U.S. student-loan overhaul raises repayment costs for borrowers and parents, CAP report says

Traders Union
All News
Economic Data
Student-loan overhaul raises costs

Highlights

Center for American Progress reports borrowers transitioning from SAVE to RAP face average annual payment increases of $2,163, with typical bachelor's earners paying $343 monthly.
The overhaul caps parent PLUS loans at $65,000 for loans originated after July 1, 2026, restricts access to income-contingent plans, and removes economic hardship deferrals.
Federal Student Aid data show 9.3 million borrowers already in default and 1.5 million more at imminent risk as new rules heighten default exposure.

Repayment changes increase borrower costs

As reported by Business Insider, the Center for American Progress released a report on Monday examining how the new federal student-loan repayment rules are changing bills and relief options for borrowers. The think tank said borrowers moving from the SAVE plan to the new Repayment Assistance Plan, or RAP, could see their student-loan payments rise by $2,163 a year on average.

The report says a typical borrower with a bachelor's degree earning about $68,615 a year would see monthly payments increase from $136 to $343, a rise of $2,482 annually on average. Its findings are based on U.S. Census Bureau income data from the American Community Survey and the Survey of Income and Program Participation, adjusted for inflation using the consumer price index.

The overhaul, signed into law in Trump's spending legislation and in effect since July 1, replaces the SAVE plan with new income-driven repayment options and borrowing caps. While RAP includes a benefit that waives unpaid monthly interest, borrowers must make on-time payments to receive that protection, with no grace period.

Sara Partridge, associate director of higher education at the Center for American Progress and a coauthor of the report, said SAVE had allowed zero-dollar monthly payments while RAP sets a $10 minimum. She said that safeguard was important for many borrowers and argued that higher required payments are arriving during a period of high inflation, stagnating wages, and broad financial pressure on household budgets.

Parents lose flexibility as default risks rise

Parents are also facing tighter borrowing and repayment rules under the overhaul. The report says parents who take out parent PLUS loans after July 1, 2026 face a lifetime borrowing cap of $65,000, compared with the previous ability to borrow up to the full cost of attendance for their children.

Those new parent borrowers are limited to the more expensive tiered standard repayment plan and lose access to the income-contingent repayment plan. Beginning next year, all borrowers also lose the ability to defer student-loan payments because of economic hardship or unemployment, removing a backstop that some households have used during periods of financial stress.

Partridge said the loss of those options could leave more borrowers delinquent or in default. Default on federal student loans typically occurs after 270 days of nonpayment and can lead to wage garnishment and the seizure of federal benefits such as Social Security.

The most recent Federal Student Aid data show 9.3 million borrowers are already in default, with another 1.5 million at risk of defaulting within the next six months. The Trump administration says the changes are meant to simplify the repayment system and curb excessive borrowing, with Undersecretary Nicholas Kent saying in a statement that the overhaul is intended to preserve access to federal student loans while helping prevent borrowers from taking on debt they may never be able to repay.

Our earlier report on Deutsche Bank upgrading Walmart highlighted how persistent inflation is boosting the retailer’s appeal among budget-conscious shoppers and supporting expectations for further market-share gains. We also noted that Walmart’s push into higher-margin businesses, automation, and digital services—including its AI shopping assistant Sparky—was cited as a key driver for improving margins and sustaining growth.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.