EAST LANSING, Mich — Millions of student loan borrowers on the SAVE repayment plan will need to switch to new federal repayment options starting July 1.
Changes to federal student loan repayment plans were made last year as part of the "One Big Beautiful Bill" that President Trump signed into law.
WATCH: Student loan repayment changes coming July 1
"Starting this July, borrowers will have access to two new affordable repayment plans," said Nicholas Kent, U.S. Under Secretary of Education.
Borrowers previously on the "Saving on a Valuable Education," or SAVE, plan will need to move to one of two new federal repayment options: the Income-Driven Repayment Assistance Plan, or RAP, and the Tiered Standard Repayment Plan.
"Right now we have a complex maze of more than 40 repayment and discharge options, and so student loan repayment has become overly complex and difficult to navigate," Kent said.
Kent said issues for borrowers often come from interest rates and negative amortization. Borrowers could meet their minimum payment on time each month, but end up paying more than their starting balance because of interest. The RAP plan addresses this issue.
"Because of an interest subsidy that the new plan provides, as well as a principal matching payment, negative amortization will not happen if you're making on-time payments," Kent said.
The Tiered Standard Repayment Plan allows borrowers to extend their repayment terms beyond the typical 10 years to 15, 20, or even 25 years, depending on their balance.
Monthly payments could change, especially for borrowers whose monthly payment on the SAVE plan was low or zero dollars. Kent said the new options will keep payments low for many borrowers.
"Under the 10-year standard plan, a borrower with a $30,000 initial loan balance would be required to make a monthly payment of about $341 dollars," Kent said. "Under the new tiered standard plan, the minimum monthly payment would drop to about $262 because the borrower could pay over 15 years instead of 10."
Communications have already gone out to borrowers about the changes.
Lenders will communicate with borrowers starting July 1 about switching plans.
Borrowers will have 90 days to get on one of the two new plans.
The MSU Office of Financial Aid said new or current borrowers from Michigan State can reach out to them or Spartan One Stop to explore options.
Kent said borrowers should make sure their information is current with their servicer and visit studentaid.gov for more information on the plans.
Want more FOX 47 News? Here's how you download our Roku app
You can also see the latest news from across our mid-Michigan neighborhoods by liking us on Facebook or following us on X.
