As of July 1, the income-driven student loan repayment plan that lowered monthly payments for more than 7 million borrowers while accelerating loan forgiveness is gone. In place of the Saving on a Valuable Education (SAVE) plan are two new choices that now require borrowers to prioritize either the amount of loan payments or the total amount borrowed.
“Borrowers should really do their research to see what plan is going to work best for them,” said Nicholas Kent, undersecretary of education, in a recent interview. “But the reality is that SAVE borrowers will have to transition to a new repayment plan sooner rather than later.”
Under the Repayment Assistance Plan (RAP), monthly loan payments are based on that borrower’s income and number of dependents. Alternatively, the Tiered Standard Repayment plan offers fixed terms of 10, 15, 20 or 25 years based on a borrower’s total outstanding loan balance.
The deadline to choose is Sept. 29. Once borrowers complete their new enrollment, monthly payments will begin per the terms of each. After the deadline, any borrower who did not choose will be placed in a standard repayment plan. Further, pending SAVE applications will be denied.
The SAVE plan’s popularity was due to the meaningful relief that borrowers with modest incomes or long repayment histories received. Many achieved reduced payments, as the plan factored in income and family size. Hundreds of thousands of borrowers with smaller original balances were able to reach loan forgiveness more quickly.
Reactions to these changes from student loan advocates vary from worsening financial stress to anticipating higher payments and still-unresolved student loan servicer issues.
A June issue brief by the Julian Bond Institute found that 45% of all student loan borrowers suffered credit distress — missed payments or collections — over the past five years. This financial strain is taking a toll on consumers’ long-term financial goals.
“For many borrowers, they’ll end up having a higher payment in the RAP plan than they would in the IBR plan, and certainly more than they would in the SAVE plan,” said Abby Shafroth, director of the National Consumer Law Center’s Student Loan Borrower Assistance Program.
Other advocates warn the tight timeline leaves little room for error.
“Now 7.5 million borrowers have weeks to switch repayment plans,” said Chris Hicks, senior policy adviser at Protect Borrowers. “The companies standing between them and default are the same ones that have spent decades driving borrowers into it. Lawmakers and regulators at every level must step up now to protect borrowers by reining in these servicers — instead of handing them yet another opportunity to profit at borrowers’ expense.”
Hicks’ comments stem from a recently released joint report by Protect Borrowers and the Debt Collection Lab at Princeton University. The report, titled “Repeat Offenders,” takes aim at student loan servicers that are paid more than a billion dollars each year to support borrowers but instead “provided borrowers with the wrong information, taken illegal fees, and wrongly rejected applications for borrowers trying to get in an affordable repayment plan.”
The report also found that in 2025, another borrower defaulted on their loans every nine seconds. As the lack of effective student loan servicing continues, the report rejects the idea that the new payment plans will relieve the financial stress of unsustainable loan debt.
“This report makes clear that the dysfunction borrowers experience isn’t a series of isolated mistakes,” said Bonnie Latreille, visiting senior fellow with the Debt Collection Lab at Princeton University and former student loan ombudsman for the U.S. Department of Education. “It’s the predictable result of a fragmented system that shifts risk onto the people least equipped to absorb it, with no one held accountable.”
The end of SAVE and the start of new repayment plans are the result of a 2025 lawsuit settlement reached last December. The lengthy litigation, brought in 2024 by then-Missouri Attorney General Andrew Bailey, was joined by his colleagues in Arkansas, Florida, Georgia, North Dakota, Ohio and Oklahoma in a lawsuit that challenged SAVE, arguing the program was illegal.
The only former SAVE borrowers excused from these payments are those who have been approved for forbearance or deferment, both temporary options most often used during financial hardships. Forbearance allows a temporary pause in payments but does not pause interest accrual. Deferment also allows a temporary payment pause but can also pause interest from accruing, depending on the type of loans borrowed. Information on these choices, who is eligible and the terms affecting each is available on Federal Student Aid’s website.
“For a population already managing multiple debt obligations, with little savings and limited cash flow, policy changes that increase payment obligations, narrow repayment options, or resume aggressive collections could not be coming at a worse time,” the Julian Bond Institute brief concluded.
Charlene Crowell is a senior fellow with the Center for Responsible Lending. She can be reached at Charlene.crowell@responsiblelending.org.
