Countdown for Borrowers: Exiting the SAVE Plan and New Repayment Options

The landscape of student loan repayment is shifting once again, and it's crucial for borrowers to stay informed. The Saving on a Valuable Education (SAVE) plan, a program launched during the Biden administration to provide financial relief to student borrowers, is coming to an end. This change affects the more than 6.9 million borrowers who were still enrolled as of March, with an average debt nearing $55,000. With a federal appeals court ordering the termination of the SAVE plan, borrowers are now facing a 90-day countdown to exit and select a new repayment option.

In response to the court's decision, loan servicers have begun notifying borrowers that they must transition to another repayment plan. The earliest exit deadline is set for September 29, but most borrowers will be given a more extended period based on when they are contacted. For instance, some Nelnet borrowers might not receive their notice until as late as March 2027. This staggered timeline can create confusion, so it's vital for borrowers to keep an eye on their notifications and deadlines.

Understanding Your Options

Once borrowers receive notice, they will have a 90-day window to select a new repayment plan. If they do not take action, they will be automatically placed in either the Standard Repayment Plan or the new Tiered Standard Plan, which may not be the most affordable option. Experts recommend that borrowers proactively assess their repayment options rather than waiting for notifications. Nancy Nierman, from the Education Debt Consumer Assistance Program, emphasizes that borrowers can begin the transition process anytime by logging into their Federal Student Aid account at StudentAid.gov.

Will Sealy, CEO of Summer, suggests that borrowers should carefully evaluate their repayment choices, as failing to enroll in a suitable plan could lead to being placed in a Standard Plan, typically the most expensive option. In the worst-case scenario, missing the transition deadline can lead to delinquency and, eventually, default, which could result in wage garnishments or loss of tax refunds.

New Repayment Plans to Consider

With the SAVE plan ending, borrowers will have several other options available to them. A notable new plan is the Repayment Assistance Plan (RAP), which caps monthly payments at 1% to 10% of a borrower’s income, with a minimum payment of $10. Notably, the RAP offers student loan forgiveness after 30 years, a longer timeline compared to other income-driven repayment plans (IDRs). Additionally, borrowers can receive a $50 monthly discount for each qualifying dependent, making it a potentially attractive option for many.

Existing borrowers can also continue to access other IDR options such as the Income-Based Repayment (IBR) and Income-Contingent Repayment (ICR) plans. The IBR plan requires borrowers to pay 10% of their discretionary income each month if they took out loans after July 1, 2014, with forgiveness after 20 years. For those with older loans, the payment is 15% and forgiveness comes after 25 years.

Making the Transition

For borrowers currently in the SAVE plan, it is crucial to act promptly and gather information about the new options. The U.S. Department of Education and various loan servicers are providing resources to help borrowers navigate these changes. Tools are available online to assist in calculating potential monthly payments under different repayment plans, which can help in making informed decisions about which plan is the best fit.

In conclusion, the transition from the SAVE plan marks a significant change in the repayment landscape for student loan borrowers. With a variety of options to consider, borrowers should take proactive steps to ensure they select a plan that aligns with their financial situation. Remember, it's essential to stay informed and make a plan to avoid potential pitfalls during this transition.