The SAVE Plan, a federal repayment plan, is ending, and over 7 million borrowers must choose a new plan within 90 days. The plan was launched in 2023 and got tangled in lawsuits, resulting in a period of no required payments for borrowers.
Understanding the New Repayment Options
Borrowers who do not choose a new plan will be automatically enrolled in the Standard Repayment Plan or the new Tiered Standard Plan. These plans base payments on the loan balance rather than income, which can result in higher monthly payments.
The Repayment Assistance Plan (RAP) is a new option available to borrowers. It calculates payments as 1% to 10% of income, with a $10 monthly minimum. However, forgiveness takes 30 years, and the forgiven amount is taxable as income.
Another option is to refinance federal student loans into a private loan. This can result in a lower interest rate and lower monthly payments, but borrowers will give up federal benefits such as income-driven repayment plans and Public Service Loan Forgiveness.
It is essential for borrowers to review their options and choose a plan that works best for them. Certified financial education instructors warn against treating federal loans as a synonym for safety and overestimating the odds of forgiveness.
Original reporting: El Paso News (HLL/CB) — read the source article.
