The SAVE plan a popular income-driven repayment option for federal student loans, has been officially discontinued following a legal settlement. This development impacts hundreds of thousands of borrowers who had applied for or were enrolled in the program. The U.S. Department of Education has directed loan servicers like MOHELA and Aidvantage to deny all outstanding SAVE plan applications, leaving borrowers to navigate new repayment options.
For those who had pending applications, the denial letters are now arriving. These borrowers had been in administrative forbearance while waiting for a decision on their applications. With the SAVE plan no longer available, borrowers must act quickly to avoid reverting to potentially unaffordable repayment plans.
Understanding the Impact of the SAVE Plan Termination
The termination of the SAVE plan has significant implications for borrowers. Those who were enrolled in the plan will be auto-enrolled in the Standard or Tiered Standard repayment plan if they do not select a new plan within 90 days. For those with pending applications, the forbearance period will end, and payments will resume based on their previous repayment plan or the Standard plan if they were not enrolled in any plan.
This shift means that many borrowers will see a substantial increase in their monthly payments. The SAVE plan offered lower payments based on a percentage of discretionary income, making it a more affordable option for many. Without this plan, borrowers must explore alternative income-driven repayment options to manage their debt effectively.
The Immediate Actions Borrowers Must Take
Borrowers who receive a denial letter must take immediate action to avoid financial strain. The first step is to submit a new income-driven repayment (IDR) application. This will keep borrowers in an income-driven plan and prevent them from being placed in a potentially unaffordable repayment plan.
The main options available include Income-Based Repayment (IBR) and the new Repayment Assistance Plan (RAP) which launched on July 1, 2026. RAP charges 1% to 10% of adjusted gross income, depending on income levels, and includes a $50 monthly deduction per dependent. It also requires a minimum $10 monthly payment, making it a flexible option for many borrowers.
For those pursuing Public Service Loan Forgiveness (PSLF) enrolling in IBR or RAP is crucial, as both plans are PSLF-eligible. Applications can be submitted through StudentAid.gov/idr or directly through the borrower’s loan servicer.
The Broader Context of the SAVE Plan’s Demise
The end of the SAVE plan is part of a broader legal and legislative landscape. The plan was vacated by a federal court on March 10, 2026, and Congress eliminated it through the One Big Beautiful Bill Act. This dual approach ensures that the SAVE plan cannot be revived without significant legal and legislative changes.
For borrowers, this means that the SAVE plan is no longer a viable option, and they must adapt to the new repayment landscape. Understanding the legal history and the practical consequences of the SAVE plan’s termination is essential for making informed decisions about loan repayment.
The administrative forbearance period during which interest was not charged ended on August 1, 2026. Since then, interest has been accruing on loan balances, which will capitalize when borrowers transition to a new repayment plan. This capitalization can significantly increase the principal balance, leading to higher long-term costs.
Additionally, months spent in administrative forbearance do not count toward loan forgiveness or PSLF. This means that borrowers who were relying on the SAVE plan for forgiveness may need to explore other options to meet their repayment goals.
Robert Farrington, founder of The College Investor and an expert in student loan debt, emphasizes the importance of taking action. With over 15 years of experience in the field, Farrington has been featured in prominent publications like The New York Times, The Wall Street Journal, and The Washington Post. His insights highlight the need for borrowers to stay informed and proactive in managing their student loans.
