Many federal student loan borrowers enrolled in the SAVE income-driven repayment plan are facing significant payment increases as the program winds down following legal challenges and legislative action. The Trump administration required borrowers to transition from SAVE to another repayment option within approximately 90 days, with some deadlines arriving as early as September 29. The staggered notification schedule means borrowers have received their transition deadlines at different times, with servicers continuing to issue notices through the end of the year.
SAVE, created during the Biden administration, provided low monthly payments based on 5% of borrowers’ discretionary income. More than 6.9 million borrowers remained enrolled as of March, carrying an average debt of roughly $55,000. Many have not made payments in over two years as litigation against the plan proceeded, allowing their debt balances to increase through accumulated interest.
Borrowers who fail to select an alternative repayment plan within their 90-day window will be automatically enrolled in either the Standard Repayment Plan or the new Tiered Standard Plan. These options calculate payments as fixed amounts divided across a set repayment period rather than based on income, potentially doubling or tripling monthly obligations for some borrowers. The Education Department is processing a substantial backlog of income-driven repayment applications, with over 530,000 requests pending.
Alternative income-driven options remain available, including the newly launched Repayment Assistance Plan, which caps payments at 1% to 10% of earnings and offers loan forgiveness after 30 years. Financial advisors recommend borrowers calculate potential payments under alternative plans immediately and adjust their budgets accordingly to avoid payment shock.
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