Julie Shields Rutyna: [00:00:00] Well, good evening everyone. My name is Julie Shields Rutina. I’m the director of college planning, education, and training at MEFA, and I am here with my colleague, Shawn Morrissey, who’s the director of college relations at MEFA. And we’re also here with our presenter this evening, Betsy Mayotte. And Betsy is the president and founder of TISLA, which is the Institute of Student Loan Advisors, and that’s a non-profit organization that provides free one-on-one student loan advice to borrowers.

So Betsy has been working in the student loan industry for over 20 years, and is an expert focusing on compliance, advocacy, and borrower support. I won’t say much more except that Betsy is frequently quoted in the media, and, um, has in the last couple of years been named Money magazine- in [00:01:00] Money Magazine’s Top 50 Influential Change Makers in America’s fine m- fine- finances

And we’re just so thrilled to have Betsy here. We turn to her with all kinds of questions on, um, about loans and loan repayment and, um, I’m gonna, I’m gonna not take another moment and let Betsy begin to, uh, share lots of great information with us tonight. Uh, Shawn and I will be answering questions behind the scenes, but we also can share some, some questions with Betsy as the webinar goes along.

So, um, with that, Betsy, I’m gonna turn it over to you.

Betsy Mayotte: Thanks, Julie. Okay, listen, before I get into the meat and potatoes of all this, I wanna set up some sorta housekeeping. Um, as Julie mentioned, uh, her and Shawn are gonna be answering q- uh, questions behind the scenes. Uh, we ask that you use the Q&A panel.

I saw someone had their hand raised. Maybe they were waving. If you were waving, hello. Uh, but we’re not gonna be calling on [00:02:00] anyone that raises their hand. So do put your questions in the Q&A. But I’m gonna tell you to slow your roll on that. If I’m doing my job correctly, I’m gonna answer your question as part of my soliloquy during this.

So hold off on your questions until we get to the topic that your question pertains to, and then if you still have questions and I don’t answer it, then absolutely put it in the Q&A. Every once in a while, I’m gonna take a breath, I’m gonna check in with Julie and Shawn, say, “Hey, is there something that I’ve already covered that might need further clarification?”

And they’ll either go, “No,” or they’ll go, “Yes, Betsy, you should talk more about this.” And then I will talk more about that. Listen, this is being recorded. This is a public session. You don’t need other people knowing your business. So this is not the place to, to ask very intricate, detailed questions that have a lot of personal information about you.

If you still have questions after, TISLA, uh, we are Massachusetts. We are a Massachusetts-based nonprofit, although we do [00:03:00] serve nationally, but go Red Sox. Um, if you go to our website, which is freestudentloanadvice.org, go to the Contact Us page if you still have questions. Um, we answer… We do all our one-on-one counseling via email.

We cannot do phone service, period. Uh, you can also contact MEFA with your questions. Uh, so that’s the place for, like, the personal, intricate, this is what my income is, these are my childrens- these are the children I have, that kinda thing. Um, okay, so the purpose of the webinar tonight is to talk about the repayment plans.

What… If you have federal student loans, what payment plans you have at your disposal. Now, there’s been a bunch of changes. Some of those changes were because of litigation. Some of those changes were because of the budget bill that passed last summer. By last summer, I mean 2025. Uh, that would be HR1. So, and that’s caused a…

All those things have caused a lot of confusion. So I’m here to tell you what payment plans you might be eligible for, and how to pick which [00:04:00] one is best for you. Speaking of which, here’s the thing, especially the past few years, there’s a lot of talk about student loan forgiveness. Um, that is not the name of the game.

The name of the game is to pay the least amount out of your own pocket over time. Now, for some people that does mean pursuing a loan forgiveness program, but for other people it might mean paying your loans off aggressively. Fact of the matter is, the vast majority of borrowers are going to end up paying their loans off themselves.

You know, when we talk about student loans, we’re talking about the person that owes, you know, $400,000, or the person that owes $200,000. The average student loan debt in the United States, which is actually very similar to the average student loan debt here in Red Sox nation, is about 38,000. So again, most people are gonna end up paying their loans off in full themselves.

One last thing I want to say about this s- about your, your overall strategy, which again, is to pay the least amount out of your own [00:05:00] pocket over time. Um, you should not pick a plan and set it and forget it. Uh, financial goals change. Financial situations change. I strongly encourage everybody within the sound of my voice to get in the habit of reevaluating your student loan strategy once a year.

Best time to do that, in my opinion, is tax time, and that’s because you have most of what you need in front of you to sort of run the numbers again at tax time. So if you remember nothing else from this webinar, I’d like you to remember, um, again, name of the game is paying the least amount over time, and to reevaluate your student loan strategy on an annual basis All right, so really quick.

There’s sort of three buckets of student loan types, and it’s s- the most important thing, the first thing you need to know is what kind of loans do I have? Um, the two main buckets are federal loans and private loans, [00:06:00] but in the middle of those two buckets, there’s a smaller bucket and that smaller bucket is sort of a subset of federal student loans.

Um, if you took… If, if you know for a fact that you have all federal loans, and you know for a fact that you never ever, ever took a loan out prior to July 1st, 2010, then you can be assured that what you have are loans under the Direct Loan program, and that can be a Stafford loan, can be a Grad Plus, Parent Plus, could be a consolidation.

But if at some point you did borrow prior to July 1st, 2010, it’s possible you have loans under another, other federal programs such as what we call the Federal Family Education Loan program, or FFEL. Um, those can also… This is where it gets confusing. Those can also be Stafford, Grad or Parent Plus, or consolidation.

Um, you could have Perkins Loans. They, that program existed till 2017. Um, there was a federal program called the HEAL program, which was [00:07:00] for medical students. They stopped making those in like the mid-’90s, but they’re still out there. Um, there’s another federal program called Loans for Disadvantaged Students.

Bottom line is this. Go to studentaid.gov. If the loan is there, it’s a federal loan. That’s first, first issue resolved. Then look at the disbursement date. If the disbursement date’s b- after July 1st, 2010, you know it’s a Direct Loan. If it’s before July 1st, 2010, you need to find out if it’s a FFEL, a Perkins, that kind of thing.

And the way to do that is look at the loan. Most of the time it’ll say Direct in front of it, or it’ll say FFEL in front of it, or it’ll say Perkins. If you’re still not sure, call your servicer and ask them. This matters because what payment plans you’re eligible for has everything to do with what kind of loan it is and when you took the loan out.

So while you’re checking, also check, uh, write down the, uh, disbursement date of the loan, [00:08:00] ’cause you’re gonna need that when figuring out which payment plans you’re eligible for. The last bucket are, uh, loans that aren’t federal. So private loans, institutional loans. Those are loans that where the school is actually the lender.

Um, state loans, so like here in Massachusetts, we have the MassSO Interest Loan. Um, those loans, private, institutional, state loans, are never eligible for any of the plans I’m gonna be talking to tonight, talking about tonight. Um, so if all you have are private loans, I’m gonna give you the next, your next 50 minutes of your life back because we’re not gonna be talking about private loan options, um, uh, during this webinar All right, as I mentioned, um, you w- if…

to find out what kind of loan you have and to look at the disbursement date and to find out who your loan servicer is and all kinds of other fun stuff, you want to go to studentaid.gov. That is the Department of [00:09:00] Education’s website. Now, studentaid.gov is where you’re gonna see what kind of loans you have, what school they were for, when they were dispersed, uh, whether they’re in default or not.

If you’re someone who’s pursuing the Public Service Loan Forgiveness program, for example, you’ll be able to see your PSLF count on this site. This is not your servicer, and this information also isn’t live. Your servicer will also be listed on this site. You’ll look at your loan details, and it’ll tell you who your servicer is.

But your loan servicer is who you’re gonna actually make your payments to, um, who you’re gonna interact with, uh, with, with questions on a daily basis. Uh, your exact loan balance is at your loan servicer. So, um, I get a lot of questions from borrowers. “Hey, listen, the FSA website, which is studentaid.gov, it says my balance is $1,000, but my servicer at Financial says my balance is $998.

Which one is right?” Your loan servicer’s right [00:10:00] because, again, the servicer’s information is live, um, but they are the ones that feed the information to studentaid.gov, and they only do it about once a month. So, um, you know, again, for basics, what kind of loan do I have, who’s my servicer, what status am I in, that kind of thing, studentaid.gov is great, but most of the time you’re gonna want to interact directly with your loan servicer.

With that said, this session’s about payment plans. Most of you are gonna want to apply or change plans through studentaid.gov. Most of the time, that’s the quickest way. Um, and you do that under Manage Loans. You’ll see it, it’s actually pretty easy. This website’s actually pretty easy to navigate. There’s also a calculator called the Loan Simulator Tool that can give you an idea of not only what your monthly payment might be on the plan- on the various plans you’re eligible for, but remember back to my first slide, it’ll also show you how much that plan is gonna cost you over time.[00:11:00]

So again, that’s really important information to be aware of. All right, I mentioned consolidation loan. Just really quick, I want to give you a warning. If you haven’t already cons- so over the years, and as Julie mentioned, I have been doing this since the Earth cooled. It’s actually close to almost 30 years now I’ve been doing this.

There’s been various periods in student loan history where we were strongly encouraging people to consolidate, and for good reason. The most recent period where we were strongly encouraging people to consolidate was right around 2024, and that was because of a waiver that the Biden administration had in place.

That’s, that deadline is gone. Um, these days, if you have all federal direct consolidation loans, there is almost zero reason for you to consolidate. In fact, it might actually harm you. Consolidation is when you, through [00:12:00] the federal government, you, instead of having individual little loans, you apply to have all those individual little loans paid off and have them create one great big fat new loan.

Your interest rate is a weighted average of the interest rate of the loans you consolidated, and Some people, uh, again, in the past, consolidation was a way to get certain benefits. But these days, not only are you not gonna get any additional benefits by consolidating, you’re actually gonna lose access to many of the payment plans that you’re probably eligible for today.

To add insult to injury, anybody who consolidates after June of 2024, if you’re pursuing the forgiveness that’s baked into the income driven repayment plan, so if y- and I’m gonna talk more about those in a minute. Um, so for those plans, if you’re on them for either 20 years, 25 or 30 years, depending on the plan, and you still have a balance, [00:13:00] the government forgives the balance.

If you consolidate, it resets your income driven plan count to zero. Um, if you’re pursuing public service loan forgiveness, consolidation does not reset your count to zero. But if you consolidate after June 30th of 2024, it reset your income driven plan count to zero. So again, um, most people there is not only will consolidation not help you, it’s probably gonna hurt you.

The reason I emphasize this with such passion and vigor is because there’s some messaging on the Department of Ed’s website right now that burns my buttons, and I have been yelling at them about it for over a year now. Um, and the messaging is something to the effect of, “Hey. Hey, buddy, listen, if you consolidate your loans, you might be eligible for different repayment plans.

You should do that.” Wink, wink, nudge, nudge. It’s not true. [00:14:00] Um, as I… Consolidation, if you’re consolidating direct loans, uh, FFEL loans and Perkins are a different story, and I’ll talk about that in a minute. But if you consolidate direct loans, not only will it absolutely 100% not make you eligible for plans you’re not eligible for now, but it will take away options that you have available to you now.

So don’t listen to that wink, wink, nudge, nudge person whispering out of the alley on the Department of Ed’s website messaging

All right. So HR1, the budget bill that passed the summer of 2025, they made, it made bigger changes to the student loan world than we’ve seen in a long time, and quite frankly, made changes that we’ve never seen Congress make before. In particular, in the past, Congress has never, ever removed existing benefits from existing borrowers.

[00:15:00] HR1 did that. Um, and I am still salty about it. In fact, I have a letter drafted that I am sending out to members of Congress, uh, in the next couple days as we speak. But here’s the bottom line. Anybody who borrows a loan or consolidates on or after July 1st, 2026, regardless of their past loan borrowing history, is only gonna have access to the new repayment assistance plan or a tiered standard plan.

That’s it. So even if you have loans where you’ve been on the plan called extended repayment, or you’ve been on the plan called income-based repayment, or pay as you earn for years, if you consolidate or borrow a new loan on or after July 1st, all that is gone. You can only get the RAP or the tiered standard.

Um, in addition to that, if you are a Parent [00:16:00] PLUS borrower and you borrow or consolidate on or after July 1st, 2026, you can’t even get the RAP plan. All you can get is that tiered standard plan. And that applies to all of your loans, not just the new loan that you took out on or after July 1st, 2026. Um, if you don’t borrow or consolidate on or after July 1st, 2026, you will remain eligible for the plans you’re eligible for today.

The only exception to that, as you’ll see in a minute, there’s two plans that are being sunsetted in 2028. But other than that, as long as you don’t borrow or consolidate on or after July 1st, 2026, you will forever remain eligible for the plans you’re eligible for today. Um- You will see as we go further that for older, for borrowers that don’t borrow or consolidate on or after July 1st, 2026, [00:17:00] the day you took your very first student loan out ever, ever, ever, ever, ever is, uh, gonna be a big component about which income-driven plans you’re eligible for.

This sort of, what I’m about to say, tracks back to what I was saying a minute ago about the deceptive messaging on the Department of Ed’s website. Consolidation does not change the history of your borrowing. So if you borrowed a loan in, say, 2010, and you really would like to be eligible for the plan called New IBR, which requires that you never borrowed prior to 2014, consolidation is not gonna change history like that.

So again, despite what the Department of Ed’s messaging says, it’s wrong. Consolidation, the only way consolidation changes your payment plan eligibility is if you have FFEL or Perkins, um, or as I mentioned, if you consolidate on or after July 1st, 2026, you lose access to everything except the REAP or the tiered standard plan [00:18:00] If you do have one older loan and the rest of your loans are newer, paying off that older loan is not gonna change the history either.

Um, and the triggering event as to when your first loan was taken out is gonna be the first disbursement date, and you can find the first disbursement date of your first loan on the studentaid.gov website. You gotta go into loan details and see the individual loans All right, so let’s talk about the plans that are, uh, options for people that borrow or consolidate on or after July 1st, 2026.

As I mentioned, you only have two options. You have what’s called the tiered standard plan, and you have what’s called the repayment assistance or the RAP plan. Now, for those of you pursuing loan forgiveness under either public service loan forgiveness or the income driven repayment plans, the RAP counts [00:19:00] towards both of those, and I’ll talk more about that in a little bit.

The tiered standard plan does not count for those. Um, the new tiered standard plan is, is fairly simple. The t- the amount of time you’re gonna have to repay the loan will depend on the total amount that you owe. So if you owe under $25,000, you’re gonna be given a 10-year term. They’re gonna figure out how much you need to pay every month for 10 years to pay the loan in full, and that’s gonna be your payment amount every month for the 10 years.

If you owe between fif- $25,000 and $50,000, you’re gonna get 15 years. If you owe over $100,000, you’re gonna get 25 years, and that’s it. You’re never gonna have more than 25 years. Um, you’re never gonna have more than a 25-year term under the tiered standard plan. As a reminder, any Parent PLUS borrowers, regardless of the history, if you borrow or consolidate on or after July 1st, you can only get the tiered standard plan.

Now, [00:20:00] the RAP plan is based on your income What they do is they look at your adjusted gross income and they take a certain, certain percentage of that AGI, divide that by 12, and that’s your monthly payment amount. Your payment can never be under $10 a month under the REAP. So if your income is under 10 grand, your payment’s gonna be $10 a month.

So $120 a year, which is divided by 12, is $10 a month. Let’s say your income is between $50,001 and 60 grand. In that scenario, they’re gonna take 5% of your AGI, divide that by 12, and that’s your monthly payment amount. The REAP plan, like all of the income-driven re- re- payment plans, requires that you recertify your income on an annual basis.

So your payment’s gonna change. Unless your income doesn’t change at all, uh, your payment’s gonna change every year. It’s either gonna go up or it’s gonna go down. There is no cap to how high the payment can go under either the [00:21:00] REAP or the tiered standard plan. Um, under the tiered standard, again, the payment’s based on your term and how much you owe and your interest rate.

Under the REAP plan, the most AGI they’re ever gonna calculate you on is 10%. So once you’re making over $100,001, uh, they’re gonna take 10% of your AGI for the REAP. Um, if you’re making $800,000 a year, they’re gonna take 10%. If you’re making $5 million a year, they’re gonna take 10% as the calculation for the REAP plan

Um, I already talked about the tiered standard. All right, couple thing, couple more things about the repayment assistance plan. So for all the income driven plans, including the RAP, your AG… If you’re married and you file your taxes jointly with your spouse, they are gonna use the joint income. Now, I know people get their back up about [00:22:00] that.

Wait a minute, um, our finances are separate, my spouse has no responsibility to my student loans. That’s great. My grandparents were married for almost 70 years, and grandpa used to say all the time, “When money goes out the door, love goes out the window.” Not exactly sure what that meant. Um, that’s fine, but federal law doesn’t care.

If you are taking advantage of the tax benefits of filing jointly as a married couple, the flip side to that is you have to count both incomes in the income driven repayment plans. Now, if you’re married and you file your taxes separately, then they’re only gonna look at your income. There is no way around that.

Um, now, if you have dependent children that you claimed on your tax return, they are gonna subt- they’re gonna figure out what your base payment is, and your base payment is your AGI multiplied by whatever percentage is appropriate based on your income, [00:23:00] and they divide by 12. That’s your base payment. For every dependent child that you claimed on your tax return, they’re gonna subtract $50 a month from that.

So let’s say your RAP payment, the base payment calculates out to $300 a month, but you have two dependent children that you claimed on your tax return. That means your RAP monthly payment’s only gonna be $200 a month. Um, here’s the two awesomest things, the wicked awesomest things about the WRAP plan. If your monthly payment doesn’t cover the amount of interest that’s accruing on your loan every month, the government’s gonna waive the remainder of that interest.

So for example, let’s say your WRAP payment’s $200 a month, but you’re accruing $400 a month in interest. Under the other income-driven plans, your total owed would just go up by $200 every month because of that 200 bucks in interest that you weren’t covering with your [00:24:00] payment. But under the WRAP plan, they’re gonna forgive that additional $200 worth of interest right off the bat, so your balance is never gonna grow.

On top of that, if your payment doesn’t, um, take at least $50 off of, um… If, if your payment doesn’t touch your principal at all, they are going to automatically credit your principal balance for up to $50 a month, and I will explain how that works. Um, I have examples coming up on the following slides. Um, the WRAP plan does count towards public service loan forgiveness.

It also has its own forgiveness component baked into it. If you are on the WRAP plan for 30 years, and I’m gonna… It’s not really 30 years. Uh, give me a minute on that. Put a pin in that for a second. But if you’re on the WRAP plan for 30 years and you still have a balance after that 30 years, they forgive the balance.

Now, as of right this [00:25:00] second, the amount that’s forgiven, not the monthly interest forgiveness, the, the, “I’ve been on the plan for 30 years, I’m, we’re, we’re gonna call it a day and just forgive the balance,” that forgiveness is taxed as income. Now, it’s possible Congress might change their mind on that in the future, um, but you have to run on the assumption they’re not going to and plan for that accordingly Getting back to the 30-year thing, all the income-driven plans have a forgiveness component baked in.

It’s either gonna be 20 years, 25 or 30 depending on the plan. Forgiveness under the income-driven plans isn’t really a clock. I have people that reach out to us all the time saying, “Hey, I’ve been paying for 25 years. Why aren’t my loans forgiven?” ‘Cause it’s not a clock. It’s a set of stairs. It’s not that your loans have been around for 25 or 30 years, it’s that you’ve made the equivalent of 20, 25 or 30-year qualifying payments.

[00:26:00] So it’s not really 20, 25 or, or 30 years. It’s really 240, 300 or 360 qualifying payments. Um, the, the qualifying payments don’t have to be made consecutively. They don’t even have to be made under the same repayment plan. Um, a qualifying payment for the REAP is any, a payment made under any of the income-driven repayment plans.

So you could have been on the plan called income-based repayment for the past 10 years. You decide REAP is a better deal for you. Instead of having 30 years before you’d hit forgiveness, those 10 years you were on the IBR before that will count, so you’ll only have 20 years left for the REAP. The only exception to that, and as you’ll see with student loans there’s always an exception , um, is payments you make under the REAP don’t count towards the other income-driven plans.

So while the income-driven plan payments count towards the REAP forgiveness, REAP payments don’t count towards the other, [00:27:00] um, the other income-driven plan forgiveness. One other caveat. In order for the payment to count towards forgiveness, whether it be towards PSLF forgiveness or whether it be for the income-driven plan forgiveness, it has to be made on time, and they are not kidding around with the on time thing.

On time o- in this scenario is defined as on or before the due date. So if you’re even one day late, payment’s still due, but it’s not gonna count towards, uh, PSLF. It’s not gonna count towards the 20, 25 or 30-year forgiveness, um, under the income-driven plans. Before the question comes up, ’cause I guess it will, I should say I’m guessing it will, if you’re on auto-pay and your payment date falls on a weekend or a holiday, it, that probably means they’re actually not gonna take it out of your bank account until the next business day.

[00:28:00] That will still count as on time for purposes of these forgiveness programs. Um, there is a glitch where there, um… I saw some people f- particularly for June for some reason, um, it was an auto-pay weekend or a holiday situation, and it’s not showing as counting. That is in the process of being fixed, so don’t worry about it All right, so let me show you how this, how the RAP plan works.

So this is someone who has a principal balance on all their loans of 60 grand. They have an adjusted gross income of 35,000, they’re single, and they have one child that they, um, report as a dependent on their tax return. Under the tiered standard plan, they’d be given 15 years, because they owe 60 grand, and their payment would be a little over $506 a month.

Under the repayment assistance plan, the, uh, for those of you that like to do the math themselves, but don’t worry, you don’t have to, uh, there are calculators [00:29:00] out there that’ll do the math for you. But for those who like to math it out, uh, you would take the AGI of 35,000, multiply it by 3%, because that’s the tier that they fall into under the RAP plan.

That gives us $1,050. You divide that by 12, that gives us a base payment of 87.50. But they have that one dependent child, so we’re subtracting $50 from that base payment, so their RAP payment amount will only be 37.50 a month. Now, here’s how the payment would get applied, and those sweet, sweet, sweet interest subsidy and principal benefits would get applied.

Let’s say they had a 6% interest rate, so they’re accruing $300 a month in interest. So they’d apply, assuming the, the borrower made the payment on time, they’d apply, uh, the 37.50 of their payment. That gives us an interest balance for the month of 262.50. That goes away. Goodbye. Goodbye interest. It’s forgiven, not [00:30:00] taxed In addition to that, because none of their payment went to principal, uh, the Department of Ed’s gonna match that payment and r- take $37.50 off of that borrower’s principal balance.

Now, the most that they’ll match is $50. And if your payment already has money coming off the principal of at least $50, then they’re not gonna match anything at all. Now, if you decide you wanna pay extra, ’cause you wanna get rid of these loans as soon as possible, that will affect the interest subsidy and the principal match.

So in this example you see in front of you, let’s say you had a windfall and you decided to pay $300. In that case, none of the interest would be forgiven. The whole 300 would go to pay the interest, but you would still get, um… You would still get the $37.50 taken from the principal balance in that case

[00:31:00] All right. Before I get into the payment plans that are available for people who didn’t borrow on or consolidate on or after July 1st, 2026, I want to check in with Julie and Shawn. I, I guess I’ll start with Julie. Are there any questions about what we’ve covered so far that you think might… could use some further clarity?

Julie Shields Rutyna: I guess I just wanted to ask a question about what you just covered. So I know sort of in the history of, of advising people on student loans, we would always tell people, “If you can pay extra, do so,” because that will, um, you know, reduce the total amount of interest you pay. But from what you just said, if the person was in the situation that you described, it really is not beneficial to pay that extra interest.

Is that

Betsy Mayotte: correct? Yeah. But here’s what I’m telling people to do in that situation. Take the extra money that you would pay and bank it. Earn your own [00:32:00] interest off of it, and then submit a lump sum payment like once a year.

Julie Shields Rutyna: Great. Great. That’s very good advice. Thank you. And I don’t know if you have anything, Shawn.

Shawn Morrissey: The only question I have, Betsy, is we get a lot of questions from people thinking they need to consolidate in order to make one payment on all their several direct loans. Can you just speak to that, that it’s, they’re all combined into one payment whether or not you consolidate?

Betsy Mayotte: Oh, I, I, I’m picking up what you’re putting down.

The vast majority of borrowers, I would s- I would say, you know, unless you are someone that had FFEL as well as direct or Perkins as well as direct You’re only gonna get one bill. All your loans are with one servicer, and you’re only gonna get one bill that’s gonna cover all the loans. So anybody who’s thinking about consolidating just to make the billing [00:33:00] easier, stop it.

Don’t do it. Um, you’re, you’re only gonna get one bill as it is, and that bill is gonna cover all 27 of your loans in a single bill

Shawn Morrissey: Thank you.

Betsy Mayotte: All right. Cool, cool, cool. Let’s talk about, um, borrowers with no borrowing history on or after July 1st, 2026. By the way, one thing I want to clarify Unless you have Parent PLUS loans, even if you didn’t borrow or consolidate on or after July 1st, you actually do have, still have access to the RAP, assuming, uh, assuming you have all direct loans.

FFEL loans don’t have access to the RAP, Perkins, HEAL. But all direct loans other than people that have, uh, Parent PLUS loans, you don’t have to consolidate or borrow again to get access to the RAP. You s- you do have access to it. So people with no borrowing history on or after July 1st, you have an embarrassment of [00:34:00] riches as far as the sheer number of repayment plans at your potential disposal, and those repayment plans fall under two buckets.

There’s the bucket of plans where your payment’s based on how much you owe, your interest rate, and the term of the loan, and those are the plans you see on the left-hand side of your screen. Most of the time, those are not eligible for any forgiveness programs, PSLF or the income-driven plans. The other bucket of plans are the ones we call, uh, the umbrella term we use that I have been using is the income-driven repayment plans, and under those plans, your payment amount is based on what your, uh, income is, uh, when you took your very first loan out, and to a very small extent, your balance.

Uh, the balance comes into play more for the maximum your payment can be under some of these plans. So, um, [00:35:00] payment plans on the left. As I already mentioned, those are generally not eligible for any forgiveness programs. The 10-year standard plan, now that’s the plan that you’re put in automatically when you first get out of school if you don’t actively pick another plan.

Um, if you’ve consolidated, you’re not under… You might be under a standard plan, but it’s not a 10-year standard plan. It’s gonna be a term longer than 10 years. Payments made under a 10-year standard plan do count towards public service loan forgiveness and the income-driven plan forgiveness. Payments made on a standard consolidation loan do not count for those things.

Graduated repayment. Those are interest-only payments for the first couple years. The payment gradually, see what we did there, goes up every year after that. You’re still paying it off within 10 years, or if you have a consolidation loan, whatever the term of that consolidation is. Extended repayment [00:36:00] is you have to owe at least 30 grand, and it acts just like the standard plan, only instead of having 10 years to pay it off, you have 25 years to pay it off.

They figure out how much you’d have to pay every month for 25 years to pay the loan off within the 25 years. Extended graduated, we took those two plans I just talked about, we mush them together, and you’re paying interest only for the first four years, and then the payment gradually goes up. You have 25 years to pay it off.

Um, standard consolidation plan, as I mentioned, doesn’t, uh, doesn’t count towards forgiveness. They figure out, you know, let’s say your consolidation loan has a 30-year term. They figure out what you’d have to pay over the 30 years to pay it off within that 30-year term. And then of course, there’s the new tiered standard plan.

Uh, unless you borrow or consolidate on or after July 1st, uh, the tiered standard’s not open for you. But the extended repayment plan sort of works the same [00:37:00] way, so you’re not really missing out on anything. I would never encourage anybody to consolidate just to get access to the tiered standard. It’s probably not gonna be…

It’s probably not gonna be helpful to you Under the income-driven plans, we have old IBR, new IBR, which believe it or not are very different plans, the pay as you earn plan, which is still exist. If you’re eligible, you can get on it today, but it is being phased out in July of 2028. Income contingent repayment, which exists, you can get on it today, also being phased out in July of 2028.

So while you can get on those two plans now, be prepared to have to switch come the spring of 2028. And then of course, there’s the new wrap plan that I’ve already talked about Here is a chart of all the plans and sort of the basics behind them. [00:38:00] Um I have this exact chart, but maybe with, with some more details on the TISL website.

I think if, um, Julie or Shawn could put the direct link to that up in the Q&A or somewhere for people to see. Um, couple things I want to point out here. I alluded earlier to the fact that your eligibility for some of the plans depends on when you took your very first student loan out ever, ever, ever, ever, ever.

Um, old IBR, so all the plans that aren’t based on income, doesn’t matter. You could have a loan from 1983, and you can get the 10-year standard, graduated, extended, graduated, extended. Yeah, you can also get old IBR. You can get ICR. Um, you can get the REAP plan [00:39:00] if you have… Uh, actually, it’s impossible for anyone to have had a direct loan back in 1983, but, um, let’s say you had FFEL loans from 1983, and at some point you consolidated, so now it’s a direct loan.

Um, again, you can get 10-year standard, graduated, extended, old IBR, ICR, uh, REAP, or the consolidated standard. Where when you took your very first student loan out ever, ever, ever, ever matters is for what we call new IBR and Pay As You Earn. In order to be eligible for new IBR, you had to have never, ever, ever, ever, ever taken a loan out prior to July 1st, 2014.

Now, new IBR is attractive to people because, um, first of all, it has the shortest forgiveness timeline. It’s 20 years or 240 payments as opposed to 25 or 30 years, and also the calculation tends to be the lowest as compared to the other plans. Um, they’re using 10% [00:40:00] of your discretionary income. I’ll talk more about what discretionary income is, how that’s defined in a second.

As opposed to old IBR, which is 15%, and ICR, which is 20%. Pay As You Earn is for borrowers who never, ever, ever, ever, ever took a loan out prior to October of ’07. Now, Pay As You Earn and IBR are fraternal twins. How they calculate your payment is exactly the same between the two. The forgiveness timeline, exactly the same between the two.

So if you’re eligible for Pay As You Earn and you’re eligible for new IBR, just get on new IBR. Um, the payment’s gonna be the same, forgiveness timeline’s gonna be the same, and you don’t have to worry about picking a new plan come 2028.

Um

I already talked about that. All right, let’s talk about discretionary income. [00:41:00] So as I mentioned, the WRAP plan uses straight AGI, adjusted gross income, which by the way I believe is line 11 on your most recent tax return. If for some reason your tax return does not accurately reflect your income, so for example, uh, last year you were making $5 million a year, this year you’re making 50,000 a year.

In that scenario, you can use what we call alternative, uh, proof of income, which would be a pay stub. Here’s the thing. If you’re using a W-2 or a pay stub as proof of income, they’re gonna use your gross income in the calculation under all of these plans, not your adjusted gross income. And using your pay stub, if you file jointly with your spouse and you decide using a pay stub makes more sense, you still have to submit proof of your spouse’s income.

That is not a way around the married filing jointly thing. You are required to submit proof of the spousal income as well [00:42:00] in that case. All right, so other than the WRAP, the income driven plans you, uh, to calculate your payment they use what we call discretionary income. Now listen, when I think discretionary income, I think the money I have left after I’ve paid all my bills, and bought groceries, um, and paid the cat’s vet bill.

Um, the, you know, my fun money. Um, that is not how discretionary income is defined under the law for the purposes of these income driven plans. Discretionary income is defined as your adjusted gross income minus the poverty le- a percentage of the poverty level that’s associated with the size of your family and the state that you live in.

Again, if you’re married and you file your taxes jointly, they’re gonna use both incomes, um, your, your joint AGI in the calculation. Now, what percentage of the poverty level they use that they [00:43:00] subtract from your AGI to calculate your payment depends on the plan. Um, income contingent repayment, they only subtract the actual poverty level based on your family size and state.

Old IBR, new IBR, and pay as you earn, they’re subtracting 150% of the poverty level, uh, based on your family size and state. And again, the RAP uses straight AGI. They don’t subtract anything from it. By the way, what this means is … So the poverty level changes every year. Uh, the poverty level is adjusted for inflation, so this year’s poverty level for a family size of four is higher than last year’s poverty level was for a family size of four.

What this means from the long term is that all the income-driven plans essentially also end up getting adjusted for inflation, but the RAP does not, which is i- not a good thing All right, here’s how the … Again, for those of you that like to math, here’s how the math works. Um, [00:44:00] in this example, the borrower’s adjusted gross income is 62,000.

They’re a family size of four living in, in the state of Maine. Um, the poverty level for a family size of four this year is thir- is, is right around 33,000. So 150% of that is 49 five. So they’re gonna subtract 49 five from the AGI of 62,000. That gives us a discretionary income of 12,500. Divide that by 12, it’s a little over 1,000 bucks.

Now, now depending on which plan it is, they’re gonna multiply that by a percentage. For new IBR and PAYE, they’re gonna multiply that by 10%, and that gives the borrower a payment of $104 a month. For old IBR, they’re gonna multiply it by, uh, 15%. They’re gonna have a payment about, of $156 a month. Remember, the REAP plan is AGI [00:45:00] only.

So to use the same example, AGI is 62,000, family size of four. Let’s assume it’s, uh, the two parents and two dependent children. So it’d be 62,000 multiplied by 6%, uh, divided by 12 is 310, then they subtract $50 for each dependent child. So under the REAP plan, this borrower would have a payment of $210 a month.

Now, listen. For those of you looking at this going, “Oh, so the REAP’s always higher,” it’s not. It really depends on the income. For whatever reason, right around the $80,000 range is when things really start to flip. So in some cases, the REAP actually is the, the cheaper monthly payment than the other payment plans, but in other cases it’s not.

You really just have to run the numbers. Um, you can run … As a reminder, you can run the numbers on, uh, our website. We have a calculator that is, um, was built just for us [00:46:00] Um, and you can find it on the repayment plan page of our website, uh, or you can use the loan simulator tool on the FSA website All right, so you’ll notice I left out ICR on the prior slide.

That’s because the calculation for ICR is overly complicated and obnoxious. You actually kinda can’t map this one out on your… I mean, you can. Not worth it. Just use the calculators. ICR, they use the, they count, they make, they do two maths for ICR, and whichever one is less is the payment you get. The easy math is they take 20% of your discretionary income, multiply that by 20, uh, they take, so 20% of your discretionary income, divide by 12.

The other one is they figure out what your payment would be under a 12-year term. Why t- why 12? That’s oddly specific. I don’t know. Um, and then they multiply it by something called an income percentage factor. Those of you [00:47:00] going, “Boy, I’m a finance person, I’ve never heard of an income percentage factor,” that’s ’cause they made it up just for ICR.

It’s published every year just like the poverty level is. It is adjusted for inflation. Not w- if, if you do wanna look it up, there’s the most recent one. I’ve provided the link to it. Um, we actually should be getting a new one, um, in soon, uh, for the, for the next year. But, um, don’t bother with the math on this one.

Just use the calculators

A couple, um, couple of tips. As I’ve said several times now, if you’re married and you file your taxes jointly, they’re gonna use both incomes. But if you’re married and you both have student loans, not only are they going… Both have federal student loans, I should say. Not only are they gonna use both incomes, but they’ll also calculate, they’ll also use both balances in the total calculation between the two of you.

So here’s, here’s what I’m, what I’m trying to explain, and [00:48:00] I’m probably not doing a good job of it. Let’s say Spouse A owes $100,000 in student loans and Spouse B owes $200,000 in student loans. If you both get on an income driven plan, they’re gonna figure out what the payment would be between the two of you, and then portion it out between the two of you.

So in the example I have in front of you, let’s say based on the income, the total income between you, the total payment between you would come out to $500 In this scenario, because borrower A owes a third of the total amount owed between the two of you, borrower A would have a payment of $165 a month, and borrower B would have a payment of $335 a month.

Now, to be clear, that doesn’t in any way, shape, or form make the other spouse legally liable for the other person’s debt. Can’t happen. They used to have a thing called spousal consolidation. They got rid of it [00:49:00] in 2006, and thank goodness because it was … talk about the road to hell is paved with good intentions.

But there is no way to, to make someone else legally liable for your federal student loans. So don’t worry about that. So for some families, both of you getting on an income driven plan can be the way to save the most money for the household as a whole. Now, here’s a tip that you’re not gonna find anywhere online.

There is, there’s actually a lot of glitches right now with the FSA website, but one of those glitches is, is despite the fact that under regulations they’re supposed to portion the payment out for a married couple in that scenario that I just described, it doesn’t happen if you apply for the income driven plans online through the Department of Ed’s website.

So if you’re a married couple, and you’re like, “Oh, hey, that Betsy lady, that, that, that was a good idea. We’re gonna do that, we’re gonna do that thing,” don’t apply online. Go to the FSA website, go to the [00:50:00] forms library. It’s on the bottom right-hand of, of the screen there, and you’ll find the paper application.

Old school paper, I know. And then you would fill it out, um, include your most recent tax return, and then upload it directly to your loan servicer’s website, both of you. That’s the only way right now to get it to be calculated correctly. If you do it through the FSA website, they’re gonna give you both the $500 payment.

And if you call to the servicer and try to get it corrected, they can’t, ’cause then that’s s- I don’t, you don’t care about the mechanics, and we don’t have time to talk about them. Just trust me on that. The other situation where this applies is for those few of you that have federal student loans at multiple servicers, you also have to do this paper method.

Otherwise … ‘Cause they’re also supposed to portion the payment out based on the total of federal loans that you owe. So if you have some, let’s say you have some old FFELP loans that are over at MOHELA, and then you have some direct loans [00:51:00] that are at EdFinancial, and you’re getting on an income driven plan, you gotta use paper, or they, they won’t, um, split the payment accurately, or at all to be, for that matter.

All right

I want to give you another example, and I want to go back to what I said way in the beginning of this, um, presentation. ‘Cause I think understandably so, especially today where everything’s more expensive, gas is more expensive, healthcare is more expensive, um, grapes are more expensive. I think I read somewhere recently that produce has gone up, like, 33% in the last four months.

Crazy. So I think a lot of us are trying to find the lowest payment possible. Uh, and I get that, but I want to show you the effects of it, because remember, the name of the game is paying the least amount out of your own pocket over time. So in this example, we’ve got a $30,000 income, family of two in Massachusetts.

[00:52:00] Um, only the, uh, borrower has loans, so there’s no spousal loans in here, and they owe 95 grand. They have an interest rate of 5.5%. This is what their monthly payment would look like under the plans that I told you about. So the standard, uh, fixed plan on a consolidation loan would be $570 a month. Um, IBR would be $52 a month.

New IBR would be 35. REAP would be 75. Um, the ranges that you’re seeing under the income-driven plans is the calculator is assuming that you’re gonna get a raise every year. So it’s estimating, I think it’s like a 3% raise every year. But the number I want you to pay attention to is the last column. So under the standard fixed plan, you would end up paying back a t- on that $95,000, you’d pay back a total of over $200,000 if you took the whole 30 years to pay it off.

Under old IBR, assuming your income never went up more than, like, [00:53:00] the 3% a year, after 25 years, you will have only paid about $23,000 out of pocket, and then the rest would be forgiven. PAYE as you earn, it’s 11 and a half. Um, income contingent, it’s 89. So that last column is almost the most important number

Um, I already talked about the forgiveness, but just to, to recap, you don’t have to be on the same income-driven plan, uh, for all 240, 300, or 360 payments. All the plans cross-pollinate with each other, so changing plans does not reset your count. The only thing that will reset your count to zero is consolidation, and that’s only if you consolidate after June of 2024.

Um, the only plan that doesn’t count towards the others is the REAP. REAP does not count towards IBR, ICR, pay as you earn. Um, you don’t have to make consecutive payments on these plans, just know that payments that [00:54:00] you make under extended or graduated or something are not gonna count towards the 240, 300, or 360

All right, Parent PLUS loans. Boy, you got the short end of the stick in that budget bill. Um, Parent PLUS loans in and of themselves, as they stand, are not eligible for any of the income-driven repayment plans. Assuming you didn’t borrow or consolidate on or after July 1st, 2026, you can get extended, graduated, and extended graduated.

Um, if you consolidated prior to July 1st, 2026, and never borrow or consolidate again, then you can get on ICR and eventually be grandfathered into income-based repayment. But if you did not consolidate where the consolidation was processed before July 1st of this year, there is zero avenue for you to get on an income-driven plan.

And [00:55:00] again, I’m, I am, I’ve written, um, I just haven’t signed it and sent it yet, to members of Congress explaining the harm that they have done to Parent PLUS borrowers. I, I have, I think I have a lot of Parent PLUS borrowers that they borrowed based on the fact that they thought they were gonna be able to access an income-driven plan, and at this, now that they can’t, they very well could default

All right, how to pick a plan. So if your head’s spinning, um, I- just as a reminder, first of all, you need to know when you took out your very first student loan ever, ever, ever, ever. Your loan servicer can tell you that, or you can find out by logging into studentaid.gov. Then you figure out, are you pursuing loan forgiveness?

Because that’s what makes sense for you to do. If that’s the case, you wanna pick the lowest income driven plan monthly payment that you’re eligible for. Is forgiveness out of the cards? You wanna pick the highest payment that you can afford. Um, [00:56:00] another strategy is to pick the lowest payment plan, but then send extra every month towards the loan with the highest interest rate.

There’s never a penalty for, for prepaying your loans. Um, and again, you don’t have to do the math yourself. Our website has a great calculator, studentaid.gov has a calculator as well How do I know what the lowest plan amount is? If your income is a lot higher than what you owe, um, and you don’t need to be on an income-driven plan or you don- or you have Parent PLUS loans, your lowest payment is probably gonna be the graduated or the extended plan.

If you never, ever, ever took a loan out prior to July 2014, new IBR is probably gonna be your lowest amount. But again, compare it to the REAP. You, you do need to use the calculator for these. These are just rules that apply to most people. Um, if you never, ever, ever took a loan out prior to October of [00:57:00] ’07, um, but you did take some out prior to 2014, PAYE or the REAP is probably gonna be your lowest.

Um, otherwise it’s gonna be IBR, ICR, or the REAP Now, if you can’t afford any of these, a temporary, a very temporary solution is a deferment or a forbearance. Uh, a deferment is for things like you’re back in school at least half-time, you’re unemployed and actively seeking full-time work, your, um, income is incredibly low and you’re receiving some sort of, uh, welfare type benefits.

Those are what, that’s what deferments are for. Uh, forbearances are for more general financial hardship. But again, these are only temporary solutions. You can only use them for a limited amount of time. But you’re … And they don’t, they … In rare cases, they count towards forgiveness. Um, you’re better off taking the deferment or forbearance than [00:58:00] defaulting, but again, you gotta remember this is a temporary solution.

So while you have the breathing room that the deferment or forbearance gives you, you’re gonna have to run the … You’re gonna have to adjust the numbers. Find a way to cut things from the budget. Um, get a side hustle if you have to, ’cause again, these are just very temporary solutions

All right. Last thing I wanna talk about, um, and I know we’re almost out of time, is the SAVE litigation. So the SAVE plan was a payment plan that the prior administration, uh, developed and offered that was challenged in court by, uh, several state attorneys general saying that, that, uh, that Department of Education did not have the legal authority to create that plan, that it was essentially too generous as far as its forgiveness and the monthly payment calculation was.

Um, prior… No payment plan has ever been challenged in court before, so that [00:59:00] was a, an- another never before that we’ve seen in the last few years. Um, before… The court definitely seemed to be leaning towards the plaintiffs in agreeing that the Depart- that Department of Ed had exceeded their legal authority, and because of that, there was an injunction, and under that injunction anybody who was on the SAVE plan or anybody who had a, had a pending application for the SAVE plan was put in forbearance.

That forbearance has been around for, like, two, a little over two years at this point. Um, at first it was a zero interest forbearance, which so that was great, but starting August of 2025, interest started accruing on those loans again. A lot of people that were put in that forbearance, uh, if they log into their account, they’ll see an end date of like 2027 or 2028.

That was always just a placeholder, always. So this administration comes in and goes, “Hey, we agree with the plaintiffs.” So they came up with a settlement. They went back to [01:00:00] court. Court said, “Fine. We’re ruling… You know, we agree with your settlement, so the SAVE plan is going away.” By the way, even if the court…

If that settlement hadn’t happened and the court hadn’t gone that way, Congress got rid of the SAVE plan anyway, effective 2028, um, as part of HR1. So because of this, the SAVE forbearance is ending. If you have a… If you’re on SAVE, if you’re in the SAVE forbearance, and you haven’t already, um, you’re going to get a notice, and that notice is gonna give you 90 days to pick a new plan.

If you don’t pick a new plan and apply for it within your 90-day window, you’re gonna automatically be put on a standard repayment plan. Now, depending on your servicer, either all the notices have gone out by now or some of them are still staggering them. My understanding is everybody will have received their notice by October, by, or by the middle [01:01:00] or end of October.

Um, but people started getting notices as early as July 1st. You wanna check your email. You wanna check your spam folder. You wanna check your online communications portal at your servicer for the notice. Um- Some services are sending text messages as reminders as well. If you don’t get the notice, that doesn’t, that doesn’t matter.

Um, you still, your 90-day window is your 90-day window, and there’s no way to draw out staying on the safe forbearance. So y- if you haven’t started exploring new plans yet, you need, you need to do it. You need to bite the bullet and do it. Um-

Y- if you haven’t gotten a notice and you don’t have one in the near future, you may wanna log into your servicer’s website and make sure they have the correct, uh, communication information for you All right, [01:02:00] that’s what I had for you today. Uh, as a reminder, the two websites I think you should bookmark is ours, freestudentloanadvice.org, and studentaid.gov.

And with that, I will check in with Julie again and see if there’s other questions that came in that you think need further clarification.

Julie Shields Rutyna: Yeah, Betsy, I just, I have one that was, uh, from something you said earlier on. Let me just get it here. Um, someone I think is just needed clarification on this. Um, here we go.

Sorry

So I, I think you said something about tax returns here, but someone asked, “Is it better for us to have our income calculated by sending a pay stub instead of a W-2?” Did I hear that right? So I thought you could just clarify that.

Betsy Mayotte: The best thing for you to do is your tax return. Tax return. Because then they’re gonna use your adjusted gross income, which is almost always lower than your gross.[01:03:00]

You send a W-2 or a pay stub, they’re gonna use your gross income.

Julie Shields Rutyna: That’s good. Thank you for that. Uh, we also have a compliment that, um, this was very easy to understand, and thanking you. Okay. Um, and then someone asked- Good … if you’re going to talk about the PSLF program.

Betsy Mayotte: Not at all.

Julie Shields Rutyna: Okay.

Betsy Mayotte: No, that’s a whole other 90-minute webinar.

We’ll do

Julie Shields Rutyna: it another time. Yep, that sounds good. Thank you. We’ll t-

Betsy Mayotte: Now, I did mention, and I’ll remind you, that if you’re pursuing PSLF, you need to be on an income driven repayment plan, period. Um, but that’s a whole other webinar for another time. Yep, sounds good. If you’re interested in PSLF, I encourage you to go to the studentaid.gov website and our website.

Our website, shameless plug, if you go under loan forgiveness programs, I’d like to think that we have it all explained in plain English

Julie Shields Rutyna: That’s great

Betsy Mayotte: And while you’re on our website, you also might want to look at the staff [01:04:00] page because on the staff page you’ll see the TISLA pets, including Alice the student loan cat.

Um, so that’s fun

Julie Shields Rutyna: I love it. Let me just see, there might be one more. It’s a… Nope, it’s more thank yous. Um, and the link to the website. Yeah, let’s put that in- Right

Betsy Mayotte: in front of you.

Julie Shields Rutyna: Yeah, it’s right at the… Oh, it’s right there- Right in front of you … at the end of the chat.

Betsy Mayotte: No, it’s right in front of you on the slide.

Julie Shields Rutyna: Yeah, on the slide. Yep, yep

That’s great. Well, thank you all. Betsy, thank you so much for all this information. We will send a link to the recording and to the slides so you’ll have all this information to go back and review it and, um, anything you need. So thank you so much. What a terrific night. Thank

Betsy Mayotte: MEFA for, uh, for putting this on.

This is really… There’s a lot of [01:05:00] people that are confused, so it’s great that you, uh, sponsored this and hosted it.

Julie Shields Rutyna: Happily. All right, everyone have a great night. Thank you.

Betsy Mayotte: Bye-bye.

Julie Shields Rutyna: Bye.