Millions of federal student loan borrowers enrolled in the Biden-era Savings for Value Education (SAVE) repayment plan are about to face a big decision. Starting in July, the U.S. Department of Education will begin notifying borrowers that they must choose a new repayment option within 90 days or they risk being automatically switched to more expensive repayment plans.
The switch comes after the court-ordered end of the SAVE plan, leaving nearly 7 million borrowers to find alternative repayment options as the Trump administration implements a new student loan system.
Nearly 7 million borrowers remain in terminated SAVINGS plan
Although the SAVE repayment plan was canceled earlier this year, nearly 7 million borrowers are still enrolled in the plan, according to U.S. Department of Education Under Secretary for Education Nicholas Kent.
Only about 300,000 borrowers have exited the program in recent weeks, the city said, while millions are still stuck in a payment pause created during the legal fight over the plan.
More than 42 million Americans have federal student loans, with outstanding debt exceeding $1.6 trillion, according to the Congressional Research Service.
Trump administration urges borrowers to leave SAVE. Education officials say remaining in SAVE is no longer beneficial for borrowers.
By remaining enrolled, borrowers fail to progress toward loan forgiveness and allow interest to accumulate on their balances.
“This is a problem for borrowers,” Kent said. “They don’t know the benefit of making their payments.”
The city added that borrowers should switch to another repayment plan.
“SAVE borrowers need to move,” Kent said.
Why is the SAVE scheme ending?
The Biden administration introduced the SAVE plan in 2023, calling it the most affordable federal student loan repayment option ever created. The program lowered monthly payments for many borrowers and shortened the timeline for loan forgiveness for some participants.
But lawsuits filed by Republicans have questioned the legality of the program. Starting in July 2024, administrative forbearance was imposed on millions of debtors while the courts considered the case.
Earlier this year, a federal appeals court ruled to end the program, prompting the Trump administration to begin switching borrowers to new repayment options.
The Department of Education will begin sending notices to SAVE borrowers starting July 1, but these notices will not be sent to everyone at the same time.
Notifications will be phased in over the summer to avoid overloading federal loan servicers, the city said.
Once borrowers receive the notice, they will typically have about 90 days to choose a different repayment plan.
Officials emphasized that borrowers do not need to take any action until they receive individual notification from their loan servicer.
Auto-enrollment can mean significantly higher payouts
Borrowers who fail to select a new repayment plan before the deadline will not remain in SAVINGS indefinitely.
Instead, the Department of Education says they will automatically be placed into the Standard Repayment Plan or the new Tiered Standard Repayment Plan.
“If you are enrolled in any of these plans, your monthly payment amount will likely increase,” an email sent to SAVE borrowers warned.
The newly created Graduated Standard Repayment Plan will require borrowers to repay their loans in full, with a minimum of $50 per month, over a repayment period based on the size of their loan balance.
Interest continues to rise while borrowers remain in SAVINGS. Education experts warned that borrowers stuck in the SAVE payment pause continue to accumulate interest without making progress toward loan forgiveness.
By typical calculations, the typical SAVE borrower owes about $57,000 at an average interest rate of 6.7%. Since interest began accruing again in August, that balance has already increased by more than $2,500 for many borrowers.
Financial experts also noted that borrowers are currently unable to receive any loans for repayment plans or forgiveness under the Public Service Loan Forgiveness program during their stay in SAVE.
Missing the deadline may ultimately lead to default
Experts warn that failing to exit SAVE could have long-term financial consequences.
If borrowers are automatically placed on standard repayment plans and cannot afford higher monthly payments, their loans may become delinquent. If they don’t make these payments, their loans will fall behind and they will default after a year of delay.
Default can trigger additional collection actions and damage borrowers’ credit histories.
Even borrowers who act quickly can face delays.
More than 530,000 federal student loan borrowers were waiting for their repayment plan applications to be processed by the end of April, according to a recent court filing.
The Department of Education’s decision to stagger notification dates is intended to help loan servicers manage the expected increase in repayment plan requests.
Democrats push for automatic enrollment in cheaper plans
More than 60 Democratic lawmakers called on the Department of Education to automatically place SAVE borrowers on the lowest-cost repayment plan possible if they don’t make an election before the deadline.
In a letter to the department, lawmakers argued: “To mitigate the potentially devastating financial impact of this transition, ED should automatically enroll every borrower currently in SAVING forbearance into the lowest-cost repayment plan currently available to that borrower.”
Instead, management stated that borrowers who do not take any action will be transferred to the Standard Repayment Plan or Graduated Standard Repayment Plan.
New repayment options and broader student loan changes are coming. Along with the end of SAVE, the Trump administration is rolling out new repayment options, including the Repayment Assistance Plan (RAP), which bases monthly payments on adjusted gross income. However, many borrowers are expected to pay more under RAP than under previous income-based repayment plans.
The administration is also implementing broader student loan reforms through recently enacted spending legislation, including new borrowing limits for graduate students and changes to federal Parent PLUS loan limits.
In an earlier statement from the Department of Education, Nicholas Kent said the reforms “will help prevent borrowers from taking on unmanageable levels of debt they may never be able to repay, while ensuring that students continue to have the access they need to federal student loans.”
Borrowers can compare available repayment options and estimate future monthly payments using the federal Loan Simulator before choosing a new plan.
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14 essential strategies to maximize your Social Security and avoid costly mistakes
Social Security is a vital lifeline for many seniors, providing significant income support during retirement. At a time when inflation is at its highest level in four decades, Social Security’s inflation-adjusted benefits provide protection against rising costs.
Rising interest rates have disrupted many retirement portfolios and caused bond fund values to decline. In this volatile financial environment, Social Security can stabilize a typical stock-bond retirement portfolio. By implementing smart strategies, retirees can maximize their Social Security benefits and ensure a more secure financial future.
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Deciding when to claim Social Security is often about maximizing your benefits. Financial planners generally recommend delaying your request for as long as possible to secure the highest monthly payment. Your benefit is based on your lifetime earnings, with full payout available at your full retirement age (FRA); this age is currently between 66 and 67 years old, depending on your year of birth. Claiming before FRA will result in a permanent decrease in your monthly earnings, while waiting after FRA will result in a permanent increase. But the decision isn’t just about maximizing the monthly check. Personal factors such as health, family circumstances and financial needs can play an important role in determining the right time to make a claim.
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John Dealbreuin came to the United States from a third world country without knowing anyone and with only $1,000; Guided by an immigrant dream. He reached his retirement number in 12 years.
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