026, while existing borrowers can continue with three current plans until they transition [2] - Current income-driven repayment plans (PAYE, ICR, IBR) will phase out, with PAYE and ICR ending by July 1, 2028, leaving IBR and the new Repayment Assistance Plan (RAP) as options for future borrowers [4][3] - The RAP will set payments based on income, with potential forgiveness after 30 years [7] Group 2: Borrowing Limits - Federal borrowing limits will tighten starting July 1, 2026, with part-time students facing reduced limits based on enrollment status [11] - Current borrowers can access previous borrowing limits for three years or until program completion, with graduate students able to borrow up to $20,500 annually [12][16] Group 3: Grad PLUS Loans and Parent Loans - The Grad PLUS loan program will be eliminated after July 1, 2026, affecting graduate and professional students seeking financing [13] - Parent PLUS loans issued after July 1, 2026, will not qualify for Public Service Loan Forgiveness (PSLF), limiting options for future borrowers [17][18] Group 4: Deferment and Tax Implications - New loans will not be eligible for economic hardship or unemployment deferments starting July 1, 2027, and forbearance will be limited to nine months within a two-year period [20] - Student loan forgiveness may become taxable again after 2025, impacting borrowers who receive forgiveness in 2026 or later [21] Group 5: Preparation Steps - Borrowers are advised to review their current repayment plans, compare future options, and note key deadlines to prepare for the upcoming changes [22][23] - Parent borrowers should act quickly to access income-driven plans or PSLF eligibility, and consider potential tax implications of loan discharge [25]