Welcome To Donald Trump's Exciting New World Of Student Loan F*ckery!
Higher monthly payments, less loan forgiveness. But one and a half (1.5) good ideas!
It’s July First, and you all know what that means: Happy Canada Day! But for Americans who have student loans, or might need them to pay for college, or who are concerned about the many ways the Trump administration is trying to roll back not just everything Joe Biden ever did but also much of the last century, it’s also the day a bunch of changes to federal student loans go into effect, courtesy of the Bloody Bollocky Blowjobs for Billionaires Bill Republicans passed last year.
In general, student loans are going to cost a lot more to repay, with new limits on how much some students can borrow, and fewer options to repay the loans. The new rules also significantly limit the ability to ever escape the wheel of student debt repayment through loan forgiveness. MAGA was super mad that so many of us had our student debt burden eliminated by Joe Biden, and everyone going forward must now suffer for Biden having given millions of Americans “a little breathing room.”
Not surprisingly, the administration is insisting the changes will “streamline” college loan programs and finally solve “decades of mismanagement” — which if you wanna get technical about it, is what Biden’s Education Department actually accomplished, in large part by making loans, especially income-driven loan forgiveness, work the way Congress designed them. The problem was that the system had been broken for so long that fixing it looked like a big giveaway to ordinary Americans, which offended Republicans’ moral sensibilities. After all, public money must only help rich donors and corporations, who must be kept happy lest they lose heart and stop creating jobs (or stop creating AI tools to eliminate jobs).
So yeah, let’s see how the new rules screw student borrowers and their families, who gets screwed most badly (surprise! It’s lower-income folks!), and what devious new plans are still being held up in the courts.
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Higher Payments! Fewer Options! Oh Joy!
The changes won’t hit all borrowers the same, or hit everyone all at once, so if you have existing student loan debt or a kiddo who’s close to entering college, you’ll want to look carefully at what your options are, beyond the overview we give here.
The Big Bugfuck Bill created two new repayment plans that will eventually replace most (but not all) existing loan repayment programs. One, the Repayment Assistance Plan (RAP), will calculate borrowers’ monthly payments based on 1-to-10 percent of their adjusted gross income. The lowest earners must make at least a payment of $10 a month, which seems cheap unless you’re at or below the poverty line. And unlike earlier income-driven repayment plans that allowed the remaining balance to be forgiven after 20 years of payments, RAP only allows forgiveness after 30 years of payments, so you can have a little party when you reach perimenopause.
The one good idea in RAP is that unpaid monthly interest will be waived if borrowers stay current on their payments, so interest doesn’t pile up forever. Frankly, we still don’t understand this:
Here's what that looks like: If you owe $200 a month in student loan interest but qualify for the minimum RAP payment of $10 a month, your $10 payment would go toward interest and the remaining $190 would be waived instead of added to your balance. This ensures your debt doesn't compound over time as it would with other loans if you don't cover your monthly interest payment.
The other new plan, the “standard” tiered repayment plan,
will give borrowers fixed repayment terms over 10, 15, 20, or 25 years, based on the amount they borrowed. The previous standard repayment plan is set over a 10-year repayment period, and the Education Department said the tiers are intended to give borrowers with higher balances more affordable payments by extending the repayment period.
You know, with endlessly piled-on interest that will not be waived.
Many borrowers are going to see their monthly payments double, which is what they get for trying to improve themselves and getting indoctrinated by Marxists.
Will No One SAVE Us? (No)
The biggest change will come for borrowers currently enrolled in existing income-based loan repayment programs. For starters, the Big Bastard Bill eliminated Joe Biden’s innovative “Saving on a Valuable Education” (SAVE) program, which lowered payments and provided quicker loan forgiveness after a number of years of repayment. Two other existing repayment plans, Income-Contingent Repayment (ICR) and Pay As You Earn (PAYE), will stop taking new enrollees today and will be phased out altogether on July 1, 2028. Only one existing income-driven plan, the Income-Based Repayment (IBR) plan, will continue for current borrowers past today without sunsetting.
About seven million people remain in SAVE plans, and starting today, their loan servicers will be sending out notices informing them they’ll have 90 days to move into one of the two new crappy repayment plans, or into the IBR plan, which may provide the best monthly payments and will still allow debt forgiveness after just 25 years, woohoo. If they do nothing, they’ll be automatically moved into the standard/tiered repayment plan, which of course is the most expensive option. That’ll learn ‘em to ever trust a Democrat!
Oh God What Else?
In addition to those big changes, borrowers will see higher interest rates, and the entire student loan program will be transferred from the Education Department to the Treasury Department, as part of Trump’s brilliant plan to eliminate the Education Department with or without congressional approval. We’re sure that will go just swimmingly, and nobody’s data will be lost or hopelessly bollixed, because this administration is full of competent professionals dedicated to doing what’s best for ordinary Americans, not just lazy grifters who slap together policy like hungover frat boys who lost the syllabus the first week of class.
In addition to the other loan repayment programs, there’s also the good old Public Service Loan Forgiveness Program (PSLF), which will forgive loans after 10 years of payments for people entering public service jobs like teaching, many government jobs, and working for nonprofits. So far, a federal court has blocked Trump from excluding politically disfavored nonprofit jobs — like working in a health clinic that provides services to trans people — from eligibility for PSLF, on the basis that such restrictions violate the First Amendment and are “arbitrary and capricious.”
Oh, yes, we did mention in our subheading that there was also half a good idea, in addition to the RAP program’s waiver of unpaid interest for those who keep up their payments. In an incentive for borrowers to set up automatic payments for their loans, the administration announced recently that it would provide a one percentage point reduction in interest for borrowers who choose autopay. But it’s a limited-time reduction that will run only from today through June 30, 2028, and borrowers must sign up by September 30. Wouldn’t want to be too generous, or student borrowers might think they deserve a break like an oil or coal company does.
OPEN THREAD.
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Bonus Bear picture. This is his lion pose.
You need to see his glorious mane.
https://substack.com/@ziggywiggy/note/c-286189152?utm_source=notes-share-action&r=2knfuc
Too hot to cook, had ham sammies the last couple of days so not in the mood for that, watching my funds so no take-out. Not wanting spaghetti either.
Oh I know, to the emergency food cabinet with boxed and canned stuff.
Kraft Deluxe Mac & Cheese and canned French Style green beans (cuz I'm fancy like that.)