Bad News Mounts for Student Loan Borrowers in the SAVE Plan 

Nearly eight million borrowers who have been in the Saving on a Valuable Education (SAVE) repayment plan got hit with significant back-to-back updates during the last week. And it’s essentially all bad news.

First, President Trump signed legislation passed by congressional Republicans last week that repeals SAVE and will force borrowers to change repayment plans, likely resulting in higher monthly payments. Then, the Trump administration announced that it would start charging interest on federal student loans subject to the SAVE plan forbearance, ending a 12-month interest moratorium and undermining previous assurances provided to borrowers that they would remain in an interest-free forbearance until the legal circumstances surrounding SAVE have changed.

Taken together, the two developments may effectively mean higher costs for SAVE plan borrowers, whether or not they take action now. But eventually, all borrowers in the SAVE plan will need to decide how to proceed in light of these changes. Here’s a breakdown of the latest developments and what student loan borrowers should know.

Student loan borrowers in the SAVE plan will need to switch plans by 2028

President Trump’s “Big, Beautiful Bill” passed Congress last week and was signed into law. The bill was revised at the last minute after the Senate Parliamentarian rejected a component of the bill that would have immediately repealed several student loan repayment plans for current borrowers.

Under the revised version of the bill, SAVE — along with the Income-Contingent Repayment (ICR) and Pay As You Earn (PAYE) plans — will phase out by July 1, 2028. At that time (and potentially before), borrowers will have only two income-driven repayment plans to choose from: Income-Based Repayment (IBR) or the new Repayment Assistance Plan (RAP). 

Under both plans, borrowers would have higher monthly payments compared to SAVE. And under both plans, borrowers could have a longer repayment term before they would qualify for student loan forgiveness — 25 years for IBR, and 30 years for RAP (borrowers in SAVE would have had a 20- or 25-year term, depending on whether or not they had graduate school loans).

Advocacy groups slammed the bill as a punitive measure that could cause real financial harm for millions of federal student loan borrowers.

“This bill isn’t beautiful — it’s brutal,” said Denise Forte, president and CEO of EdTrust, in a statement. “It raises costs for students, snatches away financial aid, and punishes families just trying to make ends meet. It’s not reform. It’s a full-scale assault on educational opportunity and economic fairness.”

“For many people who live paycheck-to-paycheck, this will be a financially devastating law. It should be repealed,” said Mike Calhoun, president at the Center for Responsible Lending.

If there is a sliver of good news, it’s that borrowers won’t be required to immediately change repayment plans. And current borrowers would be able to maintain access to IBR, which offers student loan forgiveness after 25 years in repayment (and payments made under the other IDR plans, including SAVE, would count). 

Trump administration resumes interest on student loans covered by SAVE forbearance

But this week, the situation got more complicated for SAVE plan borrowers after the Trump administration announced that the Department of Education would begin charging interest on balances starting on August 1. Interest and payments were paused last summer for eight million borrowers in the SAVE plan after a federal court blocked the program in response to a Republican-led legal challenge. The litigation has continued, with no final court ruling yet; and so the forbearance has continued, as well. But now, borrowers will see their loan balance increase.

“For years, the Biden Administration used so-called ‘loan forgiveness’ promises to win votes, but federal courts repeatedly ruled that those actions were unlawful,” said Secretary of Education Linda McMahon in a statement. “Congress designed these programs to ensure that borrowers repay their loans, yet the Biden Administration tried to illegally force taxpayers to foot the bill instead. Since day one of the Trump Administration, we’ve focused on strengthening the student loan portfolio and simplifying repayment to better serve borrowers.”

The department justified the resumption of interest charges on student loan balances enrolled in the SAVE plan as required to comply with a court ruling earlier this year that expanded the injunction blocking the program. But student loan legal advocacy organizations rejected this as nonsense. 

“No court has ordered the Department to resume charging interest to borrowers in the SAVE forbearance,” said the Student Borrower Protection Center (SBPC) in an analysis earlier this week. “On February 18, 2025, the U.S. Court of Appeals for the 8th Circuit upheld the District Court for the Eastern District of Missouri’s preliminary injunction temporarily blocking the SAVE plan itself, and instructed the lower court to widen the injunction in accordance with its analysis. Nowhere in the 8th Circuit’s opinion or order is there any discussion of the legality of the Department’s temporary, interest-free SAVE forbearance.”

“On April 14, 2025, the lower court acted on the 8th Circuit’s order, modifying its injunction and blocking the SAVE rule in its entirety, along with a subsequent housekeeping rule related to other income-driven repayment plans made using the same legal authority,” continued the SBPC. “Here again, the lower court did not opine on the legality of borrowers’ interest waiver during the SAVE forbearance nor did it instruct the government to take any other action with respect to this temporary payment pause.”

The SBPC concluded that the resumption of interest on federal student loan balances covered by the SAVE plan forbearance will cost borrowers more than $3,500 per year on average, or around $300 per month.

What student loan borrowers in the SAVE plan can do

The Department of Education is encouraging borrowers in the SAVE plan to change to a different repayment program. 

“The Department urges all borrowers in the SAVE Plan to quickly transition to a legally compliant repayment plan – such as the Income-Based Repayment Plan,” said McMahon in her statement. “Borrowers in SAVE cannot access important loan benefits and cannot make progress toward loan discharge programs authorized by Congress.” 

However, many borrowers have been trying to switch from SAVE to another IDR plan, like Income-Based Repayment (IBR), for months, but have been hampered by an IDR application shutdown the Trump administration implemented earlier this year, followed by a significant backlog that is now leading to long processing delays. As of the department’s most recent status update last month, more than 1.5 million IDR applications remain in the backlog.

In addition, borrowers who apply to switch from SAVE to IBR should expect much higher payments. For example, an undergraduate borrower with an annual income of $65,000 would have had a payment of around $250 per month under SAVE, but their payment under IBR would be around $520 per month. Some borrowers may have lower payments under ICR or PAYE, which remain available. But the department strongly implied that selecting ICR or PAYE may not be a good idea.

“Since the One Bill Beautiful Bill Act envisions restricting enrollment in PAYE and ICR Plans in the future, and because those two repayment plans are currently impacted by legal challenges as well, the Department urges SAVE borrowers to consider enrolling in the Income-Based Repayment Plan authorized under the Higher Education Act until the Department can launch the Repayment Assistance Plan,” said the department this week. 

It is not clear when student loan borrowers will be able to enroll in RAP, but it could be up to a year or longer.