The Optometry Money Podcast

How the Final One Big Beautiful Bill Act Impacts Optometrists - Taxes, Student Loans, and More!

• Evon Mendrin • Episode 143

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In this packed episode, Evon Mendrin, CFP® and host of The Optometry Money Podcast, breaks down the biggest tax and student loan law changes optometrists need to know from the recently passed One Big Beautiful Bill Act (OBBBA).

Evon discusses what’s changing—and what’s not—for individual and business tax rules, estate taxes, 529 plans, and the massive shift in student loan repayment plans. Whether you're a private practice owner, associate OD, or optometry student, this episode will give you the clarity to start planning wisely for the years ahead.

Highlights from this episode include:

Individual Tax Changes

  • Lower tax brackets and the higher standard deduction made permanent
  • New temporary senior tax deduction for ODs 65+
  • SALT deduction cap raised to $40,000 (with income phaseouts)
  • Brand-new $2,000 charitable deduction even if you take the standard deduction
  • Enhanced child tax credit and dependent care FSA limits

New & Unusual Tax Deductions

  • Temporary deduction for personal auto loan interest (for new cars only)
  • Deduction for overtime pay and tips

Business Owner Wins

  • 20% QBI deduction is now permanent—and its phaseouts widen in 2026
  • 100% bonus depreciation is back!
  • PTET workaround for SALT cap still lives on

Student Loan Changes: Huge Overhaul Ahead

  • SAVE, PAYE, and ICR plans eliminated after 7/2026
  • Current Borrowers gradually transitioned by 7/2028
  • Forgiveness periods shift, with new rules and income considerations
  • Future optometrists face new federal loan caps and more restricted repayment options

529 Plans & Trump Accounts

  • 529s can now be used for CE and licensing expenses
  • New "Trump Accounts" for minors open in 2026: Traditional IRA-style investment accounts with government seed money

Bottom Line:
You don’t need to make big decisions today - but now is the time to start planning. Evon covers how these changes may affect optometrists in every stage of their career - from practice owners to new grads.

Resources & Links:


The Optometry Money Podcast is dedicated to helping optometrists make better decisions around their money, careers, and practices. The show is hosted by Evon Mendrin, CFP®, CSLP®, owner of Optometry Wealth Advisors, a financial planning firm just for optometrists nationwide.

Evon:

Hey everybody. Welcome back to the Optometry Money Podcast War, helping ODs all over the country make better and better decisions around their money, their careers, and their practices. I am your host, Evon Mendrin, Certified Financial Planner(TM) practitioner and owner of Optometry Wealth Advisors, an independent financial planning firm just for optometrists nationwide. And thank you so much for listening. Really appreciate your time and your attention today. And on today's episode, we are gonna try to tackle the brand new bill just signed into law over the last week or so. The One Big Beautiful Bill Act, and it's definitely big. Over a hundred, over 870 pages. So it definitely lives up to that aspect of its name. Is it beautiful? Well, as we commonly hear, beauty is in the eye of the beholder. I think there's gonna be some things in here that many people will enjoy and others will not so much. And so this is gonna be an ambitious episode here. I'm gonna talk through a lot of the tax changes or really tax extensions that came out of this law, as well as the student loan aspects of the bill. And so you can kind of fast forward and pick and choose exactly what you wanna hear and what's applicable to you. But we're gonna try to get to it all. And in the show notes, I'll link to a newsletter I did as well on, on the Tax Pro, on the tax provisions. And as soon as it's done, I'll link to a newsletter on the student loan provisions in case you like to read and see the numbers directly. And so with that in mind, let's go ahead and dive in here and we'll start with the individual tax changes, as we, as we think through this bill. A lot of it really. Extends what was set to expire at the end of this year. if we think back to 2017, there was this big tax law signed into law under President Trump in his first term, the Tax Cuts and Jobs Act. And since 2018 through 2025, there were a lot of the tax provisions in that bill, especially the individual ones, but also one of the important business ones that were set to expire after this tax year. And so. with that we really weren't sure exactly which tax laws we were gonna be working with in 2026 and beyond. And so this bill definitely adds a lot of clarity to our planning now, by extending and making quote unquote permanent A lot of those, tax provisions, and when I say permanent, from a tax standpoint, that's really until a future Congress decides to make changes. So, with that in mind, let's dive into first the individual tax changes, and I'll try to summarize as best as I can here on a podcast format. the first one is that lower tax brackets were made permanent, back in that 2017 law. that law brought down the tax rates to the ones that we're currently operating with 12%, 22%, 24%, and so on. And at the end of this year, it was set to increase back to old tax brackets. We would see an increase in tax rates. and so this law made permanent these lower tax rates, into the distant future. And so there's no rush from a tax planning perspective to add income, additional income into this year or to, deferred deductions into future years just because of this change in tax brackets. So that's great to see, again, planning with more certainty there. there is a, it also extended and made permanent the higher standard deduction and. Again, going back to that bill in 2017, it basically doubled the standard deduction amount. It got rid of another deduction called an exemption, but it's, it essentially doubled that standard deduction amount and that was expected to go back to that smaller amount after this year. But this permanently increases it and in fact gives an additional bump for the 2025 year tax year. So for this year it gives a little bit of a bump. So for those married filing jointly, that standard deduction amount's gonna be$31,500. And if you are single file tax filer,$15,750. On that same note, the tax law added an additional senior tax deduction. So if you are 65 and older, or planning to be over the next three years, you get an additional$6,000 per person deduction. And this is in addition to the extra standard deduction amount you already get if you're 65 and older. It does start to phase out at certain income levels, so when your modified, adjusted to gross income Gets to$150,000 if you are married, filing joints or$75,000 if you are single. once your income gets to that point, it's reduced 6% by every dollar over that threshold. And so, if you're married, getting into age 65, that$150,000 to$250,000 income range, is a, an important planning point. And it's important if you're thinking about starting Social security or, doing Roth IRA conversions. So this phase out is really important. The thing about this deduction is it's temporary, so it's only effective for tax years, from 2025 through 2028. And why 2028? Well, we can speculate, I think a part of it's politics, right? So the, the next president, the next election is going to include conversations around or the next presidential candidates are gonna have to deal with whether they want Congress to let these expire or whether they wanna continue these deductions. So, part of that I'm sure is politics, but this is a temporary deduction from 2025 through 2028. another provision is the cap on state and local taxes. And if we think about the tax return, each of us gets to pick between a standard deduction amount, which we talked about earlier, or itemizing your deductions, which is piling up a specific list of personal deductions, personal expenses, and if that list of itemized expenses is higher than the standard deduction amount, you get to take the higher of the two. And one of those specific itemized expenses or deductions are state and local taxes. So state income taxes, property taxes, things like that. And since 2018 The state and local taxes that you could deduct as an itemized deduction Were capped at$10,000 per year with no inflation adjustment, which is a pretty tough cap if you're in a high income tax state like California or New York, New Jersey, perhaps. And so what's happening is that there is a temporary increase in this cap. this cap increases to$40,000 of state and local taxes that can be deducted between, from 2025 So this tax year through 2029, and it's$20,000 if you're married, filing separately, which you might be doing for student loan purposes And then in 2030 it goes back to that previous$10,000 cap. There are phase outs for this. So once your modified adjusted gross income number gets above$500,000, it starts to reduce 30% for every dollar above that threshold. So basically once your income gets to$600,000, you lose this cap and it goes down to the original$10,000 So this 500 to$600,000 of adjusted gross income is a pretty important planning range. it starts to make that extra income above 500,000 quite expensive once you factor in the lost salt deduction that you're losing as you get through that range. Plus additional things like QBI deduction as that starts to phase out. So I think that planning range is gonna be pretty important, especially in a really high state tax states like California and New York. And the$40,000 cap does increase 1% each year after 2026. So there's a bump in 2026 and then it increases for the next few years at 1%. and the adjusted gross income thresholds. The income thresholds also increase since inflation. But, that is welcome news to you if you live in one of those states. Something that we can plan around and something that impacts this tax year. there's also, in regards to charitable contributions, charitable donations, there is now a permanent, charitable deduction up to$2,000 if you are married, filing jointly or$1,000 for all other taxpayers. And so, the reason this comes in is that charitable donations are one of those itemized deductions. And because the standard deduction amount has been so high since 2018, far fewer taxpayers, far fewer of us. Actually have enough itemized deductions to benefit from things like state and local taxes and and property taxes and mortgage interest, and here, especially your donations to charity. And, and because of that, we've been using different strategies like bunching donations into every other year or every third year, to get that amount higher than the standard deduction very often through things like donor advised funds, and so what's changing now is that even if you don't itemize, meaning even if you take the standard deduction, they're still gonna allow you to take a deduction for your donations to nonprofits and charities. Again, up to$2,000 if you are married, filing jointly or$1,000 for everyone else. And we saw a version of this during COVID. It was pretty small. It was like$300 and$600, so it was pretty small. But, but this is an additional permanent, oppor, permanent opportunity to benefit, from a tax standpoint at least, for those donations to charity. If you are itemizing, it adds a, a little bit of a difference in how that's treated. So if you are itemizing deductions and you are donating to charity, the law adds a a 0.5, so a half of a percent floor. Meaning that only, only the donations above and beyond a half a percent of your AGI are actually deductible as an itemized deduction. So for example, if your AGI, so that's all of your income minus those pre-tax deductions, if your AGI is$250,000 and you donate$5,000 in that year, the first$1,250, so half a percent of$250,000 is not deductible. Only the amount that you donated above that$1,250 is deductible. and you're able to carry over That lost floor, that lost deduction into the next five tax years, specifically in the years that you donate enough to get over that floor. So if you're always under that half a percent floor, you're not able to carry that forward. So there's some differences there, but there's additional opportunities for deductions if you don't itemize and if you do itemize, there's a bit of a floor to get over in terms of how much you donate, which continues to make bunching donations, a strategy to consider. And these changes go into effect in 2026 tax year. So next year is when you should start thinking, is when you'll want to think about all this from a tax plan, tax planning standpoint, and make sure you keep all of your receipts for your donations moving forward. included in the provisions were, enhancements to things related to, children and childcare expenses. the first one is that there is an enhanced child tax credit that's been made permanent. right now the child tax credit is$2,000 per qualifying child under the age of 17, and it has not been adjusted for inflation over the years. what was expected to happen after this year is it would've been reduced to the previous lower amount, however, it has been kept at a higher amount and in fact has been increased. So starting in this tax year, 2025, that child tax credit will be$2,200 per qualifying child and it will be in the future, increase for inflation. This is really welcome news. There's really no reason why this credit should not have been increased for inflation. so I, I'm happy to see this and it will also keep the current income phase out limits as well, rather than go back to reduced amounts, and that's, if you're married finally jointly at$400,000. Of, adjusted gross income and$200,000 if you were single or married, filing separately. So something that impacts this tax year positively. In terms of the things that go into effect next year are, number one, an expansion to the dependent care credit. So for, two working spouses that have childcare expenses, there is a credit available that you can take up to a certain percentage of those expenses and up to a, a certain limit. And what's changing is that at the lowest income levels, submitting the maximum amount you can get, the percentage of qualifying expenses you can get a credit for, increases from 35% to 50%. Although, of course there are income Phased out. So you'll start to phase down to about 20% of those qualifying, qualifying expenses. So that's on the dependent care credit that goes into effect next year. there's also an increase in the dependent care FSA contribution limits. So if you have an dependent care FSA the annual limits will increase from$5,000 to$7,500 per year. And of course, if you're married filing separately, it cuts that in half for each of you. so that goes into effect in 2026. So that's something as you're going through the rest of this year and you're going through open enrollment for the next year, you wanna keep in mind those increased limits, to$7,500 per year. there's also some interesting additional provisions here. brand new. One of them is a new car loan interest deduction. And, what this is, is that interest on personal car loans are deductible up to$10,000 per year, which is a pretty expensive vehicle. it's phased out as your modified adjusted gross income. So as your income exceeds$200,000 for joint filers, or$100,000 for all others. So essentially, if you're married to filing jointly, once your income is, at$250,000, you lose this deduction altogether. And there are several limitations to this. One of'em is a lease Financing doesn't count, so it has to be a, a straight purchase. It must be a new car, not just an old car New to you. And the final assembly has to happen within the United States. And, and this is effective for, new cars purchased this tax year, 2025 through 2028. So this is a temporary deduction as well. there's also a temporary deduction for overtime income. So if you are earning qualified, quote unquote qualified overtime, you can deduct up to$25,000 of overtime, pay annually if you're married, filing jointly. if you are married to filing separately, this is zero, unfortunately, and then$12,500 for everyone else. And it starts to phase out once your income gets to about$300,000 if you're filing joint. cut that in half for everyone else. and you'll see a similar deduction here for tips as well. Unfortunately, optometrists cannot turn all of their income into tips. but perhaps you can start to get a little bit more overtime. I expect to see this separated out, So this overtime pay separated out on W2s and 1099 for the tax year. and this is temporary as well. So this is for tax years 2025 this year through 2028. So this is gonna be temporary. the estate tax and gift tax exemption amounts are made permanent. Since 2018, we saw a, a pretty substantially increase in the estate tax exemptions for individuals and for married couples. They were expected to go back to the old lower amounts. those have been made permanent. So for 2026, those will be$15 million per person, or$30 million per married couple. and will increase for inflation thereafter, which gives us a little bit more certainty there. It continues to make estate planning less so about estate taxes, at least federally, and more so about just ensuring that your assets and your affairs and your minor children are taken care of and handled according to your wishes if, if something happened to you and at death and incapacity and avoiding probate in states where it makes sense to, providing flexibility as much as possible in those estate plans and. Income tax planning where it makes sense. And so estate taxes are, at least from a federal standpoint, become less and less of a priority. One last thing on the individual side, is related to the ACA health insurance premium tax credits. And this is not something that the bill specifically addressed. It's more so that the bill was silent on this. Affordable Care Act. Premium tax credits helped to subsidize and lower the cost of health insurance, especially for those of you that are new to practice ownership or entering retirement. Historically, there was a hard income cliff, once your income, again, this is modified adjusted gross income, but once your income was over, was over 400%. Of the federal poverty line level for your family size, you lost all of the credit, even if it was just by a dollar. So this was a true hard cliff. from 2021 through this year, the hard cliff was removed and replaced with a more gradual phase out, which allowed you to keep more and more of that credit, more and more of that subsidy at higher income levels. There wasn't a, a hard cliff. This act was silent on this issue. It didn't do anything to extend it. So unfortunately, next year, 2026, that hard cliff continues. It returns, and so this is gonna be a really important planning point. If we're getting close to that hard cliff, if you're someone, especially again in early in practice ownership or getting into retirement, that is an income area that we wanna plan really carefully around. So wanted to just mention that in there. Now let's talk about business tax changes. And there's only a few of'em, but important ones. the qualified business income deduction was made permanent. this 20% deduction was something I was expecting and hoping would be made permanent. This is something that was planned to disappear after this year, but the reason it was put into law in the first place was because the corporate tax rate was brought down to 21%. And so to keep a bunch of business owners from changing their entities to C corporations just to get that lower tax rate. this 20% deduction of your, what's effectively your operating business income, was added in there to create a bit of parody between all these different entity types. And so because that corporate tax rate was permanent, I was expecting this to be, continued as well. And fortunately it was so in 2026 and beyond, this will not disappear, but it will stick around. And in fact, starting next year, the phase out ranges for taxable income actually widen. before you lose this deduction. Because as a specified service business, which is what they call us, optometrist and financial planners as well, once our taxable income gets to certain levels, before the deduction, we lose this deduction Little by little the amount of the deduction we qualify for goes down and down. And then once we get to the top of that threshold, we lose the deduction altogether. And so in 2026 and beyond that, that phase out range will expand, which will allow us to keep more and more of that deduction at higher income levels. So we'll still lose it at some point, at some level of taxable income, but at least there's more room for you there. We also see here the return of 100% bonus depreciation. So, bonus depreciation at 100% was made permanent. Bonus depreciation is a cousin. It's a close relative of the section 179 deduction, which is more commonly used. It's more familiar as your Optometry practice depreciates equipment, And you want to accelerate that depreciation into the current tax year rather than the standard five or seven year, depreciation schedule. And so this is very similar to that. but each of those have differences in the types of Property are the types of assets that qualify. Bonus depreciation was something that was introduced in 2017 As a part of that Tax Cuts and Jobs Act, you were allowed to accelerate a hundred percent of depreciation for that particular, those particular types of assets rather than, again, depreciated over the regular schedules or five and seven and 15 years, et cetera. this percentage eventually began to decrease 20% each year. So, for example, in 2025, you were only able to bonus or accelerate that depreciation for 40% of the cost rather than a hundred percent. now for any quote unquote qualified property you buy and place in service after inauguration day, January 19th, 2025 will qualify for 100% bonus depre appreciation. And, and again, this is a permanent provision moving forward. And, and so who, you know, who really is this important for? I think this is most particularly useful for you if you are, planning to purchase or did purchase rental real estate properties after January 19th, especially commercial real estate connected to the practice that you're working in. Because with rental investment properties, you can consider something called a cost segregation study, which is an engineering study that essentially looks at the structure of the building and separates out everything into all of the different parts. And separates out all of the stuff inside of the building that that can be depreciated on shorter schedules than the usual depreciation schedule. And then what bonus depreciation allows you to do is you can accelerate the depreciation for all of the stuff that qualifies into the current tax year. You would not be able to do that without that cost segregation study. And so for those that it makes sense, at the advice of your tax and financial professionals, this is something that can be a really strong, arrow in the tax planning quiver. and then lastly on the business side, the, pass through entity tax credits lives on. And what that is, is that, as a result of that$10,000 state and local tax cap, states started to create their own workarounds. Where, if you owned a partnership or an S corporation, you can have that partnership or s corporation pay the state tax on behalf of you the owner. And that is a, that is a deductible business expense for federal taxes. And then on your state taxes. You are able to get a credit to offset that tax so you're not double paying that state tax. And so this is sort of a workaround to get that, to get those state taxes as a federal tax deduction. each state sort of has its own rules around how exactly that worked. in some of the drafts or proposed bills that had come out, they were planning to get rid of that workaround, but, the current bill is silent. It does not remove that. So that continues to live on. So we've talked through the individual, we've talked through the business aspects. Let's talk about some other enhancements that came out of the bill. in terms of 529 plans, it enhanced the, types of expenses that are qualified educational expenses for 529 plans. it expanded the expenses connected to elementary or secondary school. So if you are drawing out of those accounts after the enactment of this bill moving forward, there's a longer list of elementary or secondary school or religious school, expenses, as well as, and this is a good one for your optometrists, credentialing and CE expenses. So your expenses, your continuing education expenses to upkeep your, Optometry license are now it looks like qualified educational expenses. So this is really interesting as some states will also give you a tax benefit, on the state tax side for contributing dollars into a 5 29 plan. And now if you can take those dollars, withdraw them and use them for ces, that's a pretty nice benefit to have. Now, we don't want to abuse it by trying to use 529 dollars for family trips around CE time. But, for those that are taking CEs moving forward, this is a, an interesting planning opportunity to plan around. there's another thing related to HSA accounts health savings accounts is that bronze plans and catastrophic plans sold on the ACA exchanges now qualify as HSA eligible plans. And before, of course, the plan had to meet a certain, minimum uh deductible and a certain maximum out of pocket maximum to be considered as a high deductible plan that was eligible for HSAs. But for now all bronze plans that are sold through an ACA exchange are now eligible. And this start, this is starting in 2026, so starting next year and beyond, One last thing here on the tax side is that there are new, Trump savings accounts. And, and so this bill creates a new type of account for minors under 18 called Trump Accounts. And these Trump accounts are essentially, traditional IRAs for all intents and purposes for the benefit of your child. The rules are essentially contributions can only be made before the year your child turns 18. there are no deductions for contributions, so you're adding after tax basis after tax dollars into the account. Um, there's no earned income requirement like regular IRA contributions. the contributions are capped at$5,000 a year, and in the future we'll have inflation adjustments as well. the only investments that can be in these accounts while the child is under 18 are mutual funds or ETFs that track a US based market cap index fund. So the S&P 500 is specifically named, but other US broad market indexes. that have expenses of point 10 of a percent or less. So really low cost US broad market index, mutual funds or ETFs. It can't be opened until a year after the bill passes, so we have quite some time before these are even a thing. And the funds can only be withdrawn once the child turns 18 and it essentially mirrors the rules of an IRA at that point. and again, your contributions as parents are after tax basis. You wanna keep an eye on those contributions moving forward. there is a provision that allows businesses to contribute to these plans, on behalf of employees up to$2,500 through a, like a actual documented plan. this is a deduction for the business and it's not income to that employee. and I, I believe counts against that$5,000 maximum, but this is potentially a new employee benefit for your practice to consider. and there's also a pilot program that will be funded with a thousand dollars of seed money, from the government, for children born in the years 2025 through 2028. So there's a bit of free money here happening, some seed money from the government, but, an interesting, new investment account for minors to consider and something I've been thinking about. Okay. What are some of the differences between this and just a custodial Roth IRA in your kids' names? why would you use one versus the other? Well, number one, Trump accounts are not going to have an earned income requirement. whereas a custodial Roth IRA, your child has to actually have earned income. So that's, a difference there. businesses, again, through a documented plan, can also contribute on behalf of employees. So that's, that's an additional benefit there. But again, custodial Roth IRAs have higher contribution limits, so the regular IRA contribution limits, and assuming the rules are followed, those, those dollars will grow tax free into the future for that child's retirement. And so because of that, you know, if the kid has earned income, I'd probably consider, starting with the Roth IRA for the kid. But there's opportunities potentially to do both. So something to consider there. This is starting probably it seems like, 2026 tax year. So that's sort of the bottom line with from the tax aspects. We have basically a lot of extensions with a little bit of extra flavoring, a little bit of enhancements there. Let's talk about now the student loan provisions. the worst possible outcomes as we saw in the proposed bills were avoided. because of a, what's essentially a Senate lawmaking referee called a Senate parliamentarian. Essentially what had happened is this parliamentarian, reviews all of these laws and advises the Senate on whether certain aspects of it can be a passed with a much easier simple majority, so 51 votes, or whether there needs to be a 60 vote majority, which is much more difficult, especially with the current makeup of, of the Senate. and in these proposed drafts, a lot of the very negative, frankly, aspects of the student loan changes for current borrowers We're going to be made effective immediately. And, and there was gonna be no grandfathering in for current borrowers. Well, that parliamentarian said, hold on. Those provisions cannot be passed with a, a simple majority. They're probably gonna need a 60, 60 vote majority. And so due to that person's efforts, the Senate had listened and so the final bill provisions for student loans, look like the following. For current borrowers, this bill eliminates all ICR based income-driven repayment plans. So it will eliminate, starting in July 1st, 2026. Income contingent repayment. Pay As You Earn and SAVE. Which are based on that original ICR law. And those repayment plans after July 1st, 2026 will be replaced by two options, a modified IBR plan, both the new and the old version. and the RAP repayment assistance plan. So if you, if you took out federal loans before July 1st, 2014, you would get the old version of IBR, which is 15% of discretionary income. If you were a new borrower, so if you took your, your first federal loans after July 1st, 2014, then you qualify for the new IBR. And that is, that is a 20 year route to forgiveness and a 10% of discretionary income calculation, which is fantastic. So you get to keep both old and new IBR. So you have a modified version of IBR or the brand new Repayment Assistance Plan. And I talked a little bit about this in a previous episode, previewing some of these laws that were coming up. and the way that this works is that the loan calculations are gonna be somewhere between 1% and 10% of your adjusted gross income rather than discretionary income. Maybe if you think about all of the current income-driven repayment plans, the way that those payment plans work is that it starts with your income by default it's adjusted gross income. It subtracts out an amounts based on the poverty line amount for your family size. And that leaves you with something called discretionary income. And then you multiply that discretionary income by either 15 or 10%. and so you get, and so part of your income is shielded by your family size. With this new repayment assistance plan, it's, it's a percentage of your adjusted gross income. So it's gonna be different, especially for those with much larger family sizes. And the way that it works is that as your adjusted gross income increases, the percentage of your AGI that it's used to calculate your loan payments increases 1% as well. And basically, once you get to a hundred thousand dollars of adjusted gross income, it's 10%, which is probably where most optometrists are gonna land. In contrast to the current student loan options, this is a 30 year route to forgiveness. So you're looking at this over most of your career, essentially as essentially a 10% tax on your income. it waives unpaid interest, which is similar to the what the SAVE plan was trying to do. It preserves married, filing separately, which is great. You can file taxes separately and exclude your spouse's income from the loan calculation. It's going to have a minimum payment of$10 a month. And in terms of family size, there is a$50 a month deduction from your payment For each dependent child you claim on your tax return. The catch here is that once you are on it, you can't move off of it onto IBR. It's a permanent enrollment. There is no mechanism for you to change off of it into IBR. And so this is very much a one and done. Once you choose this, you are going in this direction. Or the new version of the standard repayment plan. And for current borrowers, Again, Pay As You Earn and SAVE will no longer be options as of 7/1/2026, but you are able to stay on your current repayment plans at least until July 1st, 2028. So whereas before this was essentially gonna happen immediately, there's sort of a three year gradual transition into the new plan. And so again, to sort of summarize the options for current borrowers, if you're currently on old IBR, you can stay on it. Or in the future you can switch to the new RAP plan if you're currently on Pay As You Earn, you can stay on it for now, but at some point between now and July 1st, 2028, You need to choose either IBR, the new or the old one, depending on when you took out your first federal loans or the RAP plan. if you are in the SAVE forbearance, you can stay on the SAVE forbearance. up until again, July 1st, 2028, or really when the current court cases wrap up. And I think we forget that there's court cases going on, but, essentially those court case court cases probably will end up doing away with SAVE So you can stay on the forbearance until then. But, once that happens, or at, or before 2028, you need to make a decision, again, between IBR or the RAP plan. if you are on extended or graduated or standard repayment plan, you can remain on these plans as long as you don't consolidate or take new loans after July of 2026. So consolidating after July 1st, 2026, essentially, removes you from these current options. So that's something you want to be very careful about. So I have some thoughts and reflections here for current borrowers. if you're going for PSLF that hasn't changed, you're still going to get the benefit Over the next three years or so from the current IDR options. And from there you're gonna choose IBR or RAP. So PSLF borrowers, that's gonna continue on as it is. If your plan was going for 20 or 25 year taxable forgiveness, then this eliminates all 20 year options for forgiveness. Unless you are eligible for new IBR. Again, if you took out your first federal loan after July 1st, 2014, if that's you, you are probably in the small group of borrowers that made out best from this whole ordeal. and I, I wish Pay As You Earn borrowers would've been folded into that. I just don't think it makes much sense that, you know, if you were eligible for Pay As You Earn, but not IBR you lose that 20 year route to forgiveness. But this is the hand we're dealt with. If you're eligible for new IBR, you are in a, in the same great places as you were beforehand. this is going to make forgiveness more expensive. Now it doesn't necessarily mean forgiveness is entirely off the table taxable forgiveness, that is. I think the general math still works out to where if your loan to income ratio, including marrying, filing separately, like including these strategies to file separately with tax filing. If your loan to income ratio is two times your income or more, I think forgiveness can very well still make sense. if it's less than that, so under two to one ratio, then it's a big fat, it depends area and just every situation has to be looked at a little bit more carefully. I think we're gonna see a lot less obvious cases where forgiveness makes sense and it's gonna be more about running the math, looking at the differences between just paying it off and going for forgiveness. And then deciding whether that makes sense for you based on your own goals and priorities for your cash flow. And of course, this assumes that there are no further lawsuits challenging this and that future congresses don't decide to make changes after 2028, which could very well happen. of course we don't want to, we don't want to count on that, but we've seen student loan policy swing quite a bit just over the last five years alone. And this has been a trade off with forgiveness strategy. This is something I I've always said when going for forgiveness using IDR plans, you are choosing what is projected to be a mathematically better outcome over the long term. And the trade off you're accepting for that is a higher amount of volatility with politics and changes to student loan options. You're just accepting more uncertainty for what's, projected to be a better math outcome. And so you have to decide how comfortable you are with that trade off. versus simply just paying down the debt and knowing exactly what to expect. But even then, there are trade-offs as more of your cash flow is going to debt, payments versus whatever else it would've been used for. And so these are all about trade-offs, and we just have to now look at our options between now and 2028 and, and see what makes the most sense. I think for most of you, you probably will stay on the current IDR plan, probably through the next three years, up until at least 2028. But we have to review the math more carefully now and just see what makes the most sense. this was, again, I, I was hoping in terms of these bills that current borrowers would've been more favorably grandfathered into the provisions you agreed on when you took out the loans, but here we are. this is the uncertainty we kind of knew was there all, all along. So that's for current borrowers, for future borrowers, so those that are in or entering Optometry school, there's a very different path forward ahead for you. if you take out any new loans or even consolidate your current federal loans together after July 1st, 2026, your only options for repayment are gonna be the RAP plan with its 30 year time horizon to forgiveness or a standard repayment plan, which is gonna be over 10 to 25 years, depending on your loan balance. And this includes if you already have loans before then, and then take out additional loans for like your, your final year or so after July 1st, 2026. So your options are much, much more limited. in addition, there are caps on borrowing, the law does away with the Grad PLUS loan program, which was effectively a blank check up to the cost of tuition for graduate school and increases the Stafford loan limits. But, there are annual and aggregate loan limits for graduate students. For specifically professional graduate students like optometrists. Your loan limits are gonna be$50,000 per year and$200,000 in aggregate. And, and there's also an aggregate total loan balance as well. So understanding how expensive Optometry school has gotten and seeing the loan balances I'm seeing for recent graduates, we're very likely going to see future optometrists have potentially, I think, higher private student loan balances. And your options are simply gonna be more limited. And I wonder how this impacts the cost of tuition at Optometry schools. I, I think it will force schools to reevaluate the pricing of their programs. I think a lot of the increasing in college costs over time overall is, is due to sort of the blank check provided to graduate students through these loan programs. And so, you know, these are all kind of intertwined together in terms of the, the issue of rising college costs. So, I, I do wonder what graduate programs are gonna do to reevaluate the costs and even the timing of programs. You know, will that last semester start before July 1st, 2026 so that those loan balances can be included before then. But simply said, for future borrowers, if you are planning to take new loans after July 1st, 2026, even if you have other loans before that. You are going to be under these new rules, and you'll have to think more carefully about that decision. There's gonna be some really interesting decisions to be had in terms of, you know, if you are in your last year and you already had three years under the old student loan rules before July of 2026. Do you take that last year of private loans rather than federal loans? I mean, there's, there's these decisions that I'm really not ready to, to talk too much in detail. But, you know, these are some things that, that are gonna come up in conversations and that you as borrowers, that you as parents are gonna have to think about. But, these are the latest updates in the forever going saga of student loan planning. And for current borrowers, again, you have the next roughly three years to make a decision. There's nothing you need to do at this point. but before 2028, you'll have to make a decision between IBR or RAP, and you'll have to look at that math a little bit more carefully. A couple other provisions related to student loans that are positive. number one, the, tax free, discharge for death and disability is made permanent. So if you are disabled or pass away, those loans are discharged tax free. And then lastly, extends the ability for businesses to make up to a$5,250, payments toward employee student loans Into 2026 and beyond, as well as adding an inflation adjustment. And this is a lot, I, I know this is a lot from a tax standpoint. I know this is a lot from a student loan standpoint, but there are no decisions that need to be made right now. We can all take a breath, we can relax, we can enjoy summer, and then slowly start to make decisions moving forward. And if you have any questions, if you want to talk about how these provisions impact you, for me as a Planner, it's time to review each client to see what impacts each client to project out tax and student loan scenarios, work closely with the tax professionals. You know, it's just time to evaluate where that impact is. If you want someone to help walk you through these changes and how it impacts your finances, reach out. I'll throw a link in the show notes to schedule a no pressure introductory call. We can talk about what's on your mind financially, and how all these changes impact you. And I'll also throw into the show notes, again, those newsletter articles. And I'll keep you informed here on the podcast to keep you informed on LinkedIn and social media. we'll keep you informed via newsletter as well. And with that, really appreciate your time and energy and listening today. In a meaty, full episode here. we will catch you on the next episode. In the meantime, take care,

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Evon Mendrin CFP®, CSLP®

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