Millions of federal student loan borrowers will soon need to choose a new repayment plan after the termination of the Biden-era SAVE program. Those who do not act within a designated timeframe risk being placed into repayment options that may result in higher monthly bills.
The transition marks one of the most significant changes to the federal student loan system in recent years, affecting borrowers who have remained in administrative forbearance while legal challenges to the SAVE plan were resolved.
Federal student loan borrowers enrolled in the Saving on a Valuable Education (SAVE) plan will begin receiving notices from the U.S. Department of Education starting July 1, informing them of deadlines to select a new repayment option.
According to information reviewed by Business Insider, borrowers will generally have 90 days after receiving notice to move into a different repayment plan. The department warned that borrowers who fail to make a selection within that period will automatically be transferred to either the Standard Repayment Plan or the new Tiered Standard Repayment Plan.
The Department of Education stated in communications to borrowers that monthly payments under those plans will likely be higher than payments under existing income-driven repayment programs.
Borrowers Face Transition after SAVE Plan Termination
The SAVE plan was introduced by the Biden administration in 2023 and was promoted as a lower-cost repayment option for federal student loan borrowers. Republican-led legal challenges halted the program, and a federal appeals court later ordered its termination.
According to CNBC, nearly 7 million borrowers remain enrolled in SAVE. Nicholas Kent, Under Secretary of Education, told the outlet that only around 300,000 borrowers have exited the plan in recent weeks. “SAVE borrowers have to move,” Kent told CNBC.
Borrowers who remained in SAVE were placed into forbearance beginning in July 2024 while court proceedings continued. During that period, they were not required to make monthly payments. The Department of Education recently announced that borrowers will receive notices on different dates throughout the summer to avoid overwhelming loan servicers.
At the same time, administrative challenges remain. According to a recent court filing cited by CNBC, more than 530,000 borrowers who requested a new repayment plan were waiting in an application backlog at the end of April.
New Repayment Options and Concerns over Higher Payments
Beginning in July, borrowers will be able to enroll in the new Repayment Assistance Plan (RAP) or the Tiered Standard Repayment Plan.
Business Insider reported that RAP calculates monthly payments using a borrower’s adjusted gross income. The Tiered Standard Repayment Plan, meanwhile, requires borrowers to repay their loansin full over a period tied to the size of their principal balance and includes a minimum monthly payment of $50. Some borrowers have already reported projected payment increases of several hundred dollars under RAP, according to the same source.
The transition has also prompted concern among lawmakers. More than 60 Democratic lawmakers recently urged the Department of Education to automatically place borrowers into the lowest-cost available repayment plan if they do not make a selection before their deadline.
In a letter, the lawmakers wrote that the department should automatically enroll SAVE borrowers “in the lowest cost repayment plan currently available” to reduce the financial impact of the change.
Experts have also highlighted the consequences of remaining in the SAVE forbearance period. According to CNBC, higher education expert Mark Kantrowitz said borrowers in the payment pause are not making progress toward loan forgiveness and may see their balances grow as interest accrues. He also warned that borrowers who are automatically placed into fixed-payment plans could face delinquency and eventual default if they cannot afford the required payments.
The Department of Education maintains that the new repayment framework is intended to preserve access to federalstudent loans while helping borrowers avoid taking on debt levels that may be difficult to repay.
