Student Loan Payments Set to Rise After SAVE Plan Ends

The Biden administration’s Saving on a Valuable Education (SAVE) plan provided critical relief to millions of federal student loan borrowers by capping monthly payments based on income, with many paying nothing. However, with the SAVE plan officially struck down, borrowers enrolled in it should prepare for increased monthly payments once repayment resumes.

Experts do not expect payments to restart before December 2024, and some predict repayments may not be required until mid-2026. Regardless of timing, the end of SAVE means many borrowers will face higher monthly bills.

Repayment Options After SAVE Ends

With SAVE off the table, borrowers must switch to alternative income-driven repayment (IDR) plans or standard repayment options. The main IDR plans include Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Income-Contingent Repayment (ICR). Each has unique eligibility criteria and repayment formulas, often resulting in higher payments than SAVE.

Non-income-based plans include Standard, Graduated, and Extended Repayment. For borrowers pursuing Public Service Loan Forgiveness (PSLF), an income-driven plan is required.

How Much Will Payments Increase?

Using a typical example of a single borrower earning $60,000 annually with a $30,000 loan at 6.53% interest, monthly payments under SAVE would be about $217 or less. Under other plans, payments could range from $70 to $370 monthly, depending on the plan chosen.

For example, the Income-Contingent Repayment plan sets payments at 20% of discretionary income or a fixed 12-year plan, whichever is less, resulting in a $290 monthly payment and total repayment of $43,919 over 17 years.

Income-Based Repayment and Pay As You Earn plans both set payments at 10% of discretionary income, capped at the standard 10-year plan payment, with monthly payments around $312 and total payments near $41,473 over 11 years.

Standard repayment fixes payments over 10 years at $341 monthly, while Graduated Repayment starts lower at $196 and increases to $589, totaling $43,916. Extended Repayment spreads payments over 25 years at $203 monthly but doubles total repayment to $60,937.

Should You Refinance Your Federal Student Loans?

Refinancing with a private lender may offer lower interest rates for creditworthy borrowers but generally is not recommended for federal loan holders relying on benefits like income-driven plans, payment pauses, or Public Service Loan Forgiveness. Refinancing forfeits these protections and is irreversible.

Preparing for Higher Student Loan Payments

Since many borrowers have not made payments since March 2020, the resumption of payments could strain monthly budgets. Experts recommend using the Department of Education’s loan simulator to estimate payments, consulting nonprofit advisors for plan selection, exploring tax strategies to reduce adjusted gross income, and reviewing personal finances to manage costs effectively.