Key insights
- Millions of student loan borrowers must exit the SAVE plan, potentially impacting consumer spending. Borrowers need to choose new repayment plans to avoid being placed on a standard plan, which may not be suitable for everyone. The sunsetting of ICR and PAYE plans by 2028 adds further complexity. This shift could slightly reduce discretionary income, posing a minor headwind for consumer-driven sectors.
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Millions of federal student loan borrowers will need to leave their repayment plans in the coming months, and there are some pitfalls they should avoid in the process.
As of December 2025, almost 7.2 million borrowers were enrolled in the Saving on a Valuable Education Repayment plan. Since then, the federal courts nixed the SAVE plan, and the Department of Education said borrowers will need to leave the Biden-era income-driven repayment (IDR) plan.
Loan servicers will begin contacting borrowers after July 1 to tell them they have 90 days to pick another IDR. If they fail to do so in the allotted time frame, they'll be moved to a standard plan.
Borrowers still enrolled in the SAVE plan will need to leave soon or be placed on the standard repayment plan. While some might find the standard plan affordable, many SAVE borrowers will need to look for lower payments under another income-driven repayment plan, where monthly payments are based on income and family size.
For some borrowers, particularly those with high incomes or low student debt balances, standard plans may have lower monthly payments than any IDR plan. However, the standard plan may not be the right fit for all borrowers enrolled in the SAVE plan.
However, thanks to the One Big Beautiful Bill, the ICR and PAYE will be sunset by July 1, 2028, forcing borrowers on those plans to transfer again.
"Borrowers need to be thinking both short-term and long-term. So short term, make sure you can afford the payment so you don't default," said Betsy Mayotte, president of the Institute of Student Loan Advisors. "Long term, it's about paying the least amount out of your pocket over time."
"For some people, that means getting the lowest payment possible and gunning for forgiveness," she said. "And for some people, that means paying their loans off as aggressively as possible to reduce total interest costs."
Repayment plans work better for different borrowers depending on their income, loan balance, family size, and when they first took out their loans. Borrowers can calculate their monthly payments using the Department of Education's Loan Simulator.
However, the Department of Education's calculator doesn't yet show payments under the RAP plan. For now, borrowers can estimate their RAP payments using a calculator from the Institute of Student Loan Advisors.
The quickest way to leave the SAVE plan is to request a transfer via the Department of Education's Federal student aid site, studentaid.gov, Mayotte said.
Borrowers who allow the Department of Education or their servicer to obtain their income and family-size information from the IRS can be moved out of SAVE the next day, Scott Buchanan, executive director of the Student Loan Servicing Alliance, told Investopedia earlier this month.
Borrowers can also ask to leave SAVE through their loan servicer. Mayotte suggests this option for married couples where both spouses hold student loans.
"There are a couple of glitches with [the Department of Education's application] right now," Mayotte said. "If [a married couple with loans] both want to get on an IDR plan, ...they should apply directly to their loan servicer. Otherwise, the payment won't be calculated correctly between the two of them."
SAVE borrowers have not had to make payments for almost two years, while their repayment plan has been the subject of litigation. Factoring in the COVID-19 payment pause and subsequent grace periods, some SAVE borrowers haven't made a payment in more than six years.
Experts predict the already high student loan default rate could spike once SAVE borrowers leave and resume repayments. Borrowers who default can face hits to their credit scores and may eventually have their wages garnished if they don't resume repayments.
To prepare for repayment, SAVE borrowers should review their budget and use a loan simulator to see how payments will fit, Mayotte said.
"There are lifestyle creeps that may have happened in the last two years," Mayotte said. "If you can, move stuff around to make sure the payments are affordable."
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