More than 7 million U.S. student loan borrowers will be required to choose new repayment plans after a federal court struck down the Biden-era SAVE program. The U.S. Department of Education said borrowers enrolled in the SAVE plan have been in forbearance since July 2024. Loan servicers will begin sending notices from July 1, giving borrowers 90 days to transition into a new repayment plan.
Higher Payments And Policy Shift
Most borrowers are expected to face higher monthly payments. The SAVE plan had allowed payments as low as 5% of discretionary income and offered faster pathways to loan forgiveness for smaller balances. Alternative income-driven plans now typically require at least 10% of discretionary income.
The policy shift follows a ruling by the U.S. Court of Appeals for the 8th Circuit, which ended the program after a prolonged legal dispute. The decision removes one of the most generous repayment options available and raises concerns about affordability.
Nicholas Kent, Under Secretary of Education, said the administration’s position is that borrowers must repay their loans. He added that prior efforts to expand loan forgiveness are no longer being pursued.
Rising Delinquencies Signal Financial Stress
During the payment pause, borrowers were not required to make monthly payments. However, interest continued to accrue after a court ruling blocked full implementation of the SAVE plan. This has increased total loan balances for some borrowers, adding to the fiscal shortfall many households face.
Data from the Federal Reserve Bank of New York shows rising stress in the student loan system. Serious delinquency rates have reached over 16% for student loans, far above overall household debt levels. Around 7.7 million borrowers were already in default at the end of 2025, reflecting mounting repayment pressure and broader demographic headwinds affecting younger borrowers.
The administration has also introduced structural changes to repayment programs. New policies will limit deferment options tied to unemployment or economic hardship. A new Repayment Assistance Plan is scheduled to launch in July 2026, aiming to balance affordability with long-term solvency of the federal loan system.
Borrowers will be notified in phases, with those enrolled longest in the SAVE plan contacted first.
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