Millions of federal student loan borrowers enrolled in the SAVE income-driven repayment plan face imminent deadlines to switch to alternative repayment options or face substantially increased monthly payments. The Trump administration required borrowers to exit the plan, which was developed under the Biden administration and subsequently struck down through Republican-led legal challenges and legislation. The earliest transition deadline is Sept. 29 for some borrowers, though servicers are staggering notification timelines, meaning many borrowers have additional time to make their decision.
As of March, approximately 6.9 million borrowers remained in SAVE with average debt near $55,000. These borrowers have benefited from the plan’s low monthly payment structure, calculated at 5% of discretionary income, and many have avoided making payments for over two years while legal proceedings unfolded. However, their loan balances have accumulated interest during this period, and progress toward loan forgiveness has stalled. According to higher education analysts, some borrowers may be avoiding taking action, hoping the situation will resolve itself or finding the transition process overwhelming.
Borrowers who do not select a new repayment plan within their 90-day window will be automatically placed into the Standard Repayment Plan or the new Tiered Standard Plan, which calculate payments differently based on fixed amounts rather than income percentages. Experts warn that this automatic placement could result in dramatic payment increases. Analysis shows that a household earning just over $50,000 with $60,000 in student debt would owe approximately $690 monthly under the Standard Repayment Plan, compared to $158 under the newer Repayment Assistance Plan, an alternative income-driven option.
To transition successfully, borrowers should verify their contact information with their loan servicers and check studentaid.gov for notifications. Applications for new income-driven repayment plans can be submitted through servicer websites or the federal student aid portal, with an option to authorize direct IRS income verification for expedited processing. However, the Education Department is managing a substantial backlog of applications, with over 530,000 requests pending as of late April. Financial advisors recommend borrowers calculate their potential payments under alternative plans immediately and begin budgeting accordingly to avoid payment shock.
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