Key facts
- The Biden administration's SAVE student loan repayment plan is being phased out.
- Over 7 million federal student loan borrowers must transition to new plans by October 1.
- The end of the SAVE plan could negatively impact mortgage affordability by increasing debt-to-income ratios.
- Experts suggest borrowers should have planned for the return of regular student loan payments.
- Delinquency rates on various debt types, including student loans, reached a near-decade high in late 2025.
The Biden administration's SAVE income-driven repayment plan for federal student loans is officially ending on July 1, requiring over 7 million borrowers to transition to new repayment options within 90 days. This restructuring, influenced by the Trump administration's 'One Big Beautiful Bill Act' and a March 2026 court ruling deeming the SAVE plan unconstitutional, is expected to impact mortgage affordability.
Higher monthly student loan payments resulting from the plan's phase-out could reduce borrowers' purchasing power or delay homeownership by affecting their debt-to-income ratios. While the Pay As You Earn (PAYE) plan remains available until July 2028 with capped payments, other plans like the Repayment Assistance Plan (RAP) may not offer the same relief for higher-income borrowers.
Industry professionals like Donna Schmidt of DLS Servicing emphasize that borrowers should have planned for the return of regular payments, noting stabilized inflation rates. However, data from the Federal Reserve Bank of New York indicates that delinquency rates across various debt types, including student loans, reached a nearly decade-high in late 2025. Although the share of borrowers falling into serious delinquency decreased in early 2026, the percentage of student loan balances at least 90 days past due increased.
Phil Crescenzo Jr. of NFM Lending highlighted that the end of extended forbearances, particularly post-COVID-19, means these payments will now strain borrower budgets. He noted that borrowers with multiple small loans are particularly vulnerable, as multiple 90-day delinquencies can significantly harm credit scores, potentially impacting mortgage approvals. Jane Mason, CEO of Clarifire, urged the mortgage industry to be more proactive in analyzing borrower credit histories and offering assistance before delinquencies occur, especially in high-cost areas like Florida with rising property insurance and taxes.