🌟 Editor's Note
Welcome to another issue of Financial Freedom Insights. This newsletter is full of financial tips, insights, financial news, announcements, a special treat for those who make it to the bottom, and more!
🤖 AI Note
NONE of this newsletter was generated using AI. It was written by humans for humans.
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💸 Your 10 Second Financial Freedom Tip of the Week
Some insurance companies give a discount if you switch from paying monthly to paying Annually or Semi-Annually. Just take your current monthly payment, have it go to a savings account, and then pay for your insurance from there to take advantage of the savings!
📰 In the News
High gas prices continue to hurt
The average amount of gallons per fill up goes below 10 gallons as high gas prices continue to hurt consumers - article here
The S&P 500 gets a new addition
Reddit stock shoots up as it is slated to join the S&P 500 on August 18th - article here
📈 Financial Freedom Insight
New Rules for Student Loans: What You Should Know
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Financial Freedom Insight: Table of Contents
The SAVE Plan Ends
Replacements for SAVE
The Tiered Standard Plan
The Repayment Assistance Plan (RAP)
Other Student Loan Changes
What To Do if You Are in Default With Your Loan
Phasing Out of Legacy Payment Plans
On July 1, a Supreme Court ruling took effect that will change payment plans and set new limits for federal student loans. As part of President Donald Trump’s “Big Beautiful Bill,” and with the end of the SAVE plan put in place by the Biden administration, if you have a federal student loan, your monthly payments could rise.
That’s not good news for the approximate 9 million Americans who are already in default on their loans. According to the U.S. Department of Education, this number could reach 12.54 million by the end of 2026.[1]
Here’s what you need to know.
The SAVE Plan Ends
In July 2026, the U.S. Court of Appeals suck down the SAVE plan instituted by President Joe Biden, which offered favorable repayment terms for borrowers. Starting July 1, 2026, the U.S. Board of Education began sending notices to people enrolled in the SAVE plan informing them that they have 90 days to enroll in another income-driven repayment plan.
Those who don’t enroll in another plan within 90 days of receiving the notice will be auto-enrolled in one of the standard options by the Education Department. The notices were sent out in batches, and some people may not receive one until 2027.
Replacement Plans for Save
There are two repayment plans that have replaced the SAVE Plan: an income-driven repayment plan called the Repayment Assistance Plan, and the Tiered Standard Plan.
The Tiered Standard Plan
The tiered plan involves a fixed payment amount that pays off your loan within 10 to 25 years.
With the tiered plan, your monthly payment amount is based on the amount of your loan, the interest rate you are paying, and the repayment period.
The Department of Education has a loan simulator to help you understand your payments and how long it will take you to pay off a loan.
The Repayment Assistance Plan (RAP)
RAP is a new income-driven repayment (IDR) plan. Under RAP, your monthly payment is determined by your income and number of dependents. Here’s what you need to know about RAP.
· If your monthly payment does not reduce the principal owed by at least $50, the federal government will make a matching principal payment to ensure that the borrower's principal is always reduced by at least the total amount paid (but not to exceed $50).
· Under RAP, any remaining student loan balance is forgiven only after 30 years (360 qualifying monthly payments). This is a longer commitment than older IDR options (like Pay as You Earn or Income-Based Repayment (IBR)), which typically offer forgiveness after 20 or 25 years.
· Once you begin using RAP, you cannot switch back to the Standard Plan.
· RAP is not available for Parent PLUS loan debt. This exclusion applies to Direct Parent PLUS Loans and Direct Consolidation Loans used to pay off Parent PLUS Loans.
· Time spent paying under RAP does not count toward forgiveness under older legacy plans (IBR, Income-Contingent Repayment (ICR), or PAYE). If you switch from RAP to an older plan, you will lose the forgiveness progress you accumulated while enrolled in RAP.
· Unlike older income-driven plans where low-income borrowers could qualify for a $0 monthly payment, RAP requires a minimum payment. While monthly payments are capped between 1% and 10% of your Adjusted Gross Income (AGI), they can never be lower than $10 per month.
Other Student Loan Changes
There are some other changes to student loans.
Changes in Graduate School Loan Caps
Under the new rule, graduate programs are capped at $100,000 to $200,000 (higher amounts apply to some graduate degrees, like nursing, physical therapy, etc.)
Previously, graduate students had been able to take out federal loans up to the full cost of their degree.
Changes to Parent PLUS Loans
The new limits on Parent PLUS loans are $20,000 per student, and $65,000 per family.[2]
What To Do If You Are in Default with Your Student Loan
If you are in default with your student loan, you could face wage garnishment and tax refund seizures. Borrowers are considered in default when they are at least 270 days behind on payments.
You have two options if you are in default: loan consolidation or a direct consolidation loan.
Direct Consolidation Loan
This is the fastest way to pay off your loan, and it will restore your good standing and eligibility for federal student aid.
After July 1, 2026, a direct consolidation loan is considered a new loan and is limited to the two repayment plans: The Tiered Standard Plan: A fixed-payment plan over a set period (10 to 25 years) or the RAP.
Loan Rehabilitation
If you want to protect your eligibility for older, legacy IDR plans before they completely phase out, rehabilitation is your best option. I’ll explain the phasing out of legacy plans in the next section.
For loan rehabilitation, you will make nine monthly payments (often based on your income) within a 10 months window. After 10 months, you are no longer in default according to your credit history.
This option returns your existing loan to good standing. It does not create a new loan. This matters because you bypass the new RAP limitations temporarily and you can still retain access to legacy repayment plans
Phasing Out of Legacy Repayment Plans
Legacy repayment plans include:
· Income-Based Repayment (IBR)
· Pay As You Earn (PAYE) (available until July 2028)
· Income-Contingent Repayment (ICR) (available until July 2028)
The SAVE (Saving on a Valuable Education) Plan was eliminated as of March 10, 2026.
PAYE (Pay As You Earn) and ICR (Income-Contingent Repayment)
This payment plan will end on July 1, 2028. If you are currently enrolled in PAYE or ICR, you can remain on these plans for now but must transition to a new eligible plan (such as IBR or the new RAP) by July 1, 2028.
IBR (Income-Based Repayment)
Technically, IBR is not phasing out, but it is now only available for loans disbursed before July 1, 2026. Under the new rules, the requirement to demonstrate a "partial financial hardship" to enroll in IBR has been eliminated, making it easier to access for older loan holders.
The Repayment Assistance Plan (RAP)
For any new loans disbursed on or after July 1, 2026, the only available IDR option is the new Repayment Assistance Plan (RAP). Existing borrowers with pre-July 2026 loans can also transition to RAP voluntarily if they choose not to use IBR.
Should You Consolidate or Rehabilitate Your Debt?
If you are still unsure about what to do regarding your student loans, try using this repayment calculator to find the best options for you.
Sources
[1] United States Department of Education, April 21, 2025. “U.S. Department of Education to Begin Federal Student Loan Collections, Other Actions to Help Borrowers Get Back into Repayment.” https://www.ed.gov/about/news/press-release/us-department-of-education-begin-federal-student-loan-collections-other-actions-help-borrowers-get-back-repayment. Accessed August 1, 2026.
[2] Fund.com “Best Parent Student Loan in August 2026.”https://www.fund.com/top/private-student-loans/parent-loans/desk/?utm_source=bing&adid=77859382738383&cq_acc_bing=F125HG52&cq_cmp_bing=494280690&utm_campaign=PSL%20Bing%20-%20Parent&cq_adg_bing=1245748018772419&cq_term=federal%20parent%20plus%20loan&cq_plac=&cq_net=o&cq_mtype=e&cq_dvc=c&cq_loc=97790&tvar=&stvar=&msclkid=82a3b4d883d4104324e4de8dc444f481. Accessed August 1, 2026.
📙 Nathan Haas’s Scripture of the Week
Proverbs 13:22 (ESV)
“A good man leaves an inheritance to his children's children, but the sinner's wealth is laid up for the righteous.”
Tired of enduring life? Start enjoying it! Check out Joy Church to learn more about the Gospel and our Lord Jesus Christ today!
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Nathan Haas, Founder & CEO, Financial Advisor & Coach
Caroline Banton, Director of Writing & Editing
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P.P.S. Okay now its the end of the newsletter, its been a wet one out there recently (at least in Northern Illinois) so we hope everyone is staying dry!
