4 Takeaways for Student Loan Borrowers as SAVE Plan Officially Ends

The Department of Education announced the official termination of the Saving on a Valuable Education (SAVE) Plan last week.It provided key new details about the transition out of SAVE for federal student loan borrowers.According to the department, borrowers will have a limited window of time to select a new income-driven repayment (IDR) plan for their student loans.Failure to select a new repayment plan could have costly consequences.

“Today’s guidance, which every borrower enrolled in the defunct SAVE Plan will receive over the next week, puts the Biden Administration’s illegal student loan bailout agenda to rest once and for all,” said Under Secretary of Education Nicholas Kent in a statement last Friday.“For years, borrowers have been caught in a confusing cycle of uncertainty, but the Trump Administration’s policy is simple: if you take out a loan, you must pay it back.” The Education Department has released new guidance for student loan borrowers outlining what the phaseout of the SAVE Plan will look like and what it means for repayment and loan forgiveness.Here’s a breakdown.Borrowers will have a limited window to change repayment plans Student loan borrowers will have a fairly limited timeframe within which they must transition out of the SAVE Plan and into a different IDR plan.

According to the updated Education Department guidance, borrowers will have 90 days to apply for a different plan.Importantly, that clock does not start immediately.Borrowers will start receiving 90-day notices starting on July 1.“Starting on July 1, federal loan servicers will begin issuing notices to borrowers, instructing them to exit the illegal SAVE Plan and enroll in a legal repayment plan within 90 days,” said the department in its statement last week.

“Servicers will notify borrowers of their specific 90-day deadline.The 90-day period provides borrowers with ample time to explore repayment options that best suit their needs and plan accordingly.” Borrowers don’t have to wait until they receive the official notice this summer to change repayment plans, however.You can apply now.Since interest is accruing on student loans in the SAVE Plan forbearance, and the forbearance period continues to not count toward student loan forgiveness under IDR plans and Public Service Loan Forgiveness (PSLF), some borrowers may want to consider applying to switch repayment plans sooner rather than later.

“A borrower who wishes to transition before their loan servicer communicates a specific 90-day deadline may contact their servicer at any time to enroll in a lawful repayment plan,” said the department.  Borrowers can also apply online at StudentAid.gov, which may result in faster and more accurate processing if they link to the IRS in the online IDR application system to import their income data from their federal tax return.Failing to change repayment plans could have costly consequences Borrowers with student loans in the SAVE Plan should be aware that, unless they act, they will not be able to remain in a repayment plan tied to their income.Borrowers must affirmatively apply for a different IDR plan within the 90-day window when the Education Department starts sending out official notices this July.Failing to act within that timeframe will result in the borrower getting kicked out of SAVE and placed into a Standard Repayment Plan.

“Borrowers who do not transition plans within the 90-day period communicated by their servicer will be automatically enrolled into either the Standard Repayment Plan, or the new Tiered Standard Plan that will be available beginning July 1,” said the department in its statement.Unlike IDR plans, Standard Repayment Plans calculate a borrower’s monthly student loan payment based on their loan balance, interest rate, and repayment term.A borrower’s income or ability to afford the monthly payments is not a factor in the calculation.For many borrowers, a Standard Repayment Plan payment will simply not be affordable.

And in most cases, Standard Repayment Plan payments won’t count toward student loan forgiveness for IDR plans or for PSLF.Alternative repayment plan options for borrowers Borrowers looking to move their student loans from SAVE to another IDR plan currently have up to three options: Income-Contingent Repayment (ICR), Income-Based Repayment (IBR), and Pay As You Earn (PAYE).However, not all borrowers will qualify for PAYE based on the dates their student loans were disbursed.And ICR and PAYE will eventually be phased out in 2028; that means borrowers who select one of those plans will only be able to remain in those plans temporarily, and they will eventually need to change plans yet again.

IBR will remain available, though, as long as borrowers don’t take out any new federal student loans or consolidate their existing loans on or after July 1, 2026.All three of these IDR plans offer student loan forgiveness after 20 or 25 years in repayment (depending on the plan and when a borrower first took out their federal student loans).And the Education Department confirmed that it is processing discharges under all three IDR plans for qualifying borrowers.“We resumed processing discharges for the IBR Plan in September 2025,” said the department in updated online guidance.

“We have updated our systems to resume processing discharges for borrowers enrolled in the PAYE and ICR Plans.” However, borrowers should be aware that their monthly student loan payments will likely be higher (in some cases, much higher) under ICR, IBR, and PAYE than they were under the SAVE Plan before the forbearance went into effect.That’s because these plans have more expensive repayment formulas.On top of that, many borrowers have higher incomes now than they did when they first enrolled in SAVE several years ago.New repayment plan option comes out this summer Borrowers may also be able to access a new income-driven plan coming out this summer, called the Repayment Assistance Plan (RAP).

The Education Department confirmed in its announcement last week that RAP should be available by July 1.“The Department is working on implementing the student loan repayment provisions included in the Working Families Tax Cuts Act,” said the department in its statement.“This once-in-a-generation law created a new IDR plan, the Repayment Assistance Plan (RAP), and a new Tiered Standard Plan that will be available to borrowers on July 1, 2026.” RAP will have some benefits, as well as some drawbacks, for student loan borrowers.For many borrowers, RAP will be more affordable than the IBR Plan, though it may be more expensive when compared to the SAVE and PAYE Plans.

RAP will also have an interest subsidy, similar to what was provided under the SAVE Plan, to prevent runaway balance growth associated with student loan interest accrual, which is a significant benefit.  But RAP will also have a tiered repayment formula (which may result in sharp increases in monthly payments following relatively small increases in a borrower’s income); no caps on monthly payments (unlike the IBR and PAYE Plans, which cap payments at the equivalent of the 10-year Standard Plan amount); and a 30-year term before a borrower can qualify for student loan forgiveness (compared to 20 or 25 years for existing IDR plans).These downsides may give some student loan borrowers reasons to be skeptical of RAP.Importantly, borrowers who take out any new student loans, or consolidate their existing loans through the Direct consolidation program, on or after July 1 of this year will lose access to the IBR Plan.Their only income-driven repayment option will be RAP.

So, borrowers who want to preserve their existing repayment plan options may want to think twice before taking out new federal loans or consolidating going forward.