Changes are coming to student loans. How might it affect you?

0:00It's Consider This, where every day we go deep on one big news story. Today, the end of an era for student loans. On July 1st, big changes are coming from more than 43 million student borrowers in the U.S. as part of the Republicans' One Big Beautiful Bill Act. I was paying under the SAVE program before, and it was affordable enough for me to handle. That's a listener who called into the NPR program 1A last year. At this point, I don't know how much they're going to ask, and I don't know how they're calculating that, and that's a really scary thing. In a matter of weeks, President Biden's save repayment plan will end.

0:40There will also be changes to student loan forgiveness and new limits on the amount of money the federal government will lend. We've got to get out of it. We tried to do it in the big, beautiful bill. I was able to get half of the student loans cut for master's degrees. I couldn't get any more than that cut. Republican Senator Tommy Tuberville of Alabama speaking to Fox Business in April. It'll save us millions of dollars, but we could cut it all out, all of it out at one time and say, go back to your bank. If you want a student loan, go back to your bank. Consider this. Major changes are coming to student loans.

1:15How will they affect borrowers across the U.S.?

1:23From NPR, I'm Mary Louise Kelly. This message comes from NPR sponsor Carvana. Making buying a car 100 % online with real, transparent pricing and customizable financing that fits your budget. Browse thousands of cars and get yours delivered. Visit Carvana.com today. Delivery fees and terms may apply. Every episode of It's Been a Minute, NPR's What's Happening in Culture podcast starts by asking three questions. Who? How? Why now? If the culture's asking it, we're talking about it. At NPR, we stand for your right to be curious and indulge your cultural curiosity. Follow It's Been a Minute wherever you get your podcasts, and we'll break down the zeitgeisty topics that are filling your feed.

2:17It's Consider This from NPR. About 43 million Americans hold federal student loans. If you were one of them or planning to be one of them, you should know big changes are coming in July next month. Those changes include new loan limits for grad students and parents and a total overhaul of repayment plans. Here to walk us through it, NPR education correspondent Corey Turner. Hello, Corey. Hey, Mary Louise. Start with new student loan limits. What should we know? Yeah, well, one of the few things that's not changing is undergraduate student loan limits. What is changing are limits for graduate students.

2:57Up to now, grad students could borrow essentially as much as they needed, right? Your program costs$40 ,000 a year. You could borrow$40 ,000 year after year after year. After July 1st, though, grad students will be limited to$20 ,500 a year. That is a big change that many economists worry is going to drive some borrowers into the private student loan market and maybe some lower income borrowers away from grad school altogether. There are a few exceptions here. For students who are enrolled in a program by the end of this month, Mary Louise, they get grandfathered in. Also, the education department says borrowers pursuing what it calls a professional degree in fields like dentistry, law, medicine, they can qualify for$50 ,000 a year in loans.

3:47Okay. Back to the undergrad college side. Up to now, parents have been able to take out unlimited loans to help their kid pay for college. That is changing? It is. The loan program known as Parent Plus, it's not ending, but it is being scaled back. I've spoken, you know, in the past with families who, because of its unlimited nature, really found themselves buried in debt and unable to retire in some cases. In July, Parent Plus is getting new limits. It'll be capped at$20 ,000 per dependent per year. One more big change. Parents will no longer qualify for any repayment plan that takes their income into account.

4:31Now, that might feel like some sort of fine print wonkery. It's really important, Mary Louise, because it means, number one, parents will no longer have a pathway toward loan forgiveness. And number two, it means monthly payments are going to be fixed and probably considerably higher than they would have been on an income-based plan. Okay. I want to jump to another set of people, people who already have loans. They may be out of school. Now they have to repay those loans. There was this Biden-era SAVE repayment plan that has proven short-lived. What do borrowers need to do now? So it's time for them to switch plans, essentially.

5:10Save was the most generous repayment plan available. Low monthly payments, also notably for the lowest income borrowers. It offered a$0 monthly payment. But save is over. And the 7 million or so borrowers who are still enrolled in it need to know it is time for them to switch plans. And if they don't, this is really important, their loans will be moved into one of the least flexible. standard repayment plans. Their monthly payments are going to be fixed and they will be relatively high compared to the save plan. The good news, though, is for these save borrowers, if they act now or soon, they have lots of choices, lots of plans to choose from.

5:54Okay. So get on it, save borrowers. Sounds like the takeaway there. What about for new borrowers? Different story, right? What do they need to know? Yeah, for new borrowers, we're really at the end of an era. For years, borrowers have been able to choose from many different repayment plans. But Republicans voted last year to essentially get rid of all of them for new borrowers and replace them with just two. And these are both brand new plans. I'm going to talk about one of them briefly. It's called the Repayment Assistance Plan or the RAP. And like SAVE, it bases your monthly payment on your income.

6:30Now, it's not going to be as generous or as flexible as SAVE, but it does come with a few interesting perks. One, if there is any monthly interest left over after you've made your monthly payment, the plan just waives that leftover interest. So your loan won't grow. And two, parents and caregivers get to slash 50 bucks a month off their monthly payment for every dependent in their household. What about student loan forgiveness? That's been a thing. Is that still going to be a thing after July? Sort of. There's this kind of a dividing line, or there will be, between older legacy borrowers and then brand new borrowers.

7:13So for new borrowers, loan forgiveness is going to be scaled back considerably. They will be able to qualify for the RAP plan, which I mentioned. And it technically offers loan forgiveness, but it's after 30 years, Mary Louise. And so most of the experts that I've talked to say, like, the vast majority of borrowers on the RAP plan, they're going to pay off their debts long before they approach forgiveness after 30 years. For current borrowers, though, there are still some options. The plan known as Income-Based Repayment, or IBR, it's still available. And it offers forgiveness after 25 or even 20 years, depending on how old your loans are.

7:55And then for everybody, in spite of the headlines that have suggested the Trump administration is trying to push and pull at the program, public service loan forgiveness is still a thing. It is still available. It offers loan forgiveness after 10 years of public service as a teacher, police officer, nurse. Lots of different jobs qualify. It is still available. And you can find more at the department's website. One more thing to highlight, which is this. We've been talking a lot about programs being scaled back or eliminated, changes Republicans have made in that direction. They have expanded the Pell Grant program, federal program aimed at low-income students.

8:41Yeah. And this was a move that actually had some bipartisan support. The Pell Grant program is essentially free. We've been talking about loans. Pell Grants are free money intended to help the lowest income students pay for college. So last year, Republicans expanded the Pell Grant program to include really pretty short workforce training courses or programs between roughly eight and 15 weeks. So, you know, think about training programs to become a welder or a certified nursing assistant. There are a couple of caveats here, though. One, it's brand new, and everyone I've been talking to says it's going to take a little time for states to figure out what programs currently qualify, because there's some real guardrails on this thing.

9:32And then also, this is more important and within the realm of control for borrowers, if you want to do this and you think you might qualify, you've got to fill out the FAFSA, the Free Application for Federal Student Aid. So if this sounds interesting, I would definitely recommend starting with the FAFSA. And the date, again, that you've got in your sights, Corey, for when a lot of these changes we've been walking through will kick in. July 1st. July 1st. You heard it here. First. All righty. NPR education correspondent Corey Turner. And Corey has put together a comprehensive guide to all these student loan changes.

10:10You can find it at NPR.org. Thank you, Corey. You're welcome, Mary Louise. This episode was produced by Katherine Fink with audio engineering by Ted Meebane. It was edited by Tenbeat Airmus and Nicole Cohen. Our interim executive producer is Courtney Dorning.

10:31It's Consider This from NPR. I'm Mary Louise Kelly. Each story you hear on Planet Money starts with a question. What happens if we refund tariffs? Why are groceries so expensive? At NPR, we stand for your right to be curious, because the forces shaping our world can be hard to see. Follow NPR's Planet Money wherever you get your podcasts and start seeing how the economy really works.