Betsy Mayotte: [00:00:00] Unless the parent plus loans have been consolidated. By July 1st, 2026. And then there’s some other steps you need to take, but I want to finish this consolidation bit first, you are never going to be eligible for any income driven plan ever. So anybody with Parent Plus Loans today, they have to consolidate so that consol- and do it in a timeframe that ensures that the consolidation is processed. By July 1st, 2026, which means to be safe, you really need to apply to consolidate by the end of this month.

Jonathan Hughes: Hi everyone and welcome to the MEFA Podcast. My name is Jonathan Hughes, and that was our guest on the show today, Betsy Mayotte. She’s an old [00:01:00] friend of ours and a frequent guest. She’s also a nationally renowned expert on federal student aid, particularly loans, and she’s the founder of the Institute of Student Loan Advisors.

And so we are going to be talking plus loans today, and why are we going to be doing that? Because there is a really important deadline for plus loan borrowers to consolidate their loans in order to be eligible for income based repayments. So otherwise, they’re going to be losing that ability if they don’t start that process soon.

And they don’t get that done by the deadline, which is July 1st. You’ll never be able to do that again. And we’ll also lose out on the chance to have these loans, these plus loans forgiven through the Public Service Loan Forgiveness option program. So also for folks just getting their very first financial aid offers from college.

They’re going to be trying to figure out how to pay a balance due. They also need to know that plus loans are now capped and capped for the [00:02:00] year and capped for a lifetime. They, there are lifetime limits associated with plus loans now, and so we’re doing this show on new plus loan realities and how parents and students should think about their moves in the future.

We’ll be talking about a few of the things as well. I will be back after our talk, so now let’s get to it.

Thank you for being on the show, Betsy Mayotte, founder and president of the Institute of Student Loan Advisors frequent guest on this show. And always, whenever we want to do a show that centers around. Federal loans, whether that’s federal student loans or plus loans. Our first thought is to always have you on the show and again, know how busy you are.

So thank you for making time to be on the show today.

Betsy Mayotte: I love talking about this stuff.

Jonathan Hughes: So actually my first question is, what has been keeping you busy [00:03:00] lately?

Betsy Mayotte: You mean other than, an historic blizzard because that-

Jonathan Hughes: Yes. Other than that, yeah,

Betsy Mayotte: That kept me busy.

Jonathan Hughes: That was, you were right in the middle of that, right?

Betsy Mayotte: Oh, yeah. Jim Cantor was here. It’s not, you’re in the worst of it if Jim Cantor from the Weather Channel decides to set up shop.

Jonathan Hughes: Okay.

Betsy Mayotte: A mile and a half down the road from you. But anyway I’m glad that you asked what’s keeping me busy lately. I have frantically been trying to. Get the word out to Parent plus borrowers about the changes because if you, as you and I have talked about before, arguably parent plus borrowers are going to be the most negatively impacted by the changes around HR1.

Jonathan Hughes: We wanted to get this show out as soon as possible because there is a deadline coming up. Four plus. It’s an important one. So you mentioned that you were trying to get those word out, so I’ll give you the floor to do that.

Betsy Mayotte: All right, dear listeners, I’m going to warn you right now, this is going to be one of the most convoluted, [00:04:00] confusing things you may ever hear me say.

And I’ve done my best to try to curate my words to make it the least convoluted and confusing as I can. This is the best I’ve been able to come up with. So one of the big things about HR1 is they made significant changes to payment plans

Jonathan Hughes: And just in case anybody’s not sure, HR1 is.

Betsy Mayotte: The budget bill that was passed last summer.

Jonathan Hughes: Okay.

Betsy Mayotte: Parent Plus loans in and of themselves are not eligible for any plans that are based on income. So if you have high debt. And lower income and or if you’re a parent plus borrower who’s working for a nonprofit or government employer and are pursuing public service loan forgiveness, you need to be able to access plans based on your income today.

The way to do that is to consolidate what HR one did is said. Unless the [00:05:00] Parent Plus loans have been consolidated by July 1st, 2026. And then there’s some other steps you need to take, but I want to finish this consolidation bit first. Yeah. You are never going to be eligible for any income driven plans ever, so anybody with Parent Plus Loans today.

They have to consolidate so that consol and do it in a timeframe that ensures that the consolidation is processed by July 1st, 2026, which means to be safe. You really need to apply to consolidate by the end of this month. Now normally consolidation only takes around 60 days on average, but I fully, we can’t guarantee that, and nobody can control the time it takes to process, which is why I am saying to be safe, you really need to apply by the end of March.

Now, in addition to that, after you consolidate, you can [00:06:00] never. Borrow another federal student loan in your name again, and that includes a consolidation on or after July 1st, 2026. Because if you do, they’re going to take away your current eligibility for income driven plans.

Jonathan Hughes: You didn’t even think about that part.

Betsy Mayotte: Yep. If you are a parent who has Parent plus loans today and you were counting on. The income driven plans to make the plans affordable are because you were pursuing PSLF. Not only do you, but you still have kids in school. And you’re like, okay, but then what? How do I pay for future child’s education. You’re going to have two options. One is hopefully there’s another parent who can borrow the future loans and that way the existing loans won’t be contaminated, so to speak. The other option is private loans, which, you got to be careful with private loans because many private loans don’t have any [00:07:00] lower payment options at all.

And in most cases with undergrad, the parent does have to co-sign, therefore be equally liable. For that. Now, I know MEFA has private loan programs and I know that there may be some flexibility with those, but I’m just saying broadly. Private student loans, people just need to approach with education and I and caution.

But anyway, getting back to. Parent plus loans. So again, if you have parent plus loans and you want to preserve your ability to utilize a plan based on income, by the way, another reason for that, maybe you don’t need an income driven plan right now, but you plan on retiring in the next couple years. That might be a reason that you want to preserve your ability to use an income driven repayment plan.

So in addition to consolidating by July 1st. Meaning apply soon, so it’s done by [00:08:00] then. You also are going to be required to make one payment before July, 2028 on the plan called Income Contingent Repayment. That’s what, that’s your open sesame key. After you make that one payment on ICR, you’ll then be eligible for the lower cost income-based repayment. I told you it was convoluted, right?

Jonathan Hughes: Yeah. So let me get this straight. So this is for parents who have parent plus loans who want to get on an income contingent repayment plan. In order maybe to consol to take advantage of public service loan forgiveness or just to be on that plan. They need to consolidate by July 1st, meaning 2020.

Betsy Mayotte: It’s processed by then.

Jonathan Hughes: Yes, it’s processed by then and then after. So that’s the first deadline they have to worry about is that July 1st, 2026, one. Then after that, they have to make one payment on that income contingent [00:09:00] repayment plan. Would they have two years to do? Is that right?

Betsy Mayotte: Yep.

Jonathan Hughes: Okay.

Betsy Mayotte: They have to make that one payment under ICR by July, 2028. Now, listen, ICR for most people is the most expensive monthly payment.

Jonathan Hughes: Oh.

Betsy Mayotte: So if you’re doing the loan simulator tool, or we’re about to have a new calculator on the TISLA website. And you see the amount of your ICR payment and go, oh my goodness, I can’t afford that.

You only have to afford one payment. And then at that point. You’ll be able to get on IBR, which is again, for most people, a lot cheaper. Or you’ll still be able to use graduated repayment or extended repayment, and they’ll be forever grandfathered at that point. They will forever be grandfathered into income-based repayment if they ever need it. As long as they don’t borrow again.

Jonathan Hughes: As long as they don’t borrow because if you borrow again, it’s over. You’re a new borrower. Is that right?

Betsy Mayotte: If you borrow again, your Parent Plus loans consolidated or not, will only be [00:10:00] eligible for what’s called the tiered Standard plan. And that plan is not based on income or expenses or anything else, and it’s not PSLF eligible.

Jonathan Hughes: So how does someone actually do this? Let’s imagine someone’s hearing this for the first time, they want to do something about it. How do they actually go ahead and consolidate?

Betsy Mayotte: Studentaid.gov? And they could apply for ICR as part of that process to get that one payment out of the way. If they want to get that one payment out of the way right away. But yeah, studentaid.gov, they just apply online. It’s pretty simple. One other thing to mention is all the income driven plans, they base the payment off of. The borrower’s adjusted gross income, assuming they’re using a tax return as proof of income, which is what’s recommended. Now, if the borrower’s married and they file their taxes jointly, they’re going to use both incomes in the calculation.

So if you’re worried about that ICR payment [00:11:00] or even your future IBR payment, you might want to wait to apply for that until you can file your taxes separately. So at least they’re only using your income.

Jonathan Hughes: Okay.

Betsy Mayotte: And not both incomes in the calculation.

Jonathan Hughes: Is there anything else that you want to mention to parents who are thinking about doing this other than do it soon?

Betsy Mayotte: Some other changes with parent plus loans are for future loans. They’re reducing the amount you can borrow. You’re only going to be able to borrow. 20,000 a year per dependent undergraduate student, and a maximum of 65,000 per dependent undergraduate students. So it’s super important to budget for the whole college career now, instead of just doing the, what a lot of families do, which I get is, all right, let’s just get. Get through this year, we’ll worry about next year. Next year. You can’t do that anymore.

Jonathan Hughes: Yeah.

Betsy Mayotte: Because you might run out of funding. And then of course, again, with this other, for those [00:12:00] borrowers that already have parent plus loans and really need to need the ability to access lower payment options, there’s all that r role that I just went over with you.

Jonathan Hughes: Yeah. Because there’s. Two new payments. And I think maybe should we just go over that again just in case someone’s, let’s say they’re not worried about, consolidating or anything like that. They it, let’s say if somebody’s just going on they’re in the middle of their.

Financing their child’s education, they’re borrowing the plus. What options as far as repayment is go, are going to be open to them because they’re going to be borrowing new loans. So they none only be eligible for none. Does none at all.

Betsy Mayotte: They’re going to be, they’re going to be offered a standard plan. And that’s it. The term of the plan will be based on how much they owe in total. And that’s it. And even a situation where. They may not think they need a lower payment option in the future. And they still [00:13:00] have to borrow. I still want these people to consolidate and have the other parent borrow the future loans because sometimes life can throw you a left hook, so you might not think that you need, lower payment options in the future, and I hope you don’t.

Jonathan Hughes: Yeah.

Betsy Mayotte: But boy, it’s, to me, that’s like going without insurance. Without insurance.

Jonathan Hughes: And what about the loan limits? Are they going to be subjected to the $20,000 loan limit if they’re midway through their funding there?

Betsy Mayotte: So there is a grandfathering for all the new loan limit changes. So if the student is actually enrolled in a program as of June 30th. And they, and there was a prior direct loan taken out for that program. Then they’re going to be able to borrow with the existing limits, which there aren’t any existing limits. They could borrow up to the cost of attendance minus other eight for the lesser of three additional years or until the student should have completed their program, whichever is less.

Jonathan Hughes: So the other [00:14:00] part of this, that, and you just we’ve just been going over it, but, that makes this timely is that loan limit piece, because we know that a lot of parents who this is their first time going through it are going to get that financial aid offer and be looking to finance some of that.

And we know that the plus loan, is a popular loan for people to take. Again, I just wanted to stress. That yearly limit, but even more importantly, the aggregate limit. So once again, it’s 20,000 per year. And how much is it per for the aggregate?

Betsy Mayotte: It’s actually.

Jonathan Hughes: Per student.

Betsy Mayotte: We need to be calling it a lifetime limit now.

Jonathan Hughes: Okay.

Betsy Mayotte: But it’s 65,000.

Jonathan Hughes: So if you are think, like you said, be mindful of the entire degree, right? If you’re thinking about borrowing Plus and you’re doing the math, however much you’re borrowing times for, if that exceeds 65,000 you want to be careful about how you borrow, right?[00:15:00]

Betsy Mayotte: That’s right.

Jonathan Hughes: What, are there other options really? You mentioned private, but is that really it?

Betsy Mayotte: There are other options. One is to have the child attend a lower cost school for the first two years. Like a community college. And that’s something, this is not a new recommendation, 70%. Undergraduate students change schools or majors before they finish. So going to a lower cost school and or community college for the first two years. First of all, it may, if that student ends up changing majors or changes their mind on their Dr what their dream school is, you haven’t spent a lot of money on those first two years. You know what I mean? You haven’t the sunk cost isn’t as high at that point.

But even if they don’t, you’ve saved a lot of money by going to the lower cost school for the first two years. Just make sure that whatever the dream school is that they’re going to transfer into will accept the credits from.[00:16:00]

The first institution, the first two years of undergrad, for most programs, you’re all taking the same type of credits. You don’t really get into the credits that are important to the major until the junior and senior year. So that’s one way to make sure you don’t run out of federal money.

The other way is to have the student live at home so that the money’s not going towards board at the school. Have the student attend less than full-time. Although this might be a good transition to the proration question. You, I think you were going to ask me.

And work and help contribute to the cost of the tuition so you can pay more out of pocket rather than putting it all on loans.

Of course now there’s new rules. I know you haven’t asked me the question, but I know you were, go ahead. That’s okay. Yeah. There’s new rules starting in July of 2026 that if the student’s not attending full-time, the school’s required to prorate the [00:17:00] amount, they can’t get, the maximum amount of the loan they have to prorate the amount of the loan that they can get for that year.

Jonathan Hughes: Okay. So then, yeah how do we think about that as far as, so if new undergraduate students are going in and they know they’re a able to borrow 20,000 through the plus, but they need to be enrolled, they need to be thinking about whether or not they’re going to be enrolled full-time or halftime, et cetera, to see how much of that plus they’re actually eligible to receive. Is that right?

Betsy Mayotte: Yeah, that proration rule. The only folks that, that I, that really worries me. Are what we call tend to call non-traditional students.

Which are, they tend to be older adults that already have families and work and only go to school. A lot of single parents, for example, and they can only can go to school part-time, but they need the full loan amount.

Or they’re not going to be able to afford school. So that’s who I think will be really negatively [00:18:00] impacted by this new proration role.

Jonathan Hughes: And does that roughly work out, if you’re a halftime student, you get 10,000 versus 20,000, or how exactly does that work? Is that known yet, really?

Betsy Mayotte: It, yeah. It’s a pretty straight percentage.

Jonathan Hughes: So given those limitations in mind, knowing that. Parent plus loan borrowing is going to be limited and there’s going to be more people looking for other funding options. Is that how should families be looking at those options and how, what are some resources perhaps that that folks can use to make the best decision for them as far as what they do end up borrowing if they go that route?

Betsy Mayotte: So I don’t give recommendations for specific entities. It’s one of our commandments at Isla, and it ensures that we remain neutral, but there are tons of tools online that helps you compare [00:19:00] different loan products with each other. But I will caution people that a lot of those tools, they only generate results.

For the lenders they have agreements with. So don’t just use one tool. And you also want to make extra sure that you read all the terms and conditions. For example do they have lower payment options? How long can you defer the loans while the student’s in school? If you’re an undergrad, but you plan on getting a master’s degree, are you still going to be able to defer the loans then?

Is it a fixed or variable interest rate? If it’s variable, how high can the rate go?

Will you be required to make payments while in school, even if it’s just interest only, which by the way, I would recommend people do. Are there co-signer release programs and if so, how difficult are they to obtain?

If life gives you a really bad left hook so you become disabled or. [00:20:00] Worse than disabled. Will the loan, can the loan be discharged?

So those are all really important things to look for when you’re shopping around for a private student loan or something different. It could be state loans too, the state loan. I think institutional loans might be making a comeback where the school is the lender. But my advice applies to all of those categories.

Jonathan Hughes: And so I guess we’ll finally get to Grad Plus now because as you said, the Grad plus program is being eliminated. So there won’t be any more graduate plus loans beginning next year.

Is this also a, is this a, a hill rather than a cliff? That is if you’re in the middle of your grad program. Can you still continue or-?

Betsy Mayotte: The grandfather rules up are the same way If as long as you’re enrolled as of June 30th. I’ve taken out a direct loan of any kind prior to that where it was disbursement, at least dispersed prior to July [00:21:00] 1st. You’ll be grandfathered in for the lesser of when you should have been done your program, or three years. So for example, if you’re in a two year master’s program and you should complete in another year. If something happens and it ends up taking you longer, you’re still only going to have one year left of grad plus.

Jonathan Hughes: I guess I would finish just by asking about one other thing and it’s an outlier given what we’ve been focusing on, but that is the public service loan forgiveness buyback program. Is that something that you can discuss or?

Betsy Mayotte: Sure. PSLF buyback is something in regulations that says, listen, if you were in a deferment or forbearance while you were working PSLF eligible employment, and you realize that if you, instead of taking that deferment of forbearance had been on an income driven plan, those months would’ve counted for PSLF [00:22:00] down the line. You can go, Hey, let me know how much I would’ve paid during those months if I had been on an income driven plan.

Instead of this deferment or forbearance and I’ll give that to you in a lump sum. And then you go ahead and count those months. That’s what buyback is. Now. You can’t apply for buyback until you have on the books you’ve certified 120 months of eligible employment, including those months that you’re going to be trying to buy back.

You can’t buy back periods where the loan was in an in-school status. You can in school deferment, and there is a difference between the two. You can’t buy back periods of default, you can’t buy back periods that happened prior to a consolidation. But in general, most deferments and forbearances, assuming you haven’t since consolidated, you’ll be able to do buyback for now. With that said, right now [00:23:00] buybacks are taking 12 to 18 months to process.

So for some people. Applying for buyback because they’ve hit the 120, but still continuing to make eligible payments. And then seeing which one gets you over the finish line first. Is the strategy that people are using.

Jonathan Hughes: Okay. Okay. Interesting. We are going to go ahead and get this out as soon as we can so that we can, let folks know in time what they need to do in order to take advantage of that consolidation opportunity before that goes away. Before we go though, is there anything else that you would like to say?

Betsy Mayotte: Just because it’s timely for people that are stuck in the save limbo? You might have heard that. Last week the courts dismissed the case. There was a settlement agreement that we were waiting for the courts to sign off on between the Department of Ed and the plaintiffs and the settlement agreement basically said, we’re both on the same page now we don’t think save is lawful.

The court looked at it and went wait a minute. Our job as a [00:24:00] court is to field. Disputes, you guys aren’t disputing anymore, so we’re just going to dismiss the case. And that threw everything into turmoil. So there was a lot of speculation of wait a minute, if the case was dismissed.

Then isn’t the Department of Education going to be forced to let people back on save? At least until 2028 when Congress got rid of it and the law. Missouri, which was one of the original plaintiffs, they filed an appeal to the court saying wait. You should not have dismissed this case. So I thought we were going to get an answer to that appeal on Wednesday by close of business that I haven’t seen a thing.

So, this is unprecedented territory. There’s a bunch of different scenarios. The short answer is because I think it would be a whole other podcast to talk about what those potential scenarios are. And I don’t know how useful that would be anyway because it’s all speculation. While there’s a non-zero chance that Save could come back briefly.[00:25:00]

I think it’s real close to zero. I think that’s incredibly unlikely that save will come back. But again, it’s not a non-zero. So I incur I expect we’ll at least have a small update in the next week or so. Finding out if the court’s going to accept the appeal or not.

Jonathan Hughes: Okay. We’ll be on the lookout for that and I’m sure we’ll have you back on to discuss further developments.

But thank you so much for being here and for help getting the word out there. Hopefully I can help you do that and people will get on that payment plan if they need to.

Betsy Mayotte: Awesome.

Jonathan Hughes: All right, Betsy.

Betsy Mayotte: Till the next time.

Jonathan Hughes: Okay. Bye-bye. All right. Thank you Betsy. It’s always a pleasure to have you on the show. There’s no one else better to talk about these things and we are really lucky to be able to to work with you. So [00:26:00] folks, if you liked what you heard in the show today and you want to hear more from us, I’m. Planning, saving, and paying for college and career readiness.

We’ll then follow the show. And you can do that wherever you find your podcast. And please remember to leave us a good review. I would like to thank our producer, Shaun Connolly. I’d like to thank Lisa Rooney. Lauren Danz, Christina Davidson, AJ Yee, and Meredith Clement for their assistance in posting the show.

Once again, my name is Jonathan Hughes and this has been the MEFA Podcast. Thanks.