WASHINGTON — Millions of federal student loan borrowers enrolled in the Biden-era SAVE repayment program will soon need to select a new repayment option or be automatically moved into a standard repayment schedule.
The New York Times reported that the Saving on a Valuable Education (SAVE) plan is being dismantled, affecting roughly seven million borrowers who have had payments paused for nearly two years while legal challenges brought by Republican attorneys general moved through the courts.
The Department of Education headlines the web page on which updated information is available with, “U.S. Department of Education Announces Next Steps for Borrowers Enrolled in the Unlawful SAVE Plan.”
Beginning July 1, federal student loan servicers are expected to notify SAVE participants and provide deadlines for choosing a new repayment path as the Trump administration rolls out broader changes to the federal student loan system that were included in legislation enacted last year, according to The Times.
If borrowers take no action, their loans will generally be moved into the existing standard repayment plan, which typically uses fixed payments over 10 years and may result in higher monthly bills than income-driven alternatives, The Times reported. Borrowers who take out additional federal loans after July 1 may instead transition into a new tiered standard repayment structure based on loan balance size.
‘Lot of Anxiety’
“There’s a lot of anxiety out there,” Betsy Mayotte, president of The Institute of Student Loan Advisors, told The New York Times. “It’s not just about the student loan payments going up. It’s everything hitting at once.”
According to The Times, most borrowers leaving SAVE will likely choose between two income-driven repayment options:
- Income-Based Repayment (IBR), which generally requires payments equal to 10% of discretionary income for newer loans over 20 years before forgiveness, with older loans subject to a 15% payment requirement over 25 years.
- A new Repayment Assistance Plan (RAP), launching July 1, which links payments to income and household size but introduces a different structure and longer repayment timelines.
The Times reported RAP differs from previous income-driven plans in several ways:
- Payments range from 1% to 10% of adjusted gross income.
- Repayment terms can extend as long as 30 years before remaining balances are forgiven.
- Borrowers may deduct $50 per dependent from monthly obligations.
- Even borrowers with very low or no income are generally required to make a minimum $10 monthly payment.
Additional Provisions
The program also includes provisions intended to prevent balances from growing through unpaid interest and partial principal reductions, according to The Times. But experts cited by the newspaper cautioned that because RAP is not indexed to inflation, borrowers whose earnings rise only with inflation could still move into higher payment brackets over time.
Rich Williams, chief customer officer at Summer and a former deputy assistant secretary at the Department of Education, told The Times that RAP’s structure may cause abrupt payment increases tied to income thresholds instead of gradual increases seen under prior repayment plans.
Parent PLUS Borrowers Also Effected
The changes also affect Parent PLUS borrowers. According to The Times, parents who take out new federal loans after July 1 will generally only be eligible for the new tiered standard repayment plan and lose access to income-driven repayment options for both new and existing loans. Existing Parent PLUS borrowers who have already consolidated loans or enrolled in income-contingent repayment may qualify for more favorable terms under IBR rules.
Scott Buchanan, executive director of the Student Loan Servicing Alliance, told The New York Times that current requests for new repayment plans are being processed within days, though application volume could increase as SAVE deadlines approach later this summer.
