The U.S. Education Department told about 7.5 million borrowers enrolled in the SAVE income-driven repayment plan to prepare to choose a new repayment option, saying the plan is no longer lawful after a federal appeals court struck it down earlier this month.
Borrowers who had been placed in forbearance while legal challenges played out since July 2024 will begin receiving official notices starting Friday, the department said. Loan servicers will start sending those notices in stages beginning July 1, giving each borrower 90 days to pick an alternative repayment plan. The department warned many people will face higher monthly payments under the available substitutes.
In announcing the move, Education Department officials described the SAVE program as an unlawful initiative tied to what they called overly low monthly payments and promises of broad loan forgiveness. Under Secretary of Education Nicholas Kent said the department’s guidance ends what it characterized as an unlawful student loan bailout and reiterated the principle that loans must be repaid.
The SAVE plan, created under the Biden administration, had reduced payments in some cases to as little as 5% of a borrower’s discretionary income and included a forgiveness path for borrowers who made payments for at least 10 years and originally borrowed $12,000 or less. While courts considered challenges, those enrolled in SAVE were not required to make payments, but interest began accruing after a summer court ruling that blocked full implementation, increasing some borrowers’ balances.
Borrowers say the shift will be difficult. Alexis Arredondo, a first-generation college graduate who earned a microbiology degree in 2024, said he struggled to secure full-time work and relied on part-time and freelance jobs. He enrolled in SAVE after graduating with about $40,000 in loans and now faces choosing between higher monthly payments he may not be able to afford or extending repayment terms that will raise total interest costs.
Advocates and policy experts note borrowers have faced repeated changes to federal repayment rules. Mike Pierce of the Student Borrower Protection Center said people were promised fixes to a “broken” system but now confront limited choices. Alexander Lundrigan of Young Invincibles characterized the loss of SAVE as the removal of the most affordable option amid a broader affordability crisis and pointed to recent policy changes by the Trump administration and Congress that will alter repayment rules over the next two years, including removing deferment for unemployment or economic hardship on new loans.
The Education Department said a replacement income-driven option called the Repayment Assistance Plan will be available starting July 1. That plan will set monthly payments based on borrowers’ income and number of dependents and establish fixed repayment timelines ranging from 10 to 25 years.
The department’s notices will instruct affected borrowers to enroll in a replacement plan and resume payments as soon as this summer. Servicers will contact borrowers every two weeks in phased rounds, beginning with those who had been in the SAVE plan the longest.