(KRON) -- Student loan payments can be a big stress on people’s budgets and millions of Americans learned this month that their monthly payments are going up.
Federal student loan payments are rising because of the elimination of the SAVE Plan. SAVE was put in place for college graduates by former President Joe Biden, but President Trump did away with it when he signed what he refers to as the Big Beautiful Bill.
Director of Student Advocacy for Scholarship Owl, Jennifer Finetti, says borrowers were supposed to receive notice that they were being moved to a different payment plan.
“The plan that they were moved to if they did not proactively change to a different plan is the Standard Tiered Plan, and that’s the plan that’s going to jack up their rates significantly,” said Finetti.
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San Francisco resident Stephen Decatur found out that his student loan payments will be increasing by around $1,000 a month.
“I wasn’t sure what I was going to do,” said Decatur. “I was like, 'oh I need to break my lease, I need to move in with roommates, I need to sell my car.' There’s no way I can afford that.”
Borrowers like Decatur don’t need to panic yet, according to Finetti. She says most of them can opt out of the Standard Tiered Plan and her recommendation for a lower payment is the Income Based Repayment Plan, also known as the IBR plan.
“This will cap their payments at no more than ten percent of their discretionary income. SAVE plan capped it at five percent, so it will still be significant compared to the SAVE plan,” said
Finetti isn’t sure what the future holds for borrowers taking out student loans, with payment plans that seem to change with every new president. Decatur was able to put his payments on a 60-day forbearance, while he figures out a plan that works for him. Frustrated with the constant changes that result in a higher price.
“Really hard to plan for the payments that you’re actually going to have to make because the rules are constantly changing,” said Decatur.
In addition to people’s student loan payments going up, Finetti is also concerned that around nine million borrowers have defaulted on their student loans because they couldn’t afford their monthly payments.
