Student Loan Repayment Plan SAVE Faces the Ax

The Education Department has struck a deal to scrap the SAVE student loan repayment plan. This plan, known for its flexibility and low monthly payments, is now on its way out. The decision comes after a legal battle with Republican state attorneys general, who argued that SAVE was too lenient.

Key Details of the Transition

• SAVE Plan Features:
• Allowed low-income borrowers to pay as little as $0 per month.

• Offered faster loan forgiveness.

• Transition Challenges:
• The Education Department has agreed to stop enrolling new borrowers.
• Existing borrowers will be moved to other plans.

• Millions of borrowers have not made payments in years, making the transition difficult.

• New Options for Borrowers:
• Choose between fixed payment plans or income-based plans.
• New plans are set to launch in July 2026.
• The deadline for switching plans has been moved up, though the exact timeline is unclear.

Impact on Borrowers and Servicers

• Loan Servicing Companies:
• Face a daunting task in transitioning millions of borrowers.

• The head of the Student Loan Servicing Alliance warns of a bumpy road ahead.

• Advocates' Concerns:
• Persis Yu of Protect Borrowers expresses concern about the financial burden this will place on borrowers.

Broader Implications

• The settlement comes as many borrowers struggle to keep up with payments.
• Critics argue that ending SAVE will make life more expensive for borrowers.
• The Education Department's decision to capitulate to the attorneys general has sparked debate about the future of student loan repayment.