Major Changes to Student Loan Repayment Plans Starting July 1

Starting July 1, millions of student loan borrowers will need to select a new repayment option for their federal loans. If they do not, the government will decide for them. This change comes as the Trump administration implements significant modifications to the student loan system.

The Biden-era repayment plan known as SAVE, or Saving for a Valuable Education, is being officially dismantled. Approximately seven million people currently enrolled in this income-driven plan, the most affordable to date, must choose a new option and resume payments. Their payments have been paused for nearly two years due to legal challenges by Republican attorneys general.

Federal loan servicers will begin notifying SAVE enrollees with deadlines for taking action. Borrowers must choose from a new set of repayment plans. These changes result from the tax and policy bill passed last summer.

For some, this means higher monthly bills amidst rising inflation, increasing utility bills, and surging gas prices. Additionally, some families face rising healthcare costs. “There’s a lot of anxiety out there,” said Betsy Mayotte, president of The Institute of Student Loan Advisors, which provides borrower advice. “It’s not just about student loan payments going up. It’s everything hitting at once.”

SAVE participants must act urgently, but other borrowers will also feel the impact of these changes. Two new repayment programs will be introduced, and several current ones will be phased out. Understanding the options is crucial for managing these changes effectively.

The table below shows monthly payments under each repayment plan for a borrower with $60,000 in student debt, a 6.8% interest rate, and a household of two:

Note: Incomes shown end in $1 since the new RAP plan includes hard income cutoffs. Earning an extra dollar can push a borrower into a higher bracket. The Pay As You Earn (PAYE) and Income-Contingent Repayment (ICR) plans will no longer be available after July 2028.