Student loan borrowers enrolled in the SAVE repayment plan have a decision to make.  Since last July, over 8 million student loan borrowers have been placed in a national forbearance program due to the SAVE lawsuit.  Starting August 1, 2025, SAVE plan borrowers will be charged interest on the loan in forbearance.  This article outlines the options available to SAVE borrowers due to the new interest rate rule change.

These borrowers were unable to make payments and were not charged any interest during this period.  They also could not earn any loan forgiveness credits during this time since an on-time payment is required to earn a credit month for both Public Service Loan Forgiveness (PSLF) and Income-Driven Repayment (IDR) Forgiveness.

SAVE Plan Background

The SAVE Repayment plan was developed and implemented by the Biden Administration as part of his campaign promise to improve loan repayment and student loan forgiveness programs.  It was announced just after the Supreme Court denied his one-time forgiveness plan.  They reasoned that decision because it would cost taxpayers too much money.  A $400 billion program should require Congressional approval, which it did not have.

The SAVE Plan was projected to cost taxpayers approximately the same, if not more, since loopholes were discovered after implementation.  As with the one-time forgiveness plan, it needed to work its way through the court system, but was pushed back at the Appellate level based on the Supreme Court’s prior decision on the one-time forgiveness.

The SAVE Program became available in August 2023, and borrowers could enroll while it was being processed through the court system.  It was the most generous IDR method available in comparison to the existing IDR methods.  This payment reduction is why over 8 million borrowers enrolled.  There were two phases of the SAVE implementation: the first phase began on October 1, 2023, and the second phase was planned to commence on July 1, 2024.

In late June 2024, the court system required the Department of Education (DOE) to halt all SAVE-related payment and forgiveness activity.  This legal action required these borrowers to be placed in the national forbearance by the DOE.  The final ruling in the lawsuit has not been issued, so borrowers remain in a state of limbo.  In May, the DOE reopened the other IDR processing system so that some borrowers could change plans and resume payments.

SAVE Borrowers Will Be Charged Interest Starting August 1, 2025

On July 9, 2025, the DOE announced that all SAVE borrowers will be charged interest starting August 1, 2025.  This announcement will end the non-interest benefit of the national forbearance, but will still allow borrowers to avoid payments.  The announcement was unexpected and will require SAVE borrowers to review their current options to determine which is best for them.

Here is a list of questions to consider when reviewing your SAVE options.  This decision will be unique to each borrower based on their current financial situation, loan structure, and other financial goals.

• Am I pursuing student loan forgiveness, either PSLF or IDR?
• Can I afford another IDR or fixed method that is available?
• Why did my IDR monthly payment increase so much?
• Will the type and date of my federal student loan affect my options?
• When will repayment begin?
• Can I stay enrolled in SAVE?
• Will the new repayment methods be available as an option?

SAVE Conversion Question 1: Am I pursuing student loan forgiveness, either PSLF or IDR?

If you are a borrower pursuing PSLF or IDR Forgiveness, one of the requirements is to make on-time payments to earn a credit month.  Under the SAVE national forbearance, payments cannot be made, so that no credit months can be earned toward forgiveness.  This benefit alone may be a reason to transition out of SAVE.

If you stay in SAVE Forbearance, you can still have no payment, but in most cases, your future payments will be higher, assuming your income increases in future years.  In both cases, if you opt to delay payment, your forgiveness amount will be higher.  For PSLF borrowers, this will not affect your decision.  However, for those pursuing IDR forgiveness, the interest charge will be added to the forgiven amount.  As a result, the tax due at forgiveness will be higher.

For most borrowers pursuing loan forgiveness, opting out of the SAVE Forbearance will result in a better outcome than staying in SAVE.

 SAVE Conversion Question 2: Can I afford another IDR or fixed method that is available?

Before making any decision, all SAVE borrowers will need to analyze which repayment method works best for them and is affordable.  Will consolidation be beneficial?  What income will be used in changing repayment methods?  How will the new repayment option impact my decision?  This analysis needs to be done so that the right decision can be made for both the short and long term.  A PayForEd-trained advisor can help you navigate that decision.

All student loan borrowers are currently in a transition period due to the new laws.  This transition is expected to be completed by June 30, 2028.  The outcome of the SAVE lawsuit may result in additional restrictions that are not yet defined.  Having the most flexibility should be part of your plan.

SAVE Conversion Question 3: Why did my IDR monthly payment increase so much?

If you decide to change repayment methods and select an alternative IDR option, be aware that your monthly payment may increase significantly.  The SAVE program had a very generous formula and lowered your previous monthly payment to start.  This benefit is why 8 million borrowers made the change.

For most borrowers, the second reason was not explained or realized.  During the COVID-19 pandemic and its multiple extensions, IDR borrowers’ income was not recertified.  In many cases, the income used in the SAVE conversion was based on income from 2019 or earlier.  If you change IDR methods, the change process will require the borrower to recertify their income, which must be from the most recent tax return, W-2, or pay stub.  This income information must be in PDF file format and uploaded to the online application.

Depending on your marital status, filing married and separate may be a benefit.  The DOE is now integrated with the IRS data.  Additional tax planning may be required to lower your payment, especially if you have children.

SAVE Conversion Question 4: Will the type and date of my federal student loan affect my options?

The Federal Student Loan repayment process is complex.  One of the primary factors in determining which IDR option is best is your debt structure.  The type of loan and the date it was taken will dictate your loan repayment options.

As stated above, borrowers in repayment will be in transition until June 30, 2028.  The Entire loan repayment system is transitioning from a 9-repayment option system to a system of 2 or 3 options, depending on your repayment enrollment as of July 1, 2026.  Understanding your federal debt structure will help you make informed decisions now and in the future.

SAVE Conversion Question 5: When Will Repayment Begin?

There is a current backlog of student loan repayment applications due to the year-long loan SAVE Halt.  Since the courts halted the processing of IDR repayment applications and consolidations, a backlog of approximately 2 million applications has developed.  The DOE partially created this backlog by not giving proper advice on processing.  Many borrowers were instructed to apply, but the DOE were not processing them.

In mid-May, the DOE reopened the processing of the IDR application.  When the processing restarted, it decided to process last in, first out.  This means the new applications will be processed first, and payment may start shortly after.  The turnaround is approximately three weeks, so you should plan to begin making payments promptly if your application is successful.

SAVE Conversion Question 6: Can I Stay Enrolled In SAVE?

Borrowers enrolled in the SAVE program can remain in the National Forbearance and wait for the courts to make their decision.  It is expected shortly, but that has been the topic of discussion since the start of the year.  The most significant difference is that the loan will begin to accrue interest.  It is also unclear if an automatic default conversion will happen.

This automatic change did happen with the initial rollout of SAVE.  Borrowers in REPAYE were automatically enrolled in SAVE without an option.  The risk here is that the borrower could be placed in a method that is not the best option and still needs to undergo the IDR change process.  In most cases, you should conduct the analysis and initiate the conversion process now to avoid this possibility, as it could default to a more expensive plan.

SAVE Conversion Question 7: Will the new repayment methods be available as an option?

The new repayment methods will not be available until July 1, 2026.  You must be enrolled in the best IDR option before that date, as it will impact your options under the new methods.  If you are not enrolled in a legacy IDR method, you will not be able to access the Income-Based Repayment (IBR) methods.

The IBR method has a very different calculation from the new Repayment Assistance Plan (RAP).  Each method has its benefits, and the best decision will depend on several factors.  What is most important is that you are in the right spot before June 30, 2026, so you have access to all the options.  I would recommend that you are making payments in the proper plan before June 30th.

Borrowers who incur federal student loan debt after July 1, 2026, will not have access to the Income Based Repayment or IBR methods.  Any federal student loans issued after July 1, 2026, will only have access to the new Standard option and the RAP methods.

SAVE Borrower Options Summary

SAVE borrowers will need to evaluate their options now that the National Forbearance no-interest benefit is set to end on August 1, 2025.  I recommend that they analyze their options for the next 12 to 36 months, as all IDR users will be in a similar situation.

For borrowers pursuing any federal loan forgiveness benefit, it is most likely beneficial to start repayment now so that you can earn credit months toward forgiveness.  Many individuals may face multiple transitions and payment changes due to the implementation of the new repayment rules.  PayForEd and its trained advisors can help you navigate these complicated decisions.