Key facts
- Student-loan borrowers on the SAVE plan are facing shifting deadlines to select a new repayment plan.
- The Trump administration eliminated the SAVE plan, requiring borrowers to transition.
- Borrowers who do not select a new plan risk higher payment burdens.
- JPMorgan Chase Institute research indicates SAVE borrowers on a standard plan could see payment burdens rise from 3% to 12% of take-home income.
- Many borrowers have received 30-day final notices, extending their deadline by one month.
- Glitches in the transition process include incorrect billing amounts and erroneous notices.
Student-loan borrowers who were enrolled in the SAVE income-driven repayment plan are facing uncertainty and shifting deadlines as the Trump administration requires them to transition to a new repayment structure. The original deadline for many borrowers to select a new plan was September 29, after which they would be automatically placed on a standard plan with higher payments. However, many borrowers have reported receiving 30-day "final notices" in the weeks leading up to their deadline, effectively extending their transition period by one month.
The SAVE plan, which allowed for lower payments and a shorter path to debt relief, had over 7 million borrowers enrolled. The Trump administration's elimination of the plan has led to notifications being sent out on July 1, giving borrowers a 90-day window to switch.
Research from the JPMorgan Chase Institute highlights the potential financial strain on borrowers. Those moved to a standard plan could see their monthly payment burdens increase significantly, from approximately 3% of their take-home income to around 12%. The transition is expected to be challenging, especially for borrowers who have been in forbearance for over a year and may not be aware that payments are resuming. This could lead to some borrowers not re-enrolling in income-driven repayment (IDR) plans, even when it would lower their payments, potentially increasing their overall debt burden.
Adding to the confusion are various glitches reported by borrowers, including incorrect billing amounts, erroneous account status notices, and issues with payments counting toward loan forgiveness. The JPMorgan researchers warned that this transition could "create renewed delinquency risk" as millions resume payments after a pause, with many facing higher bills. Data from Federal Student Aid indicates that 9.3 million borrowers were already in default as of June 30, with an additional 1.5 million at risk of default in the coming six months.