Are you a student loan borrower on the Saving on a Valuable Education Plan, commonly referred to as the SAVE Plan? If so, the Department of Education recently announced big changes that could cost you hundreds of dollars per month if you don’t take action. Starting July 1, anyone still under the SAVE Plan will be contacted by their loan servicer, who will give them at least 90 days to choose a new repayment plan.In 2023, the SAVE Plan was introduced by President Joe Biden, a Democrat, saying it would lower the monthly payments of millions of borrowers. In response, several Republican-led states filed lawsuits to block the plan, arguing it overstepped the Education Department’s authority and would put high costs onto taxpayers. During the legal battle, borrowers on the plan were not required to make payments. However, interest resumed on debt balances last summer after a court ruling blocked the implementation of the SAVE Plan. After around two years in litigation, a federal appeals court effectively ended the plan. This leaves over 7 million borrowers to figure out their next steps. Repayment plan options If you don’t take action, your servicer will automatically enroll you in one of the new plans created by the One Big Beautiful Bill: the Tiered Standard Plan or the Repayment Assistant Plan (RAP). The new Tiered-Standard Plan offers fixed terms of 10, 15, 20, 25 years based on a borrower’s total outstanding loan balance. The Repayment Assistance Plan takes a percentage of your adjusted gross income for 30 years until forgiveness. If you have dependents, $50 will be deducted from your payment per dependent. The Education Department says both plans will be ready by July 1. Anyone who takes out federal loans after that date can only choose between those plans.Income-Driven Repayment PlansOther repayment options for SAVE borrowers include income-driven repayment plans. The Income-Based Repayment (IBR) Plan offers monthly payments of 10% of your discretionary income for 20 years if you borrowed after July 1, 2014. If you borrowed before July 1, 2014, monthly payments would be 15% of your discretionary income for 25 years. The Income Contingent Repayment (ICR) Plan has monthly payments of 20% of your discretionary income for 25 years.The Pay As You Earn (PAYE) Plan has monthly payments of 10% of your discretionary income for 20 years. However, if you choose the ICR or PAYE plan, you will have to switch again before July 2028, as both plans are scheduled to be phased out. Next steps Ultimately, choosing the “best” plan is personal. Identify your goals: Do you want to pay it off as fast as you can and pay less in interest? Or, do you want low monthly payments? For immediate next steps, look for updates from your servicer and the Education Department. Log into your servicer account to review the options to see what plan works best for you. Visit studentaid.gov to use a Federal Loan Simulator to compare plans.
Are you a student loan borrower on the Saving on a Valuable Education Plan, commonly referred to as the SAVE Plan?
If so, the Department of Education recently announced big changes that could cost you hundreds of dollars per month if you don’t take action.
Starting July 1, anyone still under the SAVE Plan will be contacted by their loan servicer, who will give them at least 90 days to choose a new repayment plan.
In 2023, the SAVE Plan was introduced by President Joe Biden, a Democrat, saying it would lower the monthly payments of millions of borrowers.
In response, several Republican-led states filed lawsuits to block the plan, arguing it overstepped the Education Department’s authority and would put high costs onto taxpayers.
During the legal battle, borrowers on the plan were not required to make payments. However, interest resumed on debt balances last summer after a court ruling blocked the implementation of the SAVE Plan.
After around two years in litigation, a federal appeals court effectively ended the plan.
This leaves over 7 million borrowers to figure out their next steps.
Repayment plan options
If you don’t take action, your servicer will automatically enroll you in one of the new plans created by the One Big Beautiful Bill: the Tiered Standard Plan or the Repayment Assistant Plan (RAP).
The new Tiered-Standard Plan offers fixed terms of 10, 15, 20, 25 years based on a borrower’s total outstanding loan balance.
The Repayment Assistance Plan takes a percentage of your adjusted gross income for 30 years until forgiveness. If you have dependents, $50 will be deducted from your payment per dependent.
The Education Department says both plans will be ready by July 1. Anyone who takes out federal loans after that date can only choose between those plans.
Income-Driven Repayment Plans
Other repayment options for SAVE borrowers include income-driven repayment plans.
The Income-Based Repayment (IBR) Plan offers monthly payments of 10% of your discretionary income for 20 years if you borrowed after July 1, 2014.
If you borrowed before July 1, 2014, monthly payments would be 15% of your discretionary income for 25 years.
The Income Contingent Repayment (ICR) Plan has monthly payments of 20% of your discretionary income for 25 years.
The Pay As You Earn (PAYE) Plan has monthly payments of 10% of your discretionary income for 20 years.
However, if you choose the ICR or PAYE plan, you will have to switch again before July 2028, as both plans are scheduled to be phased out.
Next steps
Ultimately, choosing the “best” plan is personal. Identify your goals: Do you want to pay it off as fast as you can and pay less in interest? Or, do you want low monthly payments?
For immediate next steps, look for updates from your servicer and the Education Department.
Log into your servicer account to review the options to see what plan works best for you.
Visit studentaid.gov to use a Federal Loan Simulator to compare plans.
