In an unusual move, Congress worsened terms for some existing borrowers. Now they\u2019ll have to pay more, and for a longer term.<\/p>\n
Imagine for a moment that your bank changed the terms of a loan that you had been paying down for more than a decade. It informs you that it is increasing your payment and extending the term by five years.<\/p>\n
Any commercial bank would most likely be accused of violating basic contract law.<\/p>\n
So what happens when the federal government does it?<\/p>\n
As part of the One Big Beautiful Bill Act passed last summer, Congress rewrote the rules for certain student loans. Since legislators are permitted to make changes, borrowers\u2019 legal rights aren\u2019t clear-cut \u2014 but to many of them, it still feels a lot like a broken contract.<\/p>\n
The big tax and policy bill overhauled the federal student loan machinery, from borrowing limits to repayment plans. But instead of applying only to new borrowers, certain changes have swept in many holders of existing loans. They include a less noticed group who will need to choose a new income-driven repayment plan with more onerous terms than a program they could have signed up for as many as 14 years ago.<\/p>\n
Matthew Hansen, a 40-year-old pharmacist from Sandy, Utah, who borrowed $166,000 for graduate school, is among them. \u201cIt feels like your mortgage lender calling you and saying, \u2018Hey, your home is worth a lot more now, and so we\u2019re going to add five years and $100,000 to your mortgage,\u2019\u201d he said.<\/p>\n
In 2013, Dr. Hansen enrolled in the income-driven Pay as You Earn repayment plan, known as PAYE, in which borrowers pay 10 percent of their discretionary income for 20 years. After that, any debt remaining is discharged. But the policy bill will eliminate PAYE from the menu of repayment options in the summer of 2028, forcing Dr. Hansen to enroll in a plan with less favorable terms.<\/p>\n
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