More than 7.5 million borrowers enrolled in the Saving on a Valuable Education (SAVE) plan are facing an end to their payment hiatus. The U.S. Department of Education has announced that loan servicers will begin sending out 90-day notices to SAVE borrowers starting July 1. Those who do not act within this timeframe may be assigned to either the Standard Repayment Plan or the Tiered Standard Plan, both of which could result in much higher monthly payments than borrowers were accustomed to before the program paused payments in 2020.
Borrowers who receive the notice will have a personalized countdown and must respond accordingly to avoid automatic enrollment in the more expensive plans. Betsy Mayotte, president of The Institute of Student Loan Advisors, emphasized the challenges faced by borrowers who based financial decisions on the expectation of continuing low payments. Furthermore, interest has been accruing since August 2025, meaning many borrowers will owe significantly more than when they initially took out loans.
Compounding these issues is the launch of two new federal repayment plans, the Repayment Assistance Plan (RAP) and the Tiered Standard Plan. The RAP calculates payments based on income and household size, while the Tiered Standard Plan offers fixed payments based on the borrower’s total outstanding balance over various timeframes.
Adding urgency to the situation, federal student loan delinquency rates have surged, with millions of borrowers already falling behind on payments. Concerns are further heightened as recent changes have made forgiven loans taxable income, creating potential tax liabilities for borrowers who reach forgiveness under income-driven plans.
Why this story matters:
- Over 7.5 million borrowers must navigate a complex transition back to loan payments, affecting personal financial planning.
Key takeaway:
- Borrowers need to act promptly on their repayment options to avoid costly automatic enrollments in more expensive plans.
Opposing viewpoint:
- Some financial experts suggest that new repayment options may offer better flexibility for borrowers depending on their income and repayment capabilities.
