Podcast Episode - Suze School: How “Big Beautiful Bill” Affects Your Taxes and Paying for College

For this Suze School, Suze continues explaining elements of the new “Big Beautiful Bill” and what it will mean for your money.  Today's focus is on how the new law affects your income taxes and the major cuts to federal student loans. 

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Podcast Transcript:

Suze: August 3rd, 2025. Why do I always chuckle when I say the date? I don't know. But anyway, welcome everybody to the Women and Money podcast, as well as everybody smart enough to listen.

Today is Suze School, and we are going to continue from last week's going over some of the provisions of the Big Beautiful Bill that I think you should know about. But Miss Travis, as we speak, is in British Columbia catching fish, salmon, with her sister and some friends and having the time of her life, but she will be back in time for Ask KT's asking show. Anyway, that's what she calls it, by the way. It's the KT asking show when she talks to me about it.

Get out your Suze notebooks because I am going to talk about three different aspects of the new Big Beautiful Bill, all right, just so you know. The first one is all about how there is a new law that temporarily—underline the word temporarily—increases the state and local tax deduction.

Now state and local tax deduction—it's abbreviated by the initials SALT. State and local tax. All right, so when you hear me say SALT, you'll know what I'm talking about. So those of you who live in states with an income tax, you may be in line for some really serious tax relief.

Now the big new federal tax bill that became law in early July increases the federal deduction for SALT, and that will help you on your taxes. Do you remember how ever since the 2017 tax bill when that was passed, there has been a $10,000 limit on SALT that can be deducted from federal taxes? Do you remember that?

The new law, however, increases the potential deduction to $40,000. Now this is per household, everybody—not per person, per household. The maximum $40,000 SALT deduction is allowed for single filers as well as married file jointly with a modified gross income below $500,000. If you are married filing separately, the max to take the $20,000 SALT deduction is if you make under $250,000 of modified adjusted gross income.

However, if your income is above those limits, then your maximum SALT deduction is reduced by 30% of the amount your income exceeds the limit. Now what that means to you is this: if you have over $633,333 of modified adjusted gross income and you are single or married filing jointly, you've maxed out your SALT deduction and it automatically goes all the way back down to $10,000. If you are married filing separately, once you make $316,667 or more, you've lost your $20,000 SALT deduction and it too goes back to what? $5,000.

So let me give you an example. Let's say you're single or married filing jointly—does not matter—and you make $550,000 of adjusted gross income. You are $50,000 over the $500,000 max for the full $40,000 SALT deduction. You would times that $50,000 by 30% and that equals $15,000. You would minus $15,000 from the $40,000 and you would have a $25,000 SALT deduction.

Now let's just say you were married filing separately. Same thing and your income now is, let's just say, $300,000 or $50,000 above the maximum. $50,000 again times 30% is $15,000. So $15,000 from $20,000 which is the max if you're married filing separately, so now your deduction is $5,000.

Again I'm just gonna reiterate, no matter how much money you make, you always will have either a $10,000 SALT deduction if in fact you're married filing jointly or single, or $5,000 if you are married filing separately.

Now, do you remember when I started this, I said pay attention to the word “temporary.” The $40,000 SALT deduction is temporary and it can be claimed for 2025, 2026, 2027, 2028, and 2029. Under the new law, the SALT deduction is going to revert to the $10,000 limit for all households in 2030.

So from 2026 through 2029, the $40,000 SALT deduction and the modified adjusted gross income limits will both increase 1% a year. So, if you have a hefty state income tax bill and property tax bill—let's just say you do—and your household income is near the deduction limits, it may pay to do some tax planning to see if you can push your income just below the limits so you can claim the highest possible SALT deduction.

So I want you all to sit down with a tax pro and to consider ways to reduce your income. Example: modifying Roth conversions—you may not want to do Roth conversions during those years—or reducing taxable withdrawals from your retirement accounts. That can all be a very, very smart move. All right, so just know there are rules you need to know.

The next one, and this one upsets me a little bit, I have to tell you, is the law that makes big changes to federal college loans. You ready, everybody?

Any student or family planning to take out federal loans to pay for college, you need to be aware that there are huge changes to how much can be borrowed and how repayment will work.

The big federal tax bill signed into law in July is going to limit parents how much you can borrow for a child's undergrad degree and how the repayment plans are going to change. So bottom line is that paying for college just got more complicated.

So are you ready? Let's start with a list of the new rules, and then I'll share my advice on how to plan for college, given these new rules.

Undergraduate borrowing beginning July 1st, 2026. Write this down, everybody. The Parent PLUS Loan program limits parental borrowing to $20,000 per year per student and a lifetime total per student of $65,000.

Under the old rules you could borrow up to the full cost of their attendance for your kids. Parents, not anymore. So what does that mean? That means if you're sending your kids and they want to go to these schools that are $65,000 a year, good luck. How are you going to pay for them? You better start thinking about that right now.

Parent PLUS Loans taken out after July 1st, 2026—I hate this one—will no longer be eligible for an income-driven repayment plan. Parent PLUS Loans will only be eligible, everybody, for the standard repayment plan which sets repayments between 10 and 25 years depending on the balance.

So you used to be able to pay off these loans based on your income. A standard repayment plan is a whole lot more. So parents, you better think twice before you just take out a loan. You think you're going to be able to repay it? You better know the new rules, how much you can borrow and what it is actually going to cost you, and you best sit down with your children who want help from you and really go over. Can you afford it or not.

Again, beginning July 1st, 2026, students, students, listen to me, borrowing for undergrad will have their interest payments during school added to their loan balance. Do you remember when you used to be able to get subsidized loans? Subsidized meaning that while you were in school, interest didn't accrue to the money you borrowed, not anymore.

Now what you're going to see is that the new law makes all undergrad loans unsubsidized, so in plain English that means that even though students do not have to make payments on their loans while they are in school, the interest on the loan is charged, and if unpaid while in school, the interest charged is added to the loan balance. That will mean bigger payments once the student leaves school and repayment starts.

So you might want to think about it, everybody, that if you're going to take out a student loan—the student is going to take it out—you might want to pay the interest on that loan yearly starting the very first year, because otherwise it's going to compound.

The annual borrowing limits for federal undergraduate loans is unchanged. Oh, well, we have one thing unchanged. They start at 5500 for the first year, 6500 for year 2, 7500 for year three and beyond. Now there is a lifetime limit, listen to me, of $31,000 for students who are claimed as a dependent on a parent's tax return. So limits for independent students are higher just so you know.

But I want you to think about that. If the Parent PLUS Loans, you are limited to what you can borrow, you now have to pay it back under an unfavorable term, interest on these student loans starts accumulating right away, you have to really be careful about how much you are borrowing.

Now repayment of loans taken out, everybody, after July 1st, 2026, they will be eligible for two basic repayment plans—a standard plan that will require the loan be paid off in 10 to 25 years, depending on the loan size. But however, there will be just one income-driven plan, and it’s going to be called the repayment assistance plan or RAP that will tie payments to income. Payments will range from 1% to 10% of your discretionary income. And there will be no zero payment options.

So nowadays it’s possible, depending on your income, that you don’t have to pay anything on it and you’re not in default or anything. Under RAP, a loan will be forgiven, however, after 30 years, which is 5 years longer than the old plans.

So what does that mean? For borrowers on an IDR plan taken out before July 2026, you will need to switch to one of these two new plans after July 2028. So don’t think if you took out a loan before this goes into effect that you missed it. No, you didn’t.

So beginning July 1st, 2027, not 2026, deferment of a federal loan due to economic hardship is ended.

Did you just hear me? Is this a bill that you love that passed? Are you all excited about it? Are you starting to understand how this bill works against you if you are out there and you need to borrow money to send your kids to school? Are you understanding this?

So again, I’m going to say this one more time. Beginning July 1st, 2027, not 2026, deferment of a federal loan due to economic hardship is ended. There will be no way to completely defer principal and interest payments due to hardship. No. You can still defer payments while in school, but this new rule applies to once you have left school, you are in the repayment phase, and there is nothing you can do to stop that repayment phase.

Again beginning July 1st, 2027, you will still be able to apply for repayment forbearance, which means you can’t afford to pay it back, but if granted, it will only be allowed for 9 months within any 2-year period. Remember, with forbearance you do not owe any payments, but the interest on the loan continues to accrue and is added to your loan balance.

Why do they want to be able to allow you to do that? Because student loans still in most cases are not dischargeable in bankruptcy. They can come after you. They can garnish your wages. They can even go after your Social Security check later on in life, and it’s compounding and compounding, so you better be careful.

Let’s talk about graduate borrowing because this was for undergraduate. Beginning July 1st, 2026, so about one year from now, the Graduate PLUS program is abolished.

Under this program, graduate students have been able to borrow, you all know this, up to the full cost of attendance. There are now limits on how much a graduate student can borrow.

Beginning July 1, 2026, the only remaining program for federal graduate school borrowing will be unsubsidized loans for graduate school. The annual limit for master’s programs and PhD programs will be $20,500 a year. And there will be a lifetime limit of $100,000. So for professional degrees like doctors, lawyers, federal borrowing will be limited to $50,000 a year and a $200,000 total.

Where are you all going to get the money to attend college? Doesn’t it kind of feel like we have a thing going on about higher education with everything that’s going on with many of the universities? I don’t know what you think, but I sure do.

So the new grad school lifetime limits are in addition to any federal undergraduate borrowing. Now my advice for undergrad debt.

I have long advised you, have I not, parents, you are not to put their retirement at risk by borrowing or overborrowing for their children’s college costs. You know how I feel about that, but I also know that has been a challenge for many families.

These new limits provide some guard rails that can help nudge more of you to carefully calibrate college borrowing for your kids, and the same rule applies. Children should always borrow first before you, parents. The interest rate that they pay on federal loans is lower than the cost of Parent PLUS Loans, so they need to do it first before you. Got that?

More importantly, do I sound sad to you? 'Cause this all makes me so sad I can’t even stand it. The new borrowing limits should really spark your family to double down on looking for the best affordable school. So the dream school for your children and for you is the one that is so eager for your child to attend that it will offer a great merit aid package that reduces or even eliminates, everybody, the need for your kid to borrow, let alone you.

Do you hear me? So you need to start talking to your kids about this in grammar school, in early years of high school, to say, “Listen, if you want to go to college, I need you to really have all the colleges want you to attend.” So you have got to get straight A’s. Maybe you should excel in a sport, but you have got to do everything and anything you can do.

As for the change in repayment plans, well, I have to tell you the big takeaway is that students and parents really need to think hard about what they will owe after school is over. Please remember that the repayment plans now are less generous, forbearance is limited. You need to be prepared for making on-time payments once the student leaves school.

And the worst thing you can do is borrow now without understanding your future repayment commitment. Do you understand me?

Notice I said that the repayment happens as soon as the student leaves school. Loans must be repaid regardless of whether the student graduates or not.

So if you have a kid that goes to school for two years, doesn’t graduate, and now you have all of these loans, you have to start making payments right away. So that’s just another reason to have a serious family talk long before freshman year about attending college and paying for college. The worst move is to force a child into an education they aren’t eager for and that they and you may still end up paying for even if they don’t complete a degree.

I still don’t see anything wrong with community college. Just saying.

My advice for grad school is this. All right. The majority of recent borrowers for a master’s degree borrowed less than $100,000. All right, so I’m not too concerned about this new limit. But you should be able to fulfill any borrowing needs by sticking with federal loans.

Professional degrees are another matter. The cost of obtaining a medical degree or a law degree absolutely exceeds, in most cases, $200,000. So under the new rules, anyone who needs to borrow more for their graduate degree will need to look for a private student loan. And that is a big stand-in-your-truth moment.

Do you hear me? You need to slow down and carefully, and I mean very carefully, understand the risks and requirements of a private student loan. Got that?

For starters, private student loans work a bit like a car loan. You know what I think about car loans. But anyway, you need to qualify, and that means a credit score check. So you better make sure that your FICO score, your credit score, is as high as it possibly can be because even if you are approved, the interest rate you are offered on your private loan can be fixed or a variable rate which will be set by your credit profile.

So another option is for someone else, typically a parent with income, to cosign.

Are you kidding me?

For the parents right now listening to me, please do not tell me — and more importantly yourself — that cosigning is no big deal given it is for such a worthy endeavor. What if your child doesn’t finish the degree or if the child’s income is not sufficient to cover the hefty repayments?

You, my dear parents, will be on the hook to make payments. If that in any way interferes with your retirement security, you get a hard denied from me. I’m serious.

It’s also important to understand that private loans do not offer the same repayment and protection plans as federal loans. That doesn’t mean that your child can’t become a doctor or a lawyer. It does mean that they should look for programs that will subsidize the cost. I’m going to repeat this:

The best school, whether we are talking about someone pursuing an undergrad, master’s, or professional degree, is the program that offers the best financial aid. Ideally, you would never need to take out private loans. And at a minimum, if you need private loans, it should be for the smallest amount possible.

I'm sure there are millions of you out there that are saying, “But Suze, what about me? I already have student loans. How much of this applies to me?”

The first thing I want to say to all of you is stop going on all these boards and freaking out because you're reading about, “Oh my God, my payments are immediately gonna go up 600%. I don't know how to do it. It's crazy.”

So I've always said the only way to conquer fear is through action. When you take action, however, you have to have the correct information so you know how to act.

The first thing you better all get is that anybody who has an existing subsidized or non-subsidized Stafford Loan that's going to be disbursed before July 1st, 2026, you need to know nothing has changed for you. All the rules and repayment terms that you're under, you're still under them, but only until July 1st, 2028. So you have a lot of time to figure this out or to put more money towards your student loan, but you have time.

So what happens on July 1st, 2028? Well, that's when you gotta switch to the new available options. And if you don't switch yourself, oh, you will be auto-enrolled in the standard repayment plan — remember, those are fixed monthly payments — or the new repayment assistance plan, known as RAP, which is income-driven. Those will be your only two choices.

Now, existing Parent PLUS borrowers, you can still consolidate and access some income-driven repayment plans or the IDR options. But after July 1st, 2026, new Parent PLUS loans must be repaid under the standard repayment plan and will not be eligible for RAP or IDR.

So to maintain flexibility, everybody, if you have a current Parent PLUS loan, you should think about consolidating and enrolling in an IDR plan before July 1st, 2026. Got that? After that cutoff date, you lose the ability to use any IDR option for any new Parent PLUS loan.

Now for those of you under public student loan forgiveness — oh, it still exists, but with some changes. Hopefully all of you are up to date. I've tried educating you on this — that the SAVE program that maybe you've been using to make repayments, it doesn't exist anymore, and all of you had to change by August 1st, a few days ago.

You had to change it to something else, because if you're still under SAVE, those payments are not going to count towards your repayments, all right?

So what must you do? What is the something else you must do? You should use now an IBR method and then consider switching to RAP when it launches. Just that simple.

But remember, by July 1st, 2028, you will be enrolled in RAP or a qualifying plan, and if you don't do it yourself, you're going to be auto-enrolled.

The one thing I want you to watch carefully if you're in the PSLF plans is that while in 2025 you will have forgiveness — let's say you've paid it off and you're forgiven — you're not going to pay taxes on that. Starting in 2026, unless something changes, that forgiveness most likely is going to be considered taxable.

So those are the main things you need to know if you have a current student loan.

Now, I had one more law that I wanted to talk to you about, which is about the law that kills one's car buying tax credit and creates a new one, but I have to tell you — the one about student loans dined me in. That's about all I can take about this bill right now.

So that concludes this podcast. But listen to me — on August 10th, I'm gonna continue with the other things about the BBB that you should know. And there's some really great things, by the way — especially if you work for tips, or you do overtime, or you have a car loan, or whatever it may be. Don’t miss it, because again, it’s everything you need to know.

So with that, we'll all look forward to Miss Travis joining us again. I've missed her so much, I can't even stand it. But anyway, there's only one thing that I want you to remember when it comes to your money: you have got to understand how this Big Beautiful Bill really affects you. When does it allow you to make more out of the money that you make, and when does it allow you to make less out of the money that you already make? You better understand it.

And I hope that this podcast today did a whole lot — especially on student loans — to explaining that to you. So until Thursday, there's only one thing that I want you to remember when it comes to your money, and it is this:

You have to know everything so that you really can make your money make more money.

All right, everybody. Stay safe, stay healthy, and once again, know how much we love you.

Bye bye.