SAVE Ends as Major Student Loan Changes Take Effect
Millions of Americans with federal student loans are facing significant changes after a sweeping overhaul of the student loan system took effect on July 1. The changes, enacted as part of President Donald Trump’s One Big Beautiful Bill, eliminate the Biden administration’s SAVE repayment plan, introduce a new repayment program, limit future borrowing, and require millions of borrowers to make important decisions that could affect how much they pay each month.
For many borrowers, the biggest question is simple: How much more will my monthly payment be?
“The main concern is the affordability of monthly payments,” said Michele Zampini, associate vice president at The Institute for College Access & Success. “I think a lot of people are simply going to see their payment increase significantly and they’re either going to have to stretch pretty significantly to make that payment work or they’re not going to be able to make the payment.”
The SAVE Plan Has Expired
The most significant change is the official end of the Saving on a Valuable Education, or SAVE, repayment plan created during the Biden administration.
SAVE was one of the most generous federal student loan repayment programs ever offered. Instead of basing payments primarily on the size of a borrower’s loan, the plan based payments on income. Most undergraduate borrowers paid only 5 percent of their discretionary income, while many lower income borrowers owed nothing at all. The program also prevented unpaid interest from causing loan balances to grow.
Supporters argued that SAVE made student loans affordable for millions of Americans. Critics argued that the payments were set artificially low and shifted too much of the cost to taxpayers. Earlier this year, the U.S. Court of Appeals for the Eighth Circuit struck down the program, officially ending SAVE on July 1.
Approximately 7.5 million borrowers enrolled in SAVE are now receiving notices from their loan servicers informing them they have 90 days to choose another repayment plan. Borrowers who fail to act within that window will automatically be placed into the government’s Standard Repayment Plan.
Lindsay Vail Clark, chief borrower advocate at Savi, recommends borrowers begin reviewing their options immediately because millions of borrowers are expected to apply for new repayment plans over the coming months.
The Standard Repayment Plan Is the Default Option
If borrowers do nothing after receiving their notice, they will generally be placed into the Standard Repayment Plan.
Unlike SAVE, the Standard Plan does not adjust payments based on income. Instead, borrowers make fixed monthly payments designed to pay off their loans over ten years.
That can create a substantial increase in monthly payments for former SAVE borrowers.
For example, someone with a $35,000 federal student loan at current interest rates would pay approximately $403 per month under the Standard Repayment Plan.
For many borrowers who had become accustomed to much smaller payments under SAVE, the increase could amount to several hundred dollars every month.
Betsy Mayotte, founder of The Institute of Student Loan Advisors, said the uncertainty has created tremendous stress.
“I’ve never seen so much anxiety with borrowers,” she said. “I’ve seen some people whose payments have gone up significantly.”
“There’s a lot of anxiety out there,” Mayotte added. “It’s not just about the student loan payments going up. It’s everything hitting at once.”
Borrowers Can Choose Less Expensive Plans
The good news is that borrowers do not necessarily have to accept the Standard Plan.
Most existing borrowers remain eligible for at least one income based repayment option if they actively enroll before their deadline.
One option is the Income Based Repayment Plan, commonly known as IBR. Like SAVE, IBR bases monthly payments on a borrower’s income rather than simply the amount owed. Depending on when the loans were issued, borrowers generally pay 10 to 15 percent of their discretionary income, making monthly payments substantially lower than under the Standard Plan for many households.
A second option is the new Repayment Assistance Plan, or RAP, which became available July 1. RAP also bases payments on income while providing additional protections against growing interest balances. Monthly payments are calculated using adjusted gross income, and borrowers receive a $50 monthly payment reduction for each dependent claimed on their tax return.
Under Secretary of Education Nicholas Kent said the changes simplify repayment.
“There will be fewer repayment plans to confuse borrowers and easier repayment plans for borrowers to navigate,” Kent said.
How Much Difference Can These Plans Make?
The difference in monthly payments can be dramatic.
Consider a borrower with a $35,000 federal student loan earning approximately $50,000 per year.
Under the former SAVE plan, that borrower might have paid only about $60 to $70 per month.
Under the new Repayment Assistance Plan, the payment would likely increase to roughly $90 to $110 per month.
The Income Based Repayment Plan would typically cost about $100 to $130 per month.
However, if that same borrower does nothing and is automatically placed into the Standard Repayment Plan, the monthly payment jumps to approximately $403 per month.
While both RAP and IBR generally require somewhat higher payments than SAVE did, they remain far less expensive than the Standard Plan.
Millions Already Struggling
The changes come as millions of Americans are already having trouble keeping up with their student loans.
According to the Department of Education, approximately 9 million borrowers are currently in default on their federal student loans, meaning they are at least 270 days behind on payments. Hundreds of thousands more are delinquent and could enter default later this year.
To encourage borrowers to resume making payments, the Department of Education is offering a temporary 1 percent interest rate reduction through June 2028 for eligible borrowers who enroll in automatic payments.
Education officials say the incentive is intended to improve repayment rates and strengthen the federal student loan portfolio.
Borrowers Should Not Ignore Their Notices
Financial aid experts agree on one point: borrowers should not ignore the letters arriving from their loan servicers.
Former SAVE borrowers generally have 90 days after receiving their notification to choose another repayment plan. Those who want to avoid much higher monthly payments should carefully review whether they qualify for IBR or the new RAP program and enroll before their deadline expires.
Borrowers who simply do nothing will typically be placed automatically into the Standard Repayment Plan, which for many former SAVE participants will result in the highest monthly payment of all.
