A federal appeals court this week dealt a fatal blow to the most affordable federal student loan repayment plan, starting a countdown clock for more than 7 million borrowers to transition into a new plan and resume monthly payments.
Those borrowers are now left with two main questions: How long will that clock be ticking and what happens when the buzzer sounds?
The Saving on A Valuable Education, or SAVE, plan, a Biden-era repayment plan that offered significantly lower student loan payments than other available options, will come to an end after the 8th U.S. Circuit Court of Appeals ordered a lower court to approve a settlement agreement. A district judge, who had initially dismissed the lawsuit, signed off on the deal shortly after the appeals court order.
The ruling closes the book on a lengthy lawsuit and allows the Department of Education to move borrowers out of the SAVE plan and into other repayment plans. This will mean higher monthly payments for most borrowers.
“In the coming weeks, the Department will issue clear guidance on next steps for borrowers enrolled in the illegal SAVE Plan, including details regarding how borrowers can move into a legal repayment plan,” Education Undersecretary Nicholas Kent said in a statement provided to U.S. News.
In the meantime, borrowers remain in the same wait-and-see mode they’ve been in for months.
“The confusion certainly won’t stop until the department itself comes out and gives some sense of what is going to happen here,” says Michele Zampini, associate vice president of federal policy and advocacy at The Institute for College Access & Success. “Up until now, it has all been speculation and guesswork.”
As we await those details, here’s a look at the current status of the SAVE plan, what happened this week and what the coming transition may look like for borrowers. Yes, there will be some speculation and guesswork.
[Read: Best Private Student Loans.]
What Is the SAVE Plan and Am I in It?
Of course, you probably know which repayment plan you’re in. But SAVE borrowers haven’t owed a student loan bill for more than a year and a half, and experts say some of those enrolled in the plan have never made a student loan payment. So, it’s possible your student loan situation is a little fuzzy.
Here’s a quick rundown. The SAVE plan is one of a handful of federal student loan repayment options that base your monthly payment on your income, along with other factors such as family size. Basically, those with lower incomes pay less each month, with some people paying $0 per month. As with other income-driven repayment plans, SAVE borrowers can get their debts forgiven after they make a certain number of payments.
Rolled out by the Biden administration in 2023, SAVE was immediately greeted by grateful borrowers and state-led lawsuits because it offered much lower payments than any other repayment plan. A court paused parts of the plan in June 2024, at which point borrowers were put into forbearance, meaning they were not required to make monthly payments until the legal challenges were resolved. Those loans began accruing interest again in August 2025, although monthly payments still are not required.
Like many of the Republican-led states that sued Department of Education during the Biden administration, the Trump administration argues the SAVE plan unfairly burdens taxpayers while not holding borrowers accountable for their debts. The SAVE plan was already set to be phased out in July 2028 as part of a larger student loan overhaul in Trump’s One Big Beautiful Bill Act.
Wait, Am I Breaking the Law?!
No. The Trump administration is referring to the plan as “illegal,” not your enrollment in it. So you’re not breaking the law — at least not when it comes to your loans.
What Happened in the Courts? (In Normal Language, Please)
The SAVE plan has faced legal challenges from its inception, but a December settlement between the Department of Education and the state of Missouri appeared to signal its demise. All that was needed was a judge’s approval.
However, Judge John Ross of the U.S. District Court for the Eastern District of Missouri instead dismissed the lawsuit on Feb. 27, saying that with a new administration in office, the proposed settlement was now between two parties that didn’t disagree at all, and therefore a court wasn’t needed because there was no controversy.
The dismissal provided the slightest glimmer of hope to borrowers seeking to remain on the plan. The appeals court extinguished that hope with a two-sentence ruling earlier this week, ordering the lower court to approve the deal.
[Read: Best Student Loan Refinance Lenders.]
When Might I Be Forced to Move to a New Plan?
Timing is a big question. While the Trump administration might want to move people out of the SAVE plan as soon as possible, student loan experts say there are several reasons why they may give borrowers a longer exit ramp.
First, with more than 7 million people enrolled in SAVE, transitioning them all to another plan will be a huge undertaking for the Department of Education no matter how they do it. It will take time.
Second, the administration aims to launch its shiny new income-driven repayment plan, the Repayment Assistance Plan, in July. By forcing borrowers out of SAVE earlier, the administration would miss out on a chance to funnel millions of people into the plan it wants them to be in going forward. A quick deadline could also set up a scenario where borrowers move to a soon-to-be-phased-out plan only to have to apply to switch plans again shortly after.
“I think their goal is to do everything they can to get as many borrowers into RAP as possible,” says Zampini. “I can’t imagine that they would want to tell borrowers they have to transition out of SAVE before they at least open that new plan.”
On top of that, the transition is going to require one heck of an awareness campaign. Because forbearance has gone on for so long, it’s likely many borrowers haven’t logged into their student aid account in over a year. They may not even recognize the name of their loan servicer and ignore communications.
“It’s going to be a big problem,” says Abby Shafroth, managing director of advocacy at the National Consumer Law Center. “A lot of these borrowers haven’t made payments in a year and a half, some of them might not have frankly ever made a payment. They might not even know where to make the payment. They’re not going to be necessarily aware of what’s going on. It’s going to be a big communication challenge to actually reach those borrowers.”
Finally, experts say it’s possible the deadline could be pushed back further, especially if the administration is concerned about potential processing hiccups or backlash due to higher payments.
“If one is thinking politically, they may not want to move people out until after the midterm elections,” says Zampini.
[Read: Best Parent Student Loans: Parent PLUS and Private.]
Will I Automatically Get Moved to a New Plan?
Perhaps the biggest concern of consumer advocates surrounds how your new plan will be chosen.
In one scenario, the Department of Education would make you apply for your new income-driven repayment plan. Those who do nothing might placed in the standard plan, where monthly payments would likely be much higher. (Currently, those who don’t specifically pick a plan when they take out their loans are put in the standard plan.) The standard plan is a fixed-rate loan that functions like a typical loan, with payments determined by the amount you borrowed, your interest rate and the length of your repayment period.
“If they do that, then I would imagine suddenly millions of borrowers who hadn’t been billed in a year and half would suddenly have these huge bills coming at them out of nowhere and would be shocked and raise a lot of outrage,” says Shafroth. “I think there’s potential for a lot of backlash if they do that, but it’s a question of does the department care about that right now.”
Shafroth says she’s urging officials to instead use income data the department currently has on file to determine which new plan would be most affordable for each borrower and automatically place a borrower in that plan. Then the department would notify the borrower of the chosen plan and what their monthly payment would be. The borrower could then apply for a different plan if they’d prefer it.
“That would seem to be the best thing for borrowers,” she says. “And it would save the department and its servicers a whole bunch of headaches and the need to process millions and millions of repayment applications when they’ve already been struggling with backlogs.”
Will My Monthly Payments Go Up?
Most likely. Experts say in most cases if you move from SAVE to any of the other plans, you’ll be facing a higher monthly bill.
A TICAS analysis that examined the difference in monthly payments between SAVE and RAP for hypothetical borrowers with various incomes and family sizes found that the bill often jumped by more than $100 a month. In one example, a borrower with a family of four making $81,000 would see payments soar from $36 to $440.
Experts say the Income-Based Repayment plan may be the best alternative if you’re looking to switch plans now, because it is next most affordable and isn’t being phased out in two years. However, it would still result in an increase in payments for many borrowers.
What Should SAVE Borrowers Do Now?
It depends. There are some situations where you might want to go ahead and move to another plan now.
For example, if you can afford payments on the IBR plan, transitioning to that plan now would allow you to make progress toward reaching forgiveness and having your remaining debt canceled. Likewise, if your income is low and you qualified for $0 payments in SAVE, it’s possible you also will have $0 payments in IBR.
However, there’s no rush — at least not yet — to switch plans, so those who can’t afford payments in other plans should probably stay put.
“It really depends on whether someone is in a position to afford payments under one of the other plans,” says Zampini. “If so, then it would make sense for them to be proactive. But if someone is really in a position where that payment is just going to be beyond their capability, then I think holding as long as possible probably is the best option for them for now.”
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SAVE Student Loan Plan Is Dead: Answering Every Question About What Might Happen Next originally appeared on usnews.com