More than seven million borrowers will need to change repayment plans for federal student loans.
The Saving on a Valuable Education (SAVE) plan, a Biden-era initiative meant to provide lower monthly payments and a faster pathway to loan forgiveness, has faced legal challenges since its introduction in 2023.
The U.S. Department of Education announced a settlementDec. 9, marking a final nail in the coffin for the plan.
Now, the department will no longer admit new borrowers into the plan and will move SAVE borrowers onto other repayment plans.No deadline has been set for selecting a new plan.
“The department will begin direct outreach to impacted borrowers to provide guidance about how to repay their student loans in the coming weeks,” it said.
Protect Borrowers, a nonprofit focused on the debt crisis, reports about 147,800 people in Indiana are enrolled in the SAVE plan. In all, Hoosiers owe more than$30 billion in federal student loans, according to the Department of Education.
SAVE plan borrowers haven’t been required to make payments since July 2024, but interest began accruing in August.
The department encouraged borrowers to use its Loan Simulator, though it hasn’t yet been updated with changes from the One Big Beautiful Bill Act.
Borrowers can choose between standard plans or income-driven repayment plans.
The standard plan is the default plan.Generally, borrowers would pay fixed monthly rates over 10 years.
Income-driven repayment plans are based on a borrower’s income and family size. These plans usually have lower monthly rates, though they may accrue more interest over time than standard plans. Borrowers must submit an application to the Federal Student Aid office to be switched to an income-driven repayment plan.
Borrowers looking to pause repayment can apply for a forbearance or deference, though interest will still apply to their loans.
