Millions of borrowers enrolled in the now-defunct Saving on a Valuable Education (SAVE) student loan repayment plan are beginning to receive notices giving them 90 days to choose a new repayment option.
Borrowers who fail to act before their individual deadline will be automatically moved into a standard repayment plan, which could result in significantly higher monthly payments.
The Education Department says the transition follows court rulings that ended the Biden administration's SAVE program and introduces new repayment options created under recently enacted federal law.
Millions of federal student loan borrowers enrolled in the now-defunct Saving on a Valuable Education (SAVE) repayment plan are beginning to receive notices from the U.S. Department of Education, telling them they must select a new repayment option within 90 days or be automatically transferred into another plan.
The notices, which loan servicers began sending this month, affect borrowers whose loans have remained in administrative forbearance since courts halted the Biden administration's SAVE program. Under the new policy, borrowers who do not choose a replacement plan before their individual deadline will be placed into either the Standard Repayment Plan or the new Tiered Standard Plan, depending on their loan history.
The Education Department announced earlier this year that the change follows a court-approved settlement ending the SAVE program, which the Trump administration has described as unlawful. The department said approximately 7.5 million borrowers had enrolled in SAVE before it was struck down.
New repayment choices
Borrowers leaving SAVE can choose from several repayment options, depending on when their loans were originated. For many, the primary choices include the modified Income-Based Repayment (IBR) plan or the new Repayment Assistance Plan (RAP), which became available July 1.
The RAP program bases monthly payments on income and family size while preventing unpaid interest from snowballing for borrowers who make their required payments. The new Tiered Standard Plan extends repayment terms based on the size of a borrower's debt, potentially lowering monthly payments while lengthening the repayment period.
Borrowers who wish to remain in an income-driven repayment plan must submit an application through StudentAid.gov. The Education Department says allowing it to access IRS tax information electronically can speed processing.
Higher payments for many
Consumer advocates warn that many former SAVE participants are likely to see higher monthly payments than they paid under the Biden-era program, which offered generous income protections, and in some cases, zero-dollar monthly payments.
According to a Wall Street Journal analysis, nearly half of borrowers who have already left SAVE have enrolled in IBR, while roughly 30% have selected RAP. Others have moved to older repayment plans that will eventually be phased out. Borrowers who do nothing will be assigned to a standard repayment plan, which could substantially increase their monthly bills.
The Massachusetts Attorney General's Office is urging borrowers to watch for emails and online account messages from their loan servicers and begin evaluating repayment options immediately rather than waiting until the end of the 90-day window. Officials also note that applications for income-driven plans may take time to process because of existing backlogs.
The Education Department said borrowers do not have to wait until they receive an individualized deadline if they already know which repayment plan they want. Those wishing to switch may contact their loan servicer or submit an application through StudentAid.gov at any time.