U.S. student-loan borrowers face shift to costlier repayment plans after SAVE ends

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Student loan repayment shift

Highlights

From July 1, SAVE borrowers will have 90 days to choose new repayment plans or be automatically shifted to more expensive standard or tiered standard plans.
The new tiered standard and Repayment Assistance Plans launching in July will impose higher monthly payments, with some borrowers seeing increases of several hundred dollars.
Over 60 Democratic lawmakers are urging the Department of Education to automatically enroll SAVE borrowers into the lowest-cost plan to mitigate potential financial hardship from the transition.

July transition to new repayment options

As first reported by Business Insider, an email sent to SAVE borrowers says the Department of Education will start notifying them from July 1 about deadlines to switch plans after President Donald Trump eliminated SAVE.

Borrowers who do not act within the 90-day window will be moved automatically into either the standard repayment plan or the new tiered standard plan. The department says those options are more expensive than current income-driven repayment plans, and its email warns that monthly payments will most likely increase for borrowers placed in them.

The tiered standard plan, available after July 1, requires borrowers to repay their loans over a period tied to their principal balance, with a minimum monthly payment of $50. A new Repayment Assistance Plan, also becoming available in July, calculates payments using adjusted gross income, but the article says it is still costlier than existing income-based plans that factor in a borrower’s monthly expenses.

Payment impact and policy debate

Some borrowers already say their projected payments under RAP are rising by hundreds of dollars, even though the program is intended to be the more affordable option. Borrowers are not required to take action until they receive official notices from the department setting out their transfer deadline.

More than 60 Democratic lawmakers recently urge the Department of Education to place SAVE borrowers automatically into the lowest-cost available option instead of the most expensive one if they miss the deadline. In their letter, they say that approach would reduce what they describe as potentially devastating financial effects during the transition.

The repayment changes come alongside other provisions in Trump’s spending legislation, including new borrowing caps for advanced degrees and revised limits on how much parents can borrow for children’s education. In an April press release, Under Secretary Nicholas Kent says the measures are meant to preserve access to federal student loans while limiting debt burdens that borrowers may never be able to repay.

Our earlier coverage of the No Aid for Ghost Students Act (H.R. 7892) explained how the House-backed measure would reinforce the Department of Education’s push to tighten anti-fraud controls in federal student aid. We noted the rollout of real-time, risk-based identity screening in the FAFSA system and expanded data sharing aimed at blocking improper payments and protecting taxpayer funds.

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