Student Loan Updates, Dec 2025

In this final episode of 2025, I go over some of the changes that recently came out from the Department of Education and the RISE (Reimagining and Improving Student Education Committee) meetings, and how that could impact your borrowing options in 2026. After all, the show is called “Thinking Ahead”. 

#StudentLoanUpdate, #FederalStudentAid 

Sources:

ASSOCIATION OF AMERICAN MEDICAL COLLEGES: https://www.aamc.org/

https://studentaid.gov/ 

https://www.ed.gov/laws-and-policy/higher-education-laws-and-policy/higher-education-policy/negotiated-rulemaking-for-higher-education-2025-2026

https://www.ecfr.gov/current/title-34/subtitle-B/chapter-VI/part-674/subpart-A/section-674.1

https://www.congress.gov/crs-product/IN12585

https://studentaccounts.ucf.edu/tf-doctorofmedicine/

https://studentaid.gov/announcements-events/idr-court-actions

Chapters

• 0:00 Introduction
• 5:34 Parent PLUS Loans
• 8:23 Graduate Loans
• 11:53 Undergraduate Loans
• 13:56 Grants
• 16:58 Repayment Terms
• 23:30 Current Borrower News & Lawsuits
• 25:21 Private (Bank) Student Loans
• 28:02 Conclusion and Thanks

Transcript

SPEAKER_00: 0:10

Jingle Pells Payment Fell, Student Loans Pain! Hello and welcome to the Thinking Ahead Podcast. My name is Ronaldo Stevens, and I'm your host and mentor on this journey to find out more about careers, college, and finance. Specifically, student loans, because it's that time again. What time? The time where I have to discuss what's going on about student loans and all the buzz surrounding them. I'd like to say it's the most wonderful time of the year, but why should I lie to you and myself? But we're going to focus on learning about any updates that have been made on federal loans, but I'd like to also discuss a little bit about private loans as well. Back in September, I and many of the industry colleagues were observing and commenting on all the changes that the One Big Beautiful Bill Act had put into law, mainly the student loan payout and payback phrasing, as they had said they would lower loan limits for certain students, as well as who would be available to receive funds and the payment or the repayment plans. Since then, members of Congress and the education community have participated in the reimagining and improving Student Education Committee, also known as the RISE Committee, because Congress loves witty acronyms, and they discussed how the laws will be interpreted and how to make those rules apply. I didn't actually know about this committee until a couple of weeks ago when I started researching for this episode. And on top of that, the Department of Education just posted the videos from the November and October meetings onto their YouTube channel recently. So unless you were directly tied to the committee or to a financial aid department, you probably didn't know about it. And yes, it is actually as boring as it sounds. According to newamerica.org, the DOE actually ended the meeting a day earlier than planned, which was on November 7th. So they ended it on November 6th, but not without the discussion and decisions on rules, definitions, and descriptions and how they would be implemented. Now, I believe that these decisions, and even the decision to end the meeting a little bit early, is all in part of the attempt by this administration and their business allies to try and privatize all of education and continue dismantling the Department of Education. Whether that's for the better or for worse, only time will tell, but the truth is that they are moving things in a direction that would try to push students towards privately funding their education and possibly education itself being privatized. Now that said, the DOE is going to offer three loan types moving forward: direct plus loans, direct subsidized loans, and direct unsubsidized loans, which are all offered now, but they are eliminating some of the loans that are offered. I'm going to take these loans into account and reference a couple of other programs that tie into federal funding as well. One thing to remember before you apply for any loan from the government is that you do need a federal student aid ID, or FSA ID, and that is free to get and free to register for through studentaid.gov. It is required to apply for federal financial aid and to fill out the FAFSA, the free application for financial student aid. Federal student aid. Wow. I should probably get my acronyms right. I've been doing this for a while. And also here is a disclaimer. Any information I provide on here is as I read and interpret it. You should always check with the financial aid office at your chosen school, the Department of Education website, and if you're lucky enough to have one, a financial advisor before making any financial decision, whether that's about student loans, federal or private. You are responsible for any and all financial decisions you make. Okay, lawyers. I put my legal disclaimer out there, so no touching me. Also a disclaimer, this is pretty dry and boring stuff, but saving money is pretty dry and boring when it's said and done. However, it is a very important part of making sure that you are successful in life, and that is why we think ahead about it. I know. Let's add a background track. Yeah, that'll do it. First, let's discuss the parent plus loans. Plus loans are federal loans that are taken out by the parents of undergraduate students or eligible graduate students to help financial education. However, this was one of the more contentious points of the RISE meeting, as the big beautiful bill had set specific caps on the amount of money parents can borrow. Specifically, they cap the maximum amount at$20,000 per academic year minus other financial assistance, capping it at an aggregate amount of$65,000 for each student during enrollment or for the total time that said student is taking classes. If the student is enrolled by June 30th of 2026 or before July 1st, those limits don't apply. They would have to provide reasons and notifications to the students that this could happen ahead of time. But considering the battle for funding, I doubt this will be a big problem for many schools. But filling out paperwork creates red tape, and of course that red tape creates costs, and possible extra constraints on the university and financial aid offices. Also, it gives the administration a little more gives the administration more to scrutinize whenever they're looking through colleges. So I don't think any colleges will seek to lower or deny anything, but that has yet to be seen. Again, these changes won't take place until July 2026, but they may change the way some graduate programs are funded. The intention, I believe, is to actually try and lessen the amount of money available to schools at the expense of the quote-unquote taxpayer, but this alone does not address the problem of rising tuition. And if there are students going to graduate school especially, then they will need all the assistance they can get. Moving on to graduate plus loans. As stated in subsection 685.200 of the Big Beautiful Bill, starting July 1st, 2026, a graduate or professional student may not borrow a direct plus loan. As long as you've enrolled before that date, you'll be okay taking out a graduate plus loan. However, anytime after that, you will have to take out a different kind of loan. Specifically the unsubsidized or direct subsidized loan capped at a total amount of$100,000 for the entire length of enrollment in your program. There are mixed reviews out there on this one. On the one hand, before this change, there was no limit to the amount graduates could borrow permitted that they pass the required credit check. This and the cost of school led to graduate students becoming the biggest holders of student debt, and some people feel that it's too much money given out, even though it's a loan, so they have to pay it back. On the other hand, grad students have such high debt because of the cost of grad school, specifically medical school, which usually takes at least four years to complete. At my alma mater UCF, the medical doctorate program, including housing and living expenses, is estimated to cost a total of$58,000 per year. And that's on the cheaper side. Since these programs take a minimum of three to four years, if you don't have any other source of funding, you would have to quickly rely on private loans. However, this would tie back to my main belief that you need to find other ways to fund your schooling besides loans. According to the Association of American Medical Colleges, 71% of medical students in 2022 graduated with education debt, averaging more than$200,000 per student. Part of the reason for creating federal student loans in the first place was to protect students from predatory lending from private companies, while allowing those higher echelon jobs to be open to academically gifted, but lower-income students. All this said, the cost of medical school isn't going to magically drop just because student loans are becoming less. So if you are your student or a loved one is considering med school, the AAMC recommends reaching out to a financial aid office ahead of time. So that way you can find out your options. Do research on loans early, both private and federal. That way you can know what types there are and you can decide on interest rates. And of course, budget for your schooling. And then find scholarships and repayment programs. Some places will help you go through school if you promise to work with them for a certain amount of years after you graduate. I'll put a link to the Association of American Medical Colleges into the show notes. Having fun yet? I don't get a lot of chances to make jokes in these episodes, so I'm sorry. It's it's just very dry and about student loans. I wish I could make a joke about undergraduate loans, but the direct subsidized and unsubsidized loans for undergraduate students has not changed. That's the punchline, I guess. However, that means if you're a dependent, meaning you have a parent or guardian claiming you on their taxes, your maximum borrowing amounts for undergraduate tuition are$5,500 for your first year,$6,500 for your second year,$7,500 for your third year, and each year beyond that. Up to a maximum or aggregate, get used to that word, of thirty-one thousand dollars. If you're independent, meaning you live on your own and are not claimed as a dependent on anyone's federal taxes, you have different limits set at$9,500 in your freshman year,$10,500 in your sophomore year, your second year, and$12,500 in your third year and each year beyond that for a total of up to$57,000 for the life of the loan. These maximums are combined of the subsidized and unsubsidized amounts you can borrow. So the maximum of the subsidized loans, that is the tax-deferred loans that you can get, regardless of your dependent or independent status, is$3,500,$4,500, and$5,500 for your first, second, and third beyond years, respectively. If you do have any questions about those amounts, uh go to studentaid.gov for more details. I will put a link in the show notes. Oh my gosh, it's so dry and so boring. Wow. I should have written more jokes, except it's just I don't know how to joke about student debt because it's not funny. Student debt is just not funny. Alright, uh, moving on. Pell grants. More good news, if you can call the federal loans good news, is that the federal grant the federal Pell Grant program appears to be untouched. If you're new to this, you might be asking, what is a Pell Grant? I'm glad you asked, random stranger. According to the Department of Education, the Student Aid site, federal Pell Grants are usually awarded only to undergraduate students who display exceptional financial need and have not earned a bachelor's degree, a graduate degree, or a professional degree. The second thing to note is that Pell Grants do not have to be paid back. Yay! Well, oh, except in very special circumstances. So if you withdraw early or if you cut down your hours from when you first were awarded it, uh you do lose that Pell Grant. The Pell Grant awards can and often do change from year to year. Furthermore, some schools push these out on a first-come, first-served basis. So it is best to get your FAFSA and school applications in early to make sure you get the grant rewarded in time to pay for tuition. The teach grant is also available. And that is a grant specifically for those who are planning on becoming educators in high-need fills or areas, which are listed on TSA.gov. And before you ask, TSA in this case does not stand for Transportation Safety administration. This is actually the teacher shortage areas.gov. Which is kind of weird that they use TSA for both, but maybe this one was first? I don't know. Just interesting fun fact. Wait, scratch that. I just went back and checked, and it's actually tsa.ed.gov. Still confusing, but less so. Be careful with this. Not not the web address, the grant. Because if you don't teach in a high need field, the grant will be turned into a direct loan, which will need to be paid back. To clarify, a loan is money you have to pay back. A grant is money that is given as long as you accomplish the task that the grant was given for. Speaking of payback, back into the boring stuff. The payback schedule has been adjusted, and they've made several other adjustments to the repayment options. The fixed repayment system will transition to different tiers of repayment, meaning that if you have received or will receive direct loans before July 1st, 2026, you'll be beholden to the payoff amounts and timelines set under the previous law. This will apply to direct, subsidized, unsubsidized, and plus loans, as well as direct consolidation loans, where you rolled your old payments together into one payment. These repayments are set on a fixed timetable from 10 to 30 years, depending on the amount that was borrowed, starting from$7,500, which is to be paid back within 10 years, and extending up to 30 years if you have$60,000 plus dollars of outstanding student debt. The extended repayment plan receives the same treatment and is being phased out, but is still available to borrowers who began repayment before 2006. And yes, there are people from 2006 that are still paying back their student loans. Let that be a lesson to me as well. Now, after July 1st, 2026, the repayment period and terms for all direct loans will change. And if I'm reading this correctly, I mean it is a long bill after all, you will either be able to choose the graduated repayment plan, where your payments will increase as you get closer to the payoff date, or the fixed repayment plan, where you have equal payments for the entire life of the loan. Typically, you pay more interest in the graduated plan, but people like going with that plan when they're fresh from school because it gives them more wiggle room in their first career, first job budgets. Whereas with the fixer payment plan, that is a fixed amount of your income, no matter what your income is. And some people would like to have more money in their pocket right away. I mean, who wouldn't, right? But you need to really think about which plan you want better. Personally, I like going with the fixed repayment plan because as your income increases, your payment does not increase. So your budget gets bigger without you having to worry about your student loan payment getting bigger. Whereas in the graduated plan, even if your budget is getting bigger, or sorry, your income is growing and gets Bigger. Student loans are gonna grow with that. Your student loan payment is gonna grow with that, so you will end up not really seeing the benefits of getting more pay like you would with the fixed plan. Back to the information. What are the new adjustments they made starting in 2026? If you borrow less than$25,000, you will have to pay it off within 10 years of entering repayment. Remember on the previous plan or the previous law, it was only if it was$7,500 or less. So now it's three times the amount borrowed, but paid back within the same amount of time. If you borrow between$25,000 and$50,000, you'll have to pay it off within 15 years. If you borrow between$50 and$100,000, you'll have to pay it back within 20 years. And anything equal or greater to the amount of$100,000 will have to be paid off within 25 years of entering repayment. That doesn't seem too bad, but that is almost like a mortgage payment when you look at those terms. And not to mention, less wiggle room as far as the lower amounts. Now, one benefit that they did pass along with all this adjustment of the student loan timing is that in July 2027, a year after all the other changes take place. I didn't make the rules, so don't ask me. But in July 2027, you will be able to rehabilitate a defaulted loan twice instead of once, like it is currently. So, you know, if you're trying to choose to pay off your student loans or pay for your rent, which somebody hiked up$300 a month just because they could, I think they're hoping people will start repaying their student loans again. I'm not bitter, you're bitter. As of now, uh, the income-driven repayment plans are still available for those in repayment despite its downtime earlier in this year. So they had taken down the IDR plan and application because they were against they were trying to get rid of Biden's save and repay plans, and there was a lot of litigation on that. And this actually gets to a very important note about the payoff and repayment plans, because there has been ongoing litigation since the middle of the year concerning the save and repay plans, and the Department of Education proposed a settlement with the states involved on December 9th, 2025. Now, that settlement has yet to be approved by the court, so we might see a rescrambling of the DOE on changing the repayment options available. However, considering that the states that were suing were doing it more to be against the Biden administration than the current administration, I feel like this settlement might work out in the DOE's favor. Which is not necessarily in the student's favor. Not saying, just saying. Now, private student loans, I feel, are the worst option of student loans. However, the student loan companies that are out there now actually are doing a better job than other companies had done in the past. So they are allowing deferments while you are in school, and some of them also have the forbearance programs like the Federal Student Aid Program has, where if you are in financial hardship at any time, you write them a letter explaining it, or you sometimes can just ask for it, and they'll give you a few months to get yourself an order without it affecting your credit score or your payment schedule. This does require research ahead of time to find out which one is best for you. And I recommend going to either NerdWallet or the college investor websites to see what they recommend because they do extensive research into all the companies, list the pros and cons, and give you their idea of what's best. The main things to look for when you are going with a private student loan is interest rates, number one. They will do a credit check on you, of course, it is a loan, but you'll want to look for the lowest interest rates. If you are higher than what the federal rates are offering, you may want to shop around a bit more. But I'd say anything that is lower than the average percentage of loans out there is not a terrible deal, but it also depends on the terms, because again, private companies usually charge more fees, so you'll have to pay attention to what fees there are. The other thing to look for when you're looking for a private student loan is what options they have for forgiveness or repayment, because some do just a straight fixed repayment plan, some will do graduated, like what we talked to earlier, and some will even offer an income-based repayment plan. But again, do the research. Look for something that fits into your budget and your life plan. And with all this, I've finally reached the end of my script. Now, this is not an all-inclusive, exhaustive or you know, world-ending listing of the rule changes. I could have gone into her more detail, but that requires more reading from me and more listening from you, and while I'm sure you'd love to spend all day talking about student loans with me, you probably have other stuff to do, like plan for the new year's. Personally, Assassin's Creed 3 has been calling my name. Thank you for listening to my episode so far. 2025 has been a learning experience, and definitely an interesting one, but a fun one as well. And I thank my listeners for being there with me, listening to my ramblings and terrible jokes, and supporting me by subscribing and sharing this to friends and family. So please subscribe on your favorite podcast platform, or you can like the channel on YouTube. Until the next episode, which will be in the next year, have a happy new year, and of course, keep thinking ahead.