College graduates face federal student loan changes
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College graduates in the Class of 2026 are stepping into an entirely different student loan landscape, with fewer repayment options and stricter rules for debt forgiveness than in previous years.
Overhauls to the federal lending system are part of President Donald Trump’s “big beautiful bill“Last year and other policy changes enacted by the Trump administration.
Nearly 2 million students earn bachelor’s degrees each year, according to the National Center for Education Statistics.
About 60 percent of those students will have student loans with an average balance of around $30,000, according to analysis by higher education expert Mark Kantrowitz. The typical monthly student loan bill is $304.
Here’s what this year’s graduates need to know about federal student loans in light of recent changes.
There are still 6 months until the first bill is paid
An important safety net remains intact for federal student loan borrowers: Your first bill probably won’t be due until six months after you graduate. grace periodsaid Nancy Nierman, deputy director of the Education Debt Consumer Assistance Program in New York.
Those with a Federal Perkins Loan can receive: up to nine months before they need to start paying back.
If your loans are subsidized, the government will pay the interest during the grace period, Kantrowitz said. Meanwhile, interest will accrue on unsubsidized loans.
“After the inactive period, the loan status will change to ‘In Repayment’,” Nierman said. “This will probably happen around December.”
The exact date will depend on factors such as your credit details and graduation date.
To make sure you don’t miss your first payment, you should mark your calendar about two weeks before your first payment is due, Kantrowitz said.
Student loan repayment options are changing
Beginning in the summer, college graduates should explore what repayment options might be best for them, said Betsy Mayotte, president of the nonprofit Institute of Student Loan Counselors.
Options are changing: Some plans have disappeared or will disappear, while new options will begin this July.
The Biden administration-era Value Education Savings, or SAVINGS, plan, which came with some of the lowest monthly bills ever, is no longer available. Those who graduate in the spring will not be able to access the new program. Tiered Standard PlanThe US Department of Education said:
However, starting July 1, borrowers can enroll in the new Repayment Assistance Plan. Under RAP, monthly payments will typically range from 1% to 10% of your earnings; The more you do, the larger your required payout will be. A minimum monthly payment of $10 will be due for all borrowers.
If all of your student loans were paid off before July 1 this year, you will also continue to benefit from the following plans, according to the Department of Education:
- Standard Repayment Plan
- Graduated Repayment Plan
- Extended Repayment Plan
- Income-Based Repayment Plan or IBR
- Income Contingent Repayment Plan or ICR
- Pay or PAY AS YOU WIN
“They can read and use these plans loan calculator to see both monthly payment and long-term costs studentaid.gov” said Mayotte.
“It’s important to look not just at the lowest monthly payment option, but more importantly at the lowest long-term cost options,” he added. “The name of the game is paying the least amount over time.”
Spring graduates who plan to return to school after July 1 and take out student loans again will face more limited repayment options, Nierman said. They will only be able to access new ones Tiered Standard Plan and RAP, he added.
Federal loan forgiveness rules are tightening
You should also see if you’re eligible for any state or federal debt forgiveness programs after graduation, consumer advocates said.
The Public Service Loan Forgiveness program, signed by former President George W. Bush in 2007, allows government and nonprofit employees to cancel their federal student loans after 10 years.
However Trump signed a deal executive order Last year, it was said that borrowers employed by organizations dealing with “illegal immigration, human smuggling, child trafficking, widespread damage to public property and disruption of public order” would “not be eligible” for PSLF. These changes are expected to come into force Julybut they face legal challenges.
Consumer advocates criticized the new restrictions, saying they could allow Trump officials to make any organization they don’t like ineligible for the program. Meanwhile with him PSLF help toolBorrowers can still search for a list of employers who are eligible under the program.
Most state-level student debt forgiveness programs offer relief to borrowers in certain occupations, Kantrowitz said. For example, Maine Dental Education Loan Repayment Program offers dentists in underserved areas of the state a total of $100,000 in student loan repayment assistance.
Other government programs may offer forgiveness based on your financial situation rather than your occupation.
in New York, Stand Up Loan Forgiveness Programlaunched 2015Allows some residents to receive loan forgiveness on payments for up to 24 months. Among other qualification requirements, borrowers must have an adjusted gross income of less than $50,000 per year.
Institute of Student Loan Consultants a database List of student loan forgiveness programs by state.
