U.S. student-loan borrowers get extended timeline to switch from SAVE repayment plan

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Student-loan SAVE plan extension

Highlights

Borrowers on the SAVE plan received 30-day final notices extending their switching deadline from September 29 by about a month.
JPMorgan Chase Institute found switching from SAVE to a standard plan could raise payment burdens from 3% to 12% of take-home income.
Federal Student Aid data show 9.3 million borrowers are already in default and 1.5 million more face default risk in the next six months.

Extended deadlines for SAVE borrowers

As first reported by Business Insider, borrowers approaching the end of their original 90-day window are receiving 30-day final notices that push back their deadline to choose a new repayment plan by about a month.

The earliest group of borrowers on the Biden-era SAVE plan initially faced a September 29 deadline to select a replacement plan. Borrowers who failed to act risked being moved automatically onto a standard repayment plan, which carries the highest monthly payments.

More than 7 million borrowers were enrolled in SAVE, a plan that offered lower payments and a shorter path to debt relief. The Trump administration eliminated the program and started sending notices on July 1 giving borrowers 90 days to switch to another option.

Even with the added time, borrowers continue to report confusion over changing deadlines and repayment requirements. They are also navigating billing problems, incorrect account-status notices, and the removal of payments that had counted toward loan forgiveness.

Higher payment burdens and default risks

New research from the JPMorgan Chase Institute indicates that borrowers who are shifted from SAVE onto a standard plan face much heavier payment obligations. The institute said payment burdens could rise from about 3% of take-home income to roughly 12% if borrowers do not enroll in another income-driven repayment plan.

The research also warns that the return to repayment may be difficult because SAVE borrowers have been in forbearance for more than a year and may not realize payments are coming due. That creates a risk that some borrowers will not re-enroll in an income-driven plan even when doing so would lower their monthly costs.

The broader credit impact could be significant as millions resume payments after a long pause. Federal Student Aid data show 9.3 million borrowers are in default as of June 30, with another 1.5 million at risk of entering default over the next six months.

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