Mike and Amy discuss into the significant changes brought about by the One Big Beautiful Bill Act, particularly focusing on student loans, FAFSA, Pell Grants, and the implications for families planning for college. Mike Hunsberger, a subject matter expert, provides insights into the complexities of the new legislation, including changes to repayment plans, borrowing limits, and the impact on families with existing loans. The discussion emphasizes the importance of understanding these changes and being proactive in financial planning for education.

Chapters

00:00 Introduction to Student Loan Changes

03:37 Historical Context of Student Loan Repayment

06:31 FAFSA Changes and Implications

09:30 Pell Grant Provisions and Accessibility

12:36 Direct Student Loans: What Remains the Same

15:26 Graduate School Loan Changes

18:25 Parent Plus Loan Adjustments

21:18 Impact on Family Financial Planning

24:35 Repayment Plan Changes for Existing Borrowers

27:18 Navigating Parent PLUS Loans and Repayment Plans

33:52 Expanding Opportunities with 529 Plans

38:14 College Planning for Military Families

44:35 Strategies for Families Facing Student Loan Changes

Takeaways

• The One Big Beautiful Bill Act has introduced major changes to student loans.

• FAFSA has undergone revisions that affect small business owners.

• Pell Grants are now more accessible for shorter-term education programs.

• Direct student loan borrowing limits remain unchanged for undergraduates.

• Graduate school borrowing limits have been capped significantly.

• Parent Plus loans will now have annual and total borrowing caps.

• Existing borrowers need to be aware of new repayment plan options.

• The new repayment plans may extend payment periods to 30 years.

• 529 plans have expanded usage for educational expenses.

• Families must be proactive in understanding their financial options for education.

Schedule a consultation with Mike: https://nextmissionfinancialplanning.com/contact/   

Schedule a consultation with Amy: https://www.instarfp.com/contact

TRANSCRIPT

Amy (00:01)
Hey everyone. So we’re back again today with another interview, but we’re doing it a little bit different. So our aim is to bring subject matter experts to you to do some interviews. In this case, Mike is the subject matter expert. Today we’re going to dig into some of the changes that have come about as a result of the One Big Bit of Beautiful Bill Act that passed over the summer that impacts quite a lot around ⁓ student loans,

student loan repayment and planning for college. This is a big deal. I think it’s gonna be a great episode. So looking forward to jumping into it with you.

Mike Hunsberger (00:40)
Yeah, that sounds great. Looking forward to it.

Amy (01:17)
Okay, Mike. So here we are. There’s a ton to dig into here. I mean, there’s just so much stuff. ⁓ We will forgive you if you need to refer to your notes because so much has changed. This is different and really different. So under the Biden administration, we had some changes to school loan repayment. ⁓ That I felt like, you know, those were fairly major changes, but not like what we see now. So

I guess the best way to dig into this is to just dig into it. So maybe to get started, maybe you can set the stage for us and just do a quick kind of review of where we’ve been up until ⁓ one big beautiful bill. ⁓ So if you can kind of go back in time and bring us up to speed on what happened through Biden administration and that kind of stuff.

Mike Hunsberger (02:08)
Yeah, so it seems like almost, you know, for the last few administrations, there’s been some changes, particularly around the repayment plans. Everyone seemed to introduce their new flavor, tweak it a little bit. you had, ⁓ pay, it was one of them earlier and then you had repay. And so that that’s just been a normal iteration. And, know, the Biden administration proposed save, ⁓ that

you know, got onto the books, but then, you know, it was done through the education department, not through Congress passing anything. So, ⁓ you know, it got challenged in the courts and it’s still winding through that. that, you know, caused some confusion because people could sign up for the new save plan. And then it really, you know, you went basically into hiatus at that point and there, you know, really wasn’t a lot of change. And then

On top of that, also had a lot of the you had the payment pauses during COVID that extended well past COVID. So there was there’s been a lot of confusion on the repayment side. Well, this kind of blows open the repayment side, but also hits the borrowing piece. It also changes some of the FAFSA stuff. So a lot of different facets in addition to just the repayment piece. So we’ll dig in all those today and hopefully give people a flavor. But

⁓ It is complex. your homework ⁓ because there are a lot of nuances and things that I think are going to trip up a lot of people that are now vastly different than they have been and could cause a lot ⁓ of issues and more expensive payments for people, especially if it’s parents, bar and parent plus loans. So we’ll get into all that.

Amy (04:04)
Yeah, yeah. Okay, so you know, we over the summer, July 4, in fact, big, big, bill passed. And obviously, I think, you know,

most people read about the tax changes. There were a lot of tax changes. We’re not going to touch any of those today. But I think those tax changes sort of overshadowed what all the changes with education and student loans. And, you know, so what are your thoughts around, you know, why, why did the tax changes are overshadowing? I mean, maybe because every single person is probably impacted by the tax changes versus student loans. But do you see other reasons why the education piece of things haven’t really been touched on?

too much.

Mike Hunsberger (04:48)
I mean, think that’s I think you hit the big reason is, you know, tax affects everybody. This education stuff only affects a subset of the population. But, you know, this just isn’t typically how we pass legislation like this. I mean, in addition to education, there’s clean energy. So there’s there’s a lot of different things all in this. And I think, you know, reporters and news agencies, you know, have limited.

Inc. space that they can and TV time that they can allocate to this. So taxes get the lion’s share. it’s mainly because typically these would be a different standalone bill on just education. So then it might get a little play because it wouldn’t be passed at the same time as tax. But this time they just put everything together, you know, kitchen sink bill. And I think that ⁓ is really what, you know.

is why the education and some of the other provisions have received less air time.

Amy (05:47)
Yeah. And, you know, obviously Congress is going to do ⁓ whatever, you know, their priorities are and the administration’s priorities are and things like that. know, but, you know, digging into the real lives of American people and specifically our, the people that we work with, military families, you we covered quite a lot with Kate ⁓ a couple of weeks ago or so on the GI Bill stuff. For those families who do not have GI Bill, this is really a big deal.

⁓ so I think it’s important to bring out the fact that just because the news isn’t reporting on it doesn’t mean it doesn’t apply to you. ⁓ so hopefully this podcast is, useful. and so with that, what I’d like to do at this point is start digging into the nitty gritty details, Mike, if that’s okay. Okay. So let’s start with FAFSA. We’ve had some changes to FAFSA in the years past, just the, the, you know, last year or two, we’ve had changes. but there’s more changes, ⁓ now.

Mike Hunsberger (06:31)
Yeah, that sounds great.

Amy (06:45)
So what has changed and tell us who is going to impact?

Mike Hunsberger (06:50)
Yeah, so this is a fairly minor one. We had the FAFSA, which is the Free Application for Federal Student Aid. It’s what you fill out ⁓ every year, send to the college. pulls in your tax information and kind of generates your student aid index or how much the federal government, based on this specific formula, calculates that you can afford to pay for college. ⁓

You know, we had the simplification act two years ago. It was a little rocky start. Last year was much better just on the overall form. But what they did was kind of revert one section back to how it used to be. And it used to be that if you owned a small business with less than 100, 100 fewer employees, you didn’t report the value of that business on the FAFSA.

FAFSA simplification, you started to have to. So anybody that owned a small business, you and I, ⁓ we would have to come up with some numerical value for what the business would be valued at. ⁓ That has now gone back to the way it used to be, where if you have 100 or fewer employees, you do not have to report.

the value of the business. The income will still come through because that will come through on the tax return, but again, it won’t be counted as an asset for the calculation also.

Amy (08:16)
Okay, so that sounds fairly manageable compared to some of the other stuff we’re going to jump into later. Okay, but there were also some changes around Pell Grant provisions. ⁓ Can you tell us a little bit about that?

Mike Hunsberger (08:20)
Yeah.

Yeah, this is a bipartisan thing. ⁓ Both sides really came together on this. And it basically expands the ability to use Pell Grant for shorter term ⁓ education or like grade type of classes. It will also help community college that typically offer some of these things. So yeah, it’s just an expansion of how you can qualify for a Pell Grant.

Pell grants are typically for the lower income, highest need folks. So ⁓ it can really help them get a jump on finding a job or improving their skills to get a better job. So it’s an overall net positive. One just kind of note on that is ⁓ for traditional schools, if you get the Pell grant, it goes directly to the school. And if you

And if you live off campus, but and maybe you’ve got a super low SAI, maybe even a negative SAI, so you get the full Pell Grant, you live off campus and don’t have any bills because you get free tuition. You know, trying to figure that out and you know what you can apply that Pell Grant to will be important. So just just understand that it goes directly to the school and can’t be used to defer ⁓ like housing off campus.

Amy (10:00)
Gotcha. Okay. And you know, just a foot stomp, we’ve gone through this before. So everyone, literally everyone should fill out a FAFSA when you have a senior in high school who’s getting ready to go to school the following year. Right? Everybody.

Mike Hunsberger (10:15)
Yes, everybody and even if you know you’re not going to qualify because things can change, some schools have a policy is if you don’t fill it out that freshman year, you’re basically saying I’m going to cover the full cost the whole time. And even if something significantly changes, you lose a job, know, death, something like that, you really have to fight at that point to get it back. So it just makes sense even if you’re not going to qualify.

The other thing, some schools tie it even to merit scholarships. They want you, if they’re going to give that money out, they want you to fill out the FAFSA and just understand that. yeah, and it should be coming online in a couple, actually by the time this gets released, it’s probably already online, starts October 1st. So ⁓ yeah, make sure you’re filling that out each year.

Amy (11:03)
Yep, perfect. ⁓ Okay, so let’s turn our attention to things that are a little bit more complicated than what we just went over with the FAFSA. ⁓ So in terms of student loans, repayment, that kind of stuff, let’s first talk about one of the things that’s not changing. So let’s talk about what’s not changing. I think there might only be one ⁓ that might not be true, but what isn’t changing?

Mike Hunsberger (11:28)
Yeah, so one

big thing that’s not changing on the federal student loan side, again, we’re talking federal student loans, not private loans, but the ones you get directly through the government. The federal direct student loan, I mean, these are for undergrad. You can borrow across the four years up to $31,000. That’s not changing. Starts out $5,500 for freshman year.

6,500 for sophomore year and then 7,500 for subsequent years. And for a four year, that would be 31,000. No changes there. It’s still in the student’s name. ⁓ They’re pretty much blanket approval. And again, that’s typically a manageable amount of money to borrow, ⁓ even in the student’s name. They can get either into a payment plan or

you know, $31,000 over even a 10-year standard plan, you know, isn’t, you know, really honor us if they get ⁓ a decent job out of college.

Amy (12:36)
Okay, yeah. And again, the only way to access those loans is if you complete the FAFSA. So that’s another reason to go ahead and do that. We’re gonna dig into more things that make those direct student loans maybe a little bit more attractive than other options. Okay, so that is good news that that hasn’t changed. ⁓ There are changes to grad ⁓ school loans. So can you fill us in on those changes?

Mike Hunsberger (13:04)
Yeah, this is one of the big things. So the program used to be called Grad Plus ⁓ student loans. And again, what it sounds like federal loans for graduate school. And those used to be basically unlimited that you could borrow up to the cost of attendance for any of the years you’re in grad school. So they could get significant, especially when you’re thinking about medical school or ⁓ law school.

hundreds of thousands of dollars, I’ve seen people with balances from their student loan borrowing. So basically the bill eliminated the Grad Plus program. you still can borrow, it’s just the name has changed and it’s basically, but there are some limits. So starting next year for the 2020, starting in 26 for the 26, 27 school year, new limits.

annual limits of $20,500 and also a total cap across your graduate school borrowing of $100,000. Special students, meaning lawyers, doctors in those programs, and the education department has a whole list of what qualifies dentists, can borrow up to $50,000 per year.

but are capped at $200,000 in total borrowing. right now there also is a provision if you’re in a program, they’re not going to pull the rug out for money after one year in. If that’s how you were planning to finance your education, you’ll be grandfathered in and continue. But anybody starting a new program after that 26, 27 school year is going to

be subject to this. And then there’s a lifetime borrowing max for all students. And that’s $257,000 combined. So that would be the undergrad. So you did some just, first you went to grad school and then decided, yeah, I want to go all the way to med school. That limit will come into effect for a lot of people.

Amy (15:26)
Yeah, and these, I mean, these limits as I look at them and think about, you know, some of the education planning that I’ve done and no doubt that you’ve done, ⁓ this changes the calculus and the buying decisions that some people are going to make around schools. So this is pretty interesting, something to pay attention to if you’ve got a senior in high school right now. You know, hopefully you took note of those limits and are integrating it into your purchasing decision.

Mike Hunsberger (15:54)
Exactly.

Amy (15:56)
Now, so, you know, the direct loans, ⁓ the grad loans, you know, those are student-oriented borrowing. What about changes to Parent Plus?

Mike Hunsberger (16:07)
Yeah, this is really big, and both on the borrowing side, and we’ll talk about on the repayment side some of the things that are going to change there. again, Parent Plus, like the Grad Plus, were uncapped. Cost of attendance, you could borrow for all of that. Well, that’s now going to be capped at $20,000 annually and a total cap of $65,000 per student. So if you’ve got two kids,

You can still borrow all of that for each of them, but no more of… I know people that were financing $65,000 a year for all four years per kid. so that is not going to exist anymore. so I think we’ll talk about it probably toward the end of the whole planning piece of this, but considering saving more…

find a more affordable schools or the other options to go to the private market. But I think there’s going to be some even challenges there just with when do you borrow, how do you borrow as you get to those end of the school and you’re going out for private loans and you’ve already got $100,000, $150,000 debt that you owe them.

what interest rates are you going to start to qualify for? And I think that’s going to start going up if you’ve got two, three kids, you know, and you’ve already got, you know, large balances from kids one and two, when you’re trying to borrow for kid three, it could be really, really difficult. So a lot of things to, you know, think about there, but it’s a major change with what you’d be able to borrow.

Amy (17:55)
Yeah. And I mean, what do you think about this in terms of, know, obviously this changes the education planning landscape ⁓ side of things, but we’re financial planners, right? We do education planning. I think you do a little bit more. This is sort of one of your niches. So you do quite a bit of it. ⁓ But, you know, broadly speaking, how do you think this is going to impact family financial planning?

Mike Hunsberger (18:25)
Yeah, it’s definitely just going to make it more challenging if you haven’t saved, if you haven’t started early. ⁓ And one of the challenges is when you’re hitting college age kids is probably when you’re starting to really hit your earning stride. so you may not have had the ability to save as much early on.

and then your income goes up. So then it drives up how much the schools think you can pay and the federal government thinks you can pay. So it’s kind of a nasty, nasty cycle there. So I don’t know what happens going forward. I don’t know if the schools are going to have to step in and do some things differently. There’s been a couple schools that have tried the model where they’ll kind of loan you the money and then you agree to

you know, some percentage of your income over a certain number of years, maybe that gains traction in this kind of environment ⁓ to just kind of self-finance your degree. But ⁓ it’s definitely going to change a lot of things.

Amy (19:31)
I agree. ⁓ On the flip side of things, I have clients who are in retirement still paying sizable Parent PLUS loans. ⁓ So part of me kind of thinks that…

You don’t want to take away opportunities from the next generation, but at the same time as we plan for our clients to retire, I almost feel like, so like torn, right? Is it good? Is it bad? So, I mean, do you have similar thoughts? Do you have pros and cons that you’ve been thinking through too?

Mike Hunsberger (20:05)
Yeah, I mean, I do. I hate to see that when folks come in with $300,000 plus debt for student loans and you’re like, yeah, I’d like to retire. Well, you’ve got basically a house payment, ⁓ maybe not anymore, with the way houses have gone up, but ⁓ close to a house payment that you’re now making.

to finance what education that the kids had. I’m hoping something else changes. maybe, again, the schools somehow figure out how to rein in the cost growth and make it more affordable. And then the other piece is I think more families are really going to have to shop around for schools versus, oh, yeah, it’s a great school. They love it.

you know, we want them to have the best and, you know, so we’re willing to sacrifice for that without, you know, kind of really, really understanding what this is going to look like 10 years from now when you still got this huge student loan debt and you want to retire.

Amy (21:18)
Yeah, yeah, I mean, there definitely has to be a big risk assessment on, you know, using all your assets or all your borrowing capacity to get your kids through a school that they prefer versus, you know, maybe trading off for an in-state school versus the out-of-state that you hoped for, or maybe a year or two at community college and then transferring into that dream school, you know, those kinds of things.

Mike Hunsberger (21:47)
Yeah.

Amy (21:48)
Yeah. OK, so this everything we just talked about, this is sort of for students who are currently seniors entering ⁓ school next year or beyond. ⁓ Let’s talk about now the changes for people who have existing loans, so repayment plan changes. ⁓ So what are the major changes? And I know there have been some. What are the major changes to student loan repayment plans?

Mike Hunsberger (22:00)
Yeah.

Amy (22:17)
at this point.

Mike Hunsberger (22:19)
So we’ll caveat this. There’s a bunch of different categories on where you fall and how this will impact you. So let’s say you’re an existing borrower and you aren’t going to take out any new loans after 2026. So you’re kind of in the program now and you’ve got the debt you have and that’s what you’re dealing with. ⁓

You’ll have access to the plans until 2028 that you’re currently in, and those include the ⁓ IBR income-based repayment plan. And there’s kind of two flavors of that, depending on when you took your first loan out. And basically, that is your discretionary income. ⁓ It’s basically based on that, which calculates your adjusted gross income minus 150%.

of the federal policy or poverty guideline based on your family size and where you live. ⁓ that’s one. That’s going to be the primary one for somebody who’s not borrowing anything additional. New one’s going to come online. It’s called the repayment assistance plan or RAP. ⁓ That was what was codified in the bill. That’s going to be for most

things going forward is going to be the option you have for some type of income-based payment plan. And this one could potentially offer lower monthly payments, but it will extend your payment ⁓ to 30 years. So ⁓ it’s basically based on a percentage of income starts at like 1%.

2%. Basically, above $100,000, you’re paying 10 % of your adjusted gross income for your student loan repayment. The nice thing about this new plan is if you owed more than that, let’s say, again, we’ll use the $100,000. You’re paying 10%. You’re making that exact $100,000.

So you’re paying $10,000 a year. Well, if just the interest on your loans was like $12,000, previously that $2,000 that you didn’t pay in interest would get added to the loan. And that’s how we see folks get way behind. And even though they’d be paying for 15 years, they owe more than they did when they took the loans out. Well, basically the new RAP plan will say, if you’re calculated to pay

$10,000 for that year and it’s $12,000, we’re gonna just, it’ll just cap that and they’ll even take a little bit off the principal so you’ll start going down a little bit. So again, you’ll have to do your homework to see which one makes sense based on if you’ve been in IVR for a while and it could make sense, especially if you’re a higher earner.

But you definitely have to run the numbers there.

Amy (25:36)
Yeah. Now, I mean, that almost sounds a little bit like the save plan, not nearly as generous in terms of the payment calculation, but it sounds like there’s some sort of what I’ll call ongoing forgiveness for interest accruing above what your payment would have been.

Mike Hunsberger (25:57)
Yeah, yeah, that is one of the nice things about this. The only bad thing is it pushes it out 30 years now. So that’s a long time to pay on that. So 10 % of your income for that long, it’ll add up.

Amy (26:10)
Yeah, yeah, yeah.

I mean, and just to put that into perspective, I talk to a lot of people who do make over $100,000, who have a really hard time thinking about how they’re going to save 10 % of their income per year. That’s optional. This is not. So in terms of kind planning how much you borrow, it’s also planning how much you want to pay.

Mike Hunsberger (26:27)
Right.

Amy (26:34)
⁓ Okay, so we’ve talked about, you know, loans where you’re not borrowing anymore, loans where you’re still sort of in progress or you’re going to have new loans coming up. What about the Parent Plus loans that are out there?

Mike Hunsberger (26:49)
Yeah, so and one other thing ⁓ just on the on the new plan, ⁓ you’re still going to be able to file separately for your taxes and then just count the income of one spouse, whoever owns the loans instead of having combined income, which will be ⁓ also help some people, especially if the person with the loans has a lower income job. That could definitely help. you know.

Again, need to do your homework and have a tax person run all the numbers to make sure you’re not missing out on other ⁓ things that you could take advantage of if you file together. But it definitely needs to be factored in. then, parent plus loans. ⁓ So if you have a current parent plus loans, ⁓ I guess I’ll say what changed. So if you’re going to borrow new parent plus loans,

Amy (27:31)
Gotcha.

Mike Hunsberger (27:49)
you lose any access to any kind of income based repayment plan. So anybody borrowing after 2026, you’re going to be standard repayment plan, you know, potentially into the extended repayments, but ⁓ it’s not going to take into account income. you know, so, you know, the one thing that is potentially nice, if you do still have a big balance and you want to retire. Well, if you’re in an income based plan,

You could see your payments dropped if now you’re just relying on Social Security and pulling some money from ⁓ your IRA or something like that. There’s a chance that you could have seen your payments drop, but you’re just going to have the standard, typically like a mortgage, going to be fixed for that length of time. so really, when you’re thinking about the new Parent PLUS loans, take that into account.

Amy (28:48)
And what is the timeframe for people? ⁓ So the standard repayment plan, what is the timeframe that payments are amortized over?

Mike Hunsberger (28:48)
Thank you.

So typically, if you don’t go into the extended plans, again, will be for different, you can typically get either 20 or 25 pending, but standard straight up is 10 year repayment plan is again, when somebody says, the standard that they kind of will default you into it’s that. So again, hundreds of thousand dollars in parent plus loans.

you know, you’re talking, you know, and over a 10 year instead of like a 30 year on a mortgage, you’re probably talking more than a mortgage payment to make. So ⁓ it will be challenging for a lot of parents. ⁓

Amy (29:42)
And

so that is what you just described, the standard. That is for people who are going to be borrowing money under Parent Plus going forward. Is that correct?

Mike Hunsberger (29:52)
Exactly. Starting next, you know, 2026. So typically you start looking at that in July, August for that 26, 27 school year. And that’s when that’ll come into play. ⁓ So if you, yeah, if they have the loans ⁓ already ⁓ and you know, what’s probably going to make a lot of sense is to

Amy (30:06)
Okay. And what about borrowers?

Mike Hunsberger (30:21)
stop doing any future parent plus loans and try to consolidate them all between now and July so that you can get into the income base repayment plan, especially if you’ve got a large balance. So it’s critical, again, talk to somebody that knows this stuff, ins and outs and can give you your options. But if you do nothing and

you know, haven’t consolidated your loans and just have that Parent PLUS out there. Or, you know, you’ve got one more year for that student who’s going to be a senior next year and you decide, yeah, we’re still going to take out Parent PLUS loans. Well, even if you even if you had done a double consolidation and pulled everything in, you could now be, you know, not in all your loans that were Parent PLUS could just get picked into.

the new standard payment plan and you lose all your ⁓ income-based access. I think it’s gonna be shock for a lot of people who ⁓ maybe follow this on the periphery and not really understand what’s gonna happen and they’re gonna see ⁓ potential jumps in ⁓ what they’re expected to pay.

If you have standard, you know, if you have Parent PLUS loans, you took them out for this year and you haven’t started the consolidation process yet and to get into one of the other payment plans, you know, now is definitely the time to start to doing that. Possibly you could wait till after you get, you know, if you’re going to borrow for the spring semester also and, you know, take that in late December, January.

You may be cutting a little close because the processors, the student loan servicers are way behind on getting through any of the changes that ⁓ folks have put in to try to switch plans and do all that. ⁓ not saying it won’t be possible to get done, but just understand you may be rolling the dice there on whether it will actually get done ⁓ before the deadline.

to get into an income-based repayment for existing Parent PLUS loans.

Amy (32:51)
Gotcha. Okay, so if you’re somebody who has existing loans and you know, so you have the opportunity to get into an income based plan if you aren’t already, there’s still time to do that. ⁓ As long as you don’t add any new loans and kind of muddy the waters. For new people going forward, their payment is going to be based on the standard timeframe, which is 10 years, unless they’re able to get into one of the extended schedules.

which is either 20 or 25 years. Is that a good summary?

Mike Hunsberger (33:22)
That is very good summary.

Amy (33:24)
Okay, awesome. It’s so confusing and so it’s easier to just kind of consolidate it for people. ⁓ I think probably, you the bottom line is if you’re somebody who has parent plus loans, you are thinking you might need to borrow more, you probably should have a conversation with a specialist, right? Somebody who understands this to just figure out what really is the best for your family at this point in time.

Mike Hunsberger (33:29)
Yeah, yeah.

Yeah, 100%.

Amy (33:52)
⁓ Cool. Okay. All right. So we’re through student loans. ⁓ There were some really interesting changes to 529 plans. ⁓ Can you talk to us about, ⁓ you know, basically we, you know, they expanded how 529s can be used. Can you just walk us through those ⁓ expanded opportunities and any other changes?

Mike Hunsberger (34:19)
Yeah, this has been good news. The 529 use has been expanding recently ⁓ from some of this. ⁓

elementary and secondary education that you’ve been able to use your 529 for private schools in those areas. So this is an even bigger expansion of that. So it jumps from $10,000, which you used to be able to do for those type of schools, elementary, secondary, private. And now it’s up to $20,000 per year.

that you can use out of the 529, so a good deal there. ⁓ It also ⁓ expanded what qualifies for that. ⁓ Used to be specifically the school tuition. Now it’s tuition, ⁓ curriculum and curriculum materials, books and other instructional materials, ⁓ online education, and ⁓ tuition for tutoring. ⁓

or educational classrooms or classes that were done outside the home. And specifically the tutor can’t be related to the student for those. But again, some of the early draft language had specifically talked about homeschool stuff that’s not really in here. I would suggest if you’re thinking about

you know, especially the online education materials and things like that that you may be doing if you do homeschool. Check with your states 529 and see what they’re going to, you know, allow and not allow because they kind of set the rules on that. It’s more of a state by state piece on the actual implementation, but they should be coming out with more guidance or maybe the Department of Education will put out more guidance on those specifics. But again, a great

Great news for that. The other thing it also allows is for post-secondary expenses related to credentialing. So Amy, you and I both have numerous credentials. If you still had a 529 that you were the beneficiary of, you can now start using that for specific things. So that’s great for just, again, expanding access to allow folks to.

to use it for things that maybe helps them get a, they can use it for the education piece of getting a credential, but then also some of the post-secondary, post-credentialing support that’s needed. So a good opportunity there.

Amy (37:07)
⁓ Now you made a really good point that I want to foot stomp for people. So these 529 plans, those were the changes that the federal government made. So the federal government basically opened the door. The states have to choose to walk through it. So you really do need to check your state plan ⁓ and make sure that they have agreed to follow the federal rules for what’s considered a qualified expense. Not all of the states do that. I think off the top of my head,

California is one that doesn’t necessarily always follow the federal rules. ⁓ So just double check your state plan.

Mike Hunsberger (37:45)
Yeah, exactly.

Amy (37:47)
Okay, so we’ve covered quite a lot already. There’s ton more nuance in the bill. We’re not gonna dig into that today, we’d be here all day. ⁓ So let’s just turn now to basically trying to help people understand, maybe even with sort of like a case study. So let’s take the military family who has three kids, one GI bill.

So one post-9-11 GI bill, all these new rules, nobody’s in college yet, so there is no student debt. Let’s just assume mom and dad have already, parents have already paid their student loans off. Let’s walk through what college planning might look like for this family given the new rules.

Mike Hunsberger (38:35)
Yeah, that sounds great. ⁓ again, I’d also listened to our previous couple episodes ago with Kate Harrell, ⁓ you know, wrote a book on GI Bill, you know, understanding all that and great information there. We’re not going to get nearly that deep. But ⁓ yeah, so just in general, it’s just thinking about, you know, how different are the students? Are they all, you know,

You have one that’s Harvard bound or a very other expensive college that you want to encourage. You want to be a doctor or something like that, or just a superstar. ⁓ So really understanding the individual nature of the students is probably step one, because that’s going to allow you to most efficiently use the GI Bill. ⁓ The other piece is the GI Bill’s

going to cover one maybe a little bit into, if you looked at the whole four years, sometimes you get a little bit of four years in the semester out of a GI bill just the way the calculations are done. just understanding that, it’s still going to leave you with two years or two students almost of school to pay for. So what do you do? You’re going to want to look at scholarships, a lot of good.

⁓ military affiliated scholarships out there, military and veteran. So ⁓ understanding that. And then, you know, saving as much as you can is always, you know, the number one rule. And again, trying to make up as much as you can of that, you know, the second two students that you probably have to pay some of a bill. And then applying the GI Bill when it makes sense.

you know, given if they are going to go to a state school, maybe even an out of state school, given each of them enough to do a semester, if the school turns that into, okay, we’ll consider you in state for the rest of the time. So that could be another really good option. But, and then when you’re looking at borrowing, again, it’s factoring in.

You know, there’s new limits. you are going to have to borrow Parent Plus, ⁓ it’s, now sixty five, sixty five thousand dollars per student that you’ll be able to borrow, which sounds like a lot. But, you know, with schools over one hundred thousand dollars now for, you know, the super high end schools, you know, that’s not even a year. That’s like a year of tuition and not even, you know,

Amy (41:10)
65.

Mike Hunsberger (41:28)
their room aboard. So it’s,

Amy (41:31)
mean, honestly,

65 is not even a lot of like the flagship in state schools at this point, know? ⁓ So 65 is really not a lot, yeah.

Mike Hunsberger (41:40)
Yeah, if you’re if you’re going out of state, yeah, yeah. So

yeah, and then definitely if you’re an out of state student at, you know, one of the, you know, major, major schools, you know, major public schools. So so, yeah, it’s it’s really just getting down and doing the homework and figuring out what a realistic budget is and then shopping for the schools. Yes, it would be great if your kid could go to any school.

they wanted to and cost wasn’t an issue. But you probably don’t buy your car that way. You probably don’t buy your house that way. If you can’t qualify for the $3 million house because you can’t get a loan for it, we don’t just go, well, we’re going to do it anyway and somehow make that happen. Too many folks that I’ve talked to just

seem to think, I got to do that for education. I got to get my kid the best thing. ⁓ really, you know, unless they’re trying to be a Supreme Court justice or, you know, something like, you know, very specific where they have to go to the Yale or the Harvard or something that you see that really, really selective area. are a lot of great schools out there that you can go through on a reasonable budget that, you know, isn’t going to impact.

your retirement or your future lifestyle or your kids future lifestyle. So it’s really just shopping smarter and finding the schools that you know will will be a fit for your student, but also not you know bankrupt you. ⁓

Amy (43:25)
Yeah, now, you know, for a family who’s staring down the barrel of sending three kids off to school, let’s say, and they’re gonna, you know, let’s say the first kids are gonna start next year and their youngest is, you know, in seventh grade. ⁓ You know, so that’s three kids in the next five-ish, six-ish years. ⁓ You know, we’ve talked about the idea of saving more.

and you’ve also talked about like, ⁓ you know, shopping and kind of laying out your strategy. ⁓ Can you just, you know, maybe, ⁓ you know, highlight what conversations, how conversations might be changing ⁓ for families and students in a situation like this? Because, you know, obviously there’s tons of families who are getting ready to just start sending their first kid off to school, whether it’s one or two or three.

or five, or many. ⁓ should, besides just save more and shop for better value, how should families embrace this? Because we’re stuck with it for now. How should families take control of the situation?

Mike Hunsberger (44:35)
The most important thing to understand is getting a good estimate of your student aid index, where you are based on your income, your assets, and what that number is. Once you have that, that’s kind of the best case scenario. You can find a school that, say, knocks out to $25,000 is your student aid index. That means that the federal government

expects that you could pay that much based on their formula per year to send somebody to school. And so if that’s your number, you know, it’s then it goes into looking at schools that will kind of get you if that is even reasonable for what you know, some of what you’ve got saved. Maybe you can borrow a little bit, you know, with those federal student loans that will go in the student’s name. And, you know, if your income’s low enough,

you can qualify for the tax credits, understanding that number and then looking at schools that will get closest to that number is probably the biggest thing. And there’s different calculators out there on the Internet and on the Department of Education’s website that will give you kind of your ballpark SAI. The schools are required to have a net price calculator so that you put in all the information and it will spit out. I will say some of those are better than others.

⁓ that some say, yeah, we kind of stand behind ours. If it gave you something and the information’s the same as what you apply with, we’ll be in that ballpark type thing. Others are like, yeah, it’s kind of a best guess, but we won’t really know definitely until we see everything on the true forms. ⁓ yeah, getting those numbers, trying different schools.

And then looking at, know, if they’re a high performing student, looking at the merit side and finding schools that, you know, will provide just if they’ve got a high ACPS, GAP or GPA, you know, those trying to find those schools are also useful.

Amy (46:53)
So kind of as we wrap up, other, if there’s a few other pieces of advice that you can give to families who are dealing with student loan repayment changes, things like that, ⁓ what advice can we leave families with given all the changes that we just discussed?

Mike Hunsberger (47:16)
I wish I had a better note, but I mean, it’s challenging. There’s a lot of reports that the servicers are overwhelmed. They’re trying to process stuff. patience is going to be the word in that. then unfortunately, it’s going to be being relentless. The wait times can be.

measured in hours and not minutes sometimes. you know, it may mean if you need to talk to your servicer, it may mean trying to get in right when they open and the queue is low or at the end of the day. But, you know, be your advocate and, you know, keep on top of the dates, the deadlines and make sure you understand.

what’s going to happen, depending if you’re borrowing more or you’re set, but you’re having to switch repayment plans or consolidate your loans. You really need to not just say, it’s too complicated and I don’t know enough about it. I’m just going to do whatever’s happening. They will get you into a payment plan.

It just may, you know, it may not be the one you want and it may not be the one you can afford. So, you know, being proactive is probably the other piece besides being, you know, having some patience on, you know, how long this could actually take to move between plans.

Amy (48:59)
Yeah, and I mean, just starting, I would say, probably ⁓ just starting to wrap your mind around the fact that there’s, well, maybe this is a better question for you. What do you think the average impact is going to be across the board on folks who are trying to repay student loans right ⁓ now? Kind of my sense is that there could be substantial increases for a lot of people. Do you see it the same way?

Mike Hunsberger (49:30)
I do. I mean, especially if folks don’t take action and, you know, aren’t aware of the whole parent plus thing and accidentally borrow more and didn’t realize. And now they’re just going to get, you know, a huge, huge hit because maybe they did stuff right before, but they’re just not tracking that. I can’t borrow any more or I’m going to jeopardize all this. So, yeah, that’s that could be. ⁓

definitely a challenge. ⁓

Otherwise, I mean, I think the RAP plan is reasonable. I mean, it’s not quite as good as SAVE, and it does extend the payments longer. So that’s not ideal. I think it really is going to come down to more planning on the front end, trying to avoid some of this and making sure you understand. Because I think I talked about a little bit when you’re

with the new limits, especially with the going forward students who, parents who haven’t sent anybody to school yet, when you’re limited and you start building up even the federal side and borrowing that money and then going to augment with private loans, you’re going to being less qualified for borrowing more. And the last thing you want is to be midway through

child three and they’re like, hey, you know, either the rate’s so high to borrow or, you know, hey, we’re not going to loan you any more money at all. And then, you know, they’re out of luck with two years of a degree and you’re never able to finish it to get to the next, you know, full level. So that would definitely be another concern.

Amy (51:32)
Yeah, well, ⁓ we could spend so much more time on this because there’s so many nuances here. I think the key takeaway is that if you are about to send kids off to school, ⁓ you either need to do your homework in deep detail or potentially, you know, go find somebody to work with.

who is good at this and who already understands what’s going on. If you currently have student loans, ⁓ like Mike said, it makes a lot of sense to be proactive in trying to figure out what your payment may adjust to ⁓ instead of having a bad shock and not being able to ⁓ recover from that. ⁓ Mike, I learned a lot. I’ve been focused on the tax side of the Big Beautiful Bill Act myself. ⁓ So this has been very helpful for me. I hope it’s been helpful for our listeners. ⁓

anything else to leave folks with today.

Mike Hunsberger (52:26)
No, just do your homework and make smart decisions for you and your family. That’s really all you can do.

Amy (52:37)
Awesome. Well, it’s been great, Mike. Thanks for all your expertise. I learned a lot. I hope everyone else did too. Take care.

Mike Hunsberger (52:43)
Yeah, thanks, Amy.

Bye.