Starting this summer, college graduates will be stepping into a different student loan landscape, one that involves fewer ways to pay back what you owe as well as changes to debt forgiveness.
The revisions to the federal lending system follow the passage of President Donald Trump’s “Big Beautiful Bill” last year and other policy changes.
Borrowers will be glad to know that one key safety net remains intact: your first bill likely won’t be due until six months after you graduate due to the government’s grace period. If you loans are subsidized, the government will pay the interest during that six-month window.
Starting July 1st, borrowers can enroll in the the new Repayment Assistance Plan (RAP). Monthly payments will typically range from 1% to 10% of your earnings. In other words, the more you make, the higher your monthly payment will be.
Also beginning July 1st, students who plan to return to school and are taking out loans will have more limited repayment options. They’ll only have access to RAP and the new Tiered Standard Plan, a new, non-income-driven federal student loan repayment option featuring fixed payments over 10 to 25 years based on total loan balance.
It replaces the traditional 10-year standard plan for new borrowers and those with new loans, offering lower monthly payments for higher debt.
Certified Financial Planner with Outlook Wealth Advisors, Michael Neuenschwander, says it’s important to think about how much your loan will cost you long-term.
“Don’t focus on just the monthly payment. You rally want to look at what it will cost you over the life of the loan,” he said. “On average, most people take 20 years to pay back a student loan. So it’s not just about what’s the lowest payment, it’s about the real cost of the loan over that time frame.”
After graduating, check to see if you’re eligible for any state or federal debt forgiveness programs. The Public Service Loan Forgiveness Program (PSLF), signed into law by President George W. Bush in 2007, allows government and non-profit employees to have their federal student loans canceled after ten years of payments. But President Trump signed an executive order last year that narrows eligibility. The order is currently facing legal challenges by nearly two dozen attorneys general and it remains unclear exactly which organizations will no longer be considered a qualifying employer for PSLF.
For help estimating monthly payments, the government has a loan calculator here Loan Simulator | Federal Student Aid. And to check out monthly payment and long-term costs, go here Home | Federal Student Aid