Logan Hughes tries not to think about it, but his student loan payments are about to more than double. At night he can’t help but worry and wakes up grinding his teeth.
Hughes is a certified public accountant who knows better than most how to manage a budget.
He graduated in 2016, and after a year of looking he landed a job. Once he had some work experience under his belt, he bought a home in Raytown last year.
But now his partner is struggling to find suitable work while the cost of living continues to rise — and a $490 a month hike in his student loan payments is looming.
“I really didn’t think I’d be living paycheck to paycheck making six figures. It honestly feels ridiculous,” Hughes said. “I don’t live an extravagant life, but I’m considering doing DoorDash or Uber to make up the difference, and that was just not on my bingo card.”
Nearly 8 million Americans enrolled in the Biden-era Saving on a Valuable Education (SAVE) plan face similar payment increases as sweeping changes to the federal student loan programs take effect. SAVE borrowers started to see interest accrue on their accounts Aug. 1, but that’s not the only change.
When the One Big Beautiful Bill Act was signed into law by President Donald Trump in early July, it effectively ended the SAVE plan, which was widely considered the most generous student loan repayment option. SAVE resulted in $0 payments for single borrowers making under about $35,000 a year, calculated payments based on 10% of income above that level, made sure interest didn’t grow and eventually forgave the debt.
The One Big Beautiful Bill also eliminated all but a few simpler repayment plans. Standard repayment and a new income-driven plan called Repayment Assistance Plan (RAP) will be the only options available for new borrowers after July 2026. Borrowers with current student loans will need to change to one of these plans or the income-based repayment plan (IBR) that survives the change because it was put in place by a previous act of Congress.
“The changes are pretty massive,” said Landon Warmund, a certified student loan professional. “This is the largest overhaul of our repayment plan system that we’ve seen in at least the last 10 years.”
Sticker shock
The average student loan borrower on SAVE can expect monthly increases of $210 to $370 a month in Kansas and $270 to $380 a month in Missouri, according to the Center for American Progress.
The Student Borrower Protection Center said in June that when changes from the Trump budget bill take place, borrowers on SAVE will repay approximately $41.5 billion in the first year alone. That large sum of money going out of the economy and into the coffers of loan servicers has some economists worried.
“On an individual level, it’s going to be brutal for the people making under $100,000,” said Chris Kuehl, an economist who co-founded Armada Corporate Intelligence. “Particularly for those making under $50K a year, because it’s not a matter of ‘this is going to slow down my house or car buying,’ it’s going to be ‘I can’t afford groceries or rent.’”
One such borrower is Richelle Kent, a stay-at-home parent in Gladstone. She carries student loan debt from a culinary degree and has been paying $234 a month on an income-contingent repayment plan. Under the new repayment rules, the payment would jump to $600 a month for her family, which includes a husband who works in retail and a child.
“There’s absolutely no way I can pay that amount. I’d have to not pay for electricity, phone, internet or half my grocery bill,” Kent said. “I’d rather turn my degree back in.”
Across income levels, the change in repayment options is expected to cause monthly payment increases for most borrowers.
“I really want to repay my loans but I’m stuck between a rock and a hard place.”Suzanne Ashby, pharmacist
Pharmacist Suzanne Ashby previously worked as a teacher and is now in the nonprofit sector, where she’d be eligible for public service loan forgiveness after 120 qualifying payments. But her monthly payment will go from $635 a month to $1,750 after the new rules kick in.
“When I bought my house, I accounted for a few hundred dollars for insurance increases or emergencies, but no one budgets for an extra $1,000 a month,” Ashby said. “It’s like the game has changed in the middle of the match. I really want to repay my loans but I’m stuck between a rock and a hard place.”
Understanding the changes to student loan repayment
James Bergeron, acting undersecretary at the U.S. Department of Education, said the new law is a win for borrowers because it “simplifies the student loan repayment system.” Others argue that it offers fewer options and that yet another change causes confusion.
“Student loan borrowers have been craving consistency and had none for five full years,” said Warmund, the student loan professional. “There’s been different programs and initiatives — some good, some bad — and borrowers are getting confused not knowing what applies to them.”
Warmund said that while the SAVE plan was a good option for some, it wasn’t in place long enough for people to fully see its benefits.
“If we compare the new options to the SAVE plan, it’s not going to look good,” Warmund said. “But compared to the loan options available before COVID, it’s really not so bad.”
Gone are the “alphabet soup” of income-based repayment options: SAVE, REPAYE, ICR and PAYE. Income-driven repayment plans account for nearly 60% of federally held student loans, according to the Brookings Institution.
In place of the eliminated plans will be a new program called Repayment Assistance Plan. It will be implemented “no later than July 1, 2026,” according to the new law.
RAP requires borrowers to make a minimum payment of $10 per month regardless of income, ending the $0 payment option. Monthly payments are calculated as a percentage of adjusted gross income — before taxes, after deductions. They start at 1% for those earning $10,000 to $19,999, then 2% for those making between $20,000 and $29,999, scaling up to 10% for those earning $100,000 or more.
Unlike SAVE’s 20- to 25-year forgiveness timeline, RAP offers loan forgiveness after 30 years of payments.
The plan does include some borrower-friendly features. If the borrower’s minimum monthly payment doesn’t cover interest, it waives unpaid interest and takes up to $50 off the principal. Borrowers also get $50 off their monthly payment per dependent. A crucial difference is that once you enroll in the RAP plan, you can’t switch to another plan, which is a change from previous income-driven plans.
“Student loan borrowers have been craving consistency and had none for five full years.”Landon Warmund, certified student loan professional
There is one other income-driven repayment option for current borrowers whose income is low relative to their student loan debt: the older income-based plan known as IBR. The plan calculates payments based on adjusted gross income above 150% of the federal poverty line, 10% for loans after 2014 and 15% for loans before 2014. IBR also makes sure that borrower’s payments are never above the standard plan’s repayment, and forgives unpaid debt after 20 years.
To qualify for IBR, borrowers must submit an income-driven repayment application and recertify their income each year. Currently there is a months-long backlog for applications.
What to do now
No action is required by borrowers on SAVE just yet, although interest has started to accrue.
Warmund said to consider your priorities as a borrower, make a plan and have it in place by July 2026. He said that some want to pay off the debt as soon as possible to avoid added interest, while others look for the lowest payment because of budget limitations or if they are pursuing loan forgiveness.
“When we talk about potential loan forgiveness, the way we think about the debt changes,” Warmund said. “It’s no longer about trying to pay the highest amount possible, it’s about trying to make the smallest payment to get the most forgiven.”
He suggested making hypothetical payments to prepare. If your payment is going to be $400 a month, put that money in savings each month so you can build up a cushion and get used to making that payment.
“I want to be sure that people are prepared in terms of cash flow and budgeting for student loan payments in general because lots of people don’t deal with sudden adjustments very well,” Warmund said.
After July 1, 2026:
- Existing borrowers can choose one of three repayment options: IBR, RAP and standard repayment.
- New borrowers can choose between RAP and standard repayment.
- Standard repayment will also change. Those who owe less than $25,000 will have 10 years to repay. Those who owe more but less than $50,000 will have 15 years. If you owe between $50,000 and $100,000 you repay over 20 years. Anything owed above $100,000 would be paid down over 25 years.
- During a two-year period, those on SAVE and other plans marked for elimination will be moved to a new repayment plan.
- Those on SAVE will be automatically enrolled in RAP if no action is taken.
“The great thing is you have time to evaluate it now, take a deep breath and look at your finances,” Warmund said. “Look for any opportunities where you could maybe save a little money, earn a little more, or a mixture of the two.”
Economic ripples
Millions suddenly having larger bills, paired with creeping inflation and tariffs, have Kuehl, the economist, concerned about sector downturns.
Kuehl breaks the U.S. economy down into thirds. The top third takes home over $100,000 a year, the middle third between $50,000 and $100,000 and the bottom third less than $50,000.
He said that the sudden increase in student loan bills won’t cause a full-scale recession on its own.
“For the past five to seven years the economy has been driven almost entirely by people in the upper third of income,” Kuehl said. “Companies that are doing well are selling high-end houses, cars and luxury goods. Those aren’t things that people repaying student loans are generally looking at.”
He said that while his chief concerns with the economy are tariffs, inflation and worker shortages, suddenly higher student loan bills could cause some sector-specific downturns like a recession in the rural population, a low-cost housing recession or a transportation sector recession.
“It’ll affect all the industries depending on price point,” Kuehl said. “Fast food will see decline, but fine dining won’t notice. Nordstrom won’t feel a thing, but Walmart will.”
Kuehl said one indicator to watch is credit card debt. When people start to feel the pinch of paying extra, they only have a couple of options: cut the budget someplace or pay for things with credit cards.
“Credit card obligations kind of twin with student loans,” he said. “There are a lot of people in the bottom third that are now using credit cards for groceries and things they normally wouldn’t put on credit because they don’t have enough money.”
“The economy has been driven almost entirely by people in the upper third of income.”Chris Kuehl, economist
Hughes, the Raytown CPA, said that as everything gets more expensive, it’s an especially bad time to raise student loan bills.
“When you’re taking dollars out of the money supply and putting it towards student loan servicers and the Department of Education, you’re going to see pullbacks in discretionary spending,” he said. “With everything else going on, it just feels like we’re approaching an economic cliff.”
This story was originally published by The Beacon, a fellow member of the KC Media Collective.
