The Trump administration is giving student loan borrowers enrolled in a Biden-era repayment plan an ultimatum: switch to another federal plan or automatically be placed in the most expensive one.
There are more than 7 million people in the Saving on a Valuable Education plan, commonly known as Save, which offers lower monthly payments and a faster path to loan forgiveness than other income-driven repayment plans. Nearly half of those borrowers have incomes that are low enough to qualify for zero-dollar monthly payments. If they fail to act, their loans will be moved to the standard plan with fixed payments over 10 years, which could lead to whopping increases in their monthly bills.
On Friday, the Education Department will begin emailing Save borrowers to encourage them to apply to a different repayment plan. The message will be followed up in July by notices from loan servicers giving borrowers 90 days to switch plans or automatically be placed in the standard plan, according to three people familiar with the matter who spoke on the condition of anonymity because they were not authorized to speak publicly. Communications from servicers will arrive in waves to stagger the deadline for borrowers to exit the plan, the people said.
Late Friday, the Education Department confirmed its plans in an announcement outlining the exit strategy.
“For years, borrowers have been caught in a confusing cycle of uncertainty, but the Trump Administration’s policy is simple: if you take out a loan, you must pay it back,” Under Secretary of Education Nicholas Kent said in a statement.
The Save saga has spanned two administrations, left millions of borrowers in uncertainty, and thrown the entire student loan repayment system into chaos. Within months of President Joe Biden introducing the plan in 2023, Republican state attorneys general sued, challenging the program’s legality. The lawsuit halted Save and led the Education Department to postpone payments for enrollees through forbearance for nearly two years while the case was being considered.
The Trump administration reached a settlement in December with the states to end Save, but a federal judge dismissed the case last month. The U.S. Court of Appeals for the 8th Circuit stepped in weeks later to reverse that ruling, effectively killing the program.
Student advocates and activists say the Education Department’s exit strategy puts too much of the burden on borrowers to quickly navigate a complicated repayment system.
“The Department could have moved borrowers it is kicking out of SAVE into the next most affordable plan, and given people plenty of notice of the change,” Abby Shafroth, managing director of advocacy at the National Consumer Law Center, said in an email. “But instead it’s leaving people to fend for themselves in the midst of a deepening affordability crisis.”
Transitioning millions of people into other repayment plans will be a monumental task.
The Trump administration has been encouraging borrowers to explore other options since last summer, when the Education Department resumed applying interest on loans in the Save plan, but the majority of enrollees have remained in the program.
Student advocates say some borrowers have applied for other income-driven repayment plans but have been waiting for a response to their applications for months, a backlog that advocates worry will make the exit strategy difficult.
The Education Department had previously said the Save litigation was responsible for hundreds of thousands of applications being rejected or stuck in limbo. The agency told its loan servicers to deny borrowers who had selected the “lowest payment amount” on their income-driven repayment application because it would be the contested Save plan. Most of the pending applications are from people who wanted to enroll in Save, according to the department.
The agency said servicers have processed about a quarter-million forms a month, and getting through the system is fairly simple since the Education Department revised the application to exclude Save. The department has told borrowers who were caught in the backlog to resubmit the form. Borrowers who miss the deadline to exit Save and are placed in the standard plan can still apply for a more affordable option later.
But there are other complications.
People who switch into another income-driven plan now may have to switch again as all but one of those plans is going away after July 1, 2028, because of the tax law that President Donald Trump signed last summer.
Starting this July, borrowers will have the option of a new income-driven repayment plan, dubbed the Repayment Assistance Plan, which ties monthly payments to a borrower’s income, ranging from 1 to 10 percent depending on earnings. But even that option is likely to require Save enrollees to pay more a month.
Student advocates had hoped the Education Department would let Save wind down as directed in the Republican tax law, which gave enrollees until July 1, 2028, to leave the plan. But the Trump administration has been eager to put Biden’s signature repayment plan to rest.
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