Millions of student loan borrowers currently enjoying a payment pause are facing a potential shift as the Trump administration announces a proposed settlement regarding the Saving on a Valuable Education (SAVE) plan. With over 7.6 million borrowers still in SAVE forbearance as of July, experts recommend that individuals begin planning for the transition back to repayment. While the exact timeline for this change remains unclear, the Education Department indicated that borrowers would receive information “in the coming weeks” about selecting a new repayment plan.
The SAVE forbearance is applicable to those who enrolled in the Biden administration’s repayment strategy but became ensnared in legal disputes, leaving them in a limbo of uncertainty as the program was ultimately deemed defunct by a federal court. The 8th U.S. Circuit Court of Appeals previously blocked SAVE, siding with states that argued the Biden administration lacked the authority to implement the program, previously considered to have the most favorable terms for borrowers. As a result of these complications, the Biden administration placed borrowers in a forbearance status during the summer of 2024, while Trump officials resumed charging interest to those remaining paused in their payments.
Experts suggest that borrowers should proactively seek alternative repayment options. Mark Kantrowitz, a higher education expert, encourages those affected to explore various income-driven repayment (IDR) plans available at StudentAid.gov. These plans typically limit monthly payments based on a borrower’s income and can lead to loan forgiveness after a set number of years. The Income-Based Repayment (IBR) plan is likely the most beneficial for many, particularly as other options such as Income-Contingent Repayment (ICR) and Pay As You Earn (PAYE) will be phased out by July 2028.
Furthermore, a new IDR option known as the “Repayment Assistance Plan” (RAP) will roll out in 2026, offering a longer repayment period of up to 30 years, which may appeal to borrowers looking for lower monthly payments. Borrowers are encouraged to utilize online tools that provide estimates for potential monthly bills under different repayment plans. Additionally, those enrolled in the Public Service Loan Forgiveness (PSLF) program can leverage the PSLF Buyback option to receive credit for payments made during the SAVE forbearance.
As the situation continues to evolve, borrowers are advised to remain informed and proactive about their student loan repayment options, ensuring they are prepared for the forthcoming changes. The commitment to financial literacy and awareness during this transitional phase could pave the way for a positive outcome for borrowers as they navigate their repayment journeys.