7M Student Borrowers Are Set to Receive an Unwanted Letter
Millions of Americans with federal student loans will soon have to move out of a repayment plan that was recently struck down in federal court.
According to the Department of Education, about 7.5 million borrowers who enrolled in the SAVE income-driven repayment program will begin receiving notices on Friday instructing them to choose a different repayment option. Payments could restart as early as this summer. These borrowers have been in forbearance since July 2024 while legal challenges to the program worked their way through the courts.
Starting July 1, loan servicers will provide borrowers with a 90-day window to select a new repayment plan. Most of the available alternatives will likely result in higher monthly payments compared with what borrowers paid under SAVE.
The SAVE program was introduced during the Biden administration as a way to reduce the burden of student debt. It allowed some borrowers to limit payments to as little as 5 percent of their discretionary income and offered loan forgiveness after as few as 10 years for those who borrowed smaller amounts.
Earlier this month, the U.S. Court of Appeals for the 8th Circuit ruled that the program was invalid. The Department of Education, now operating under President Trump and led by Education Secretary Linda McMahon, says the program was unlawful and built on what officials describe as unrealistic promises of loan forgiveness and unusually low monthly payments. Nicholas Kent, the undersecretary of education, said the department’s position is simple: borrowers who take out loans are expected to repay them.
Borrowers and advocacy groups say the changes have been difficult to navigate. Even though payments were paused under the SAVE program, interest has continued to accumulate since a court decision last summer, leaving some borrowers with larger balances than before.
Alexander Lundrigan of the advocacy group Young Invincibles said the situation worsens an already serious affordability problem by eliminating what many borrowers viewed as the most manageable repayment option. Mike Pierce of the Protect Borrowers organization said borrowers are once again being told to resume payments without many favorable choices available.
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