More than 7 million student loan borrowers who have enrolled in a Biden era payment plan They will receive notices starting Friday with instructions to find a new plan to pay their debt, the Department of Education said.
Borrowers enrolled in the SAVE plan, which was struck down by a federal court earlier this month, have been in receivership since July 2024 while a legal battle plays out in court. Starting July 1, loan servicers will begin issuing notices giving borrowers 90 days to select a new payment plan.
Available payment plans will mean higher monthly payments for most of those borrowers.
The Department of Education called the plan “illegal” and said in a statement Friday that it relies on “the false promise of student loan forgiveness and artificially low monthly payments.”
“Today’s guidance, which all borrowers enrolled in the defunct SAVE Plan will receive over the next week, puts an end once and for all to the Biden Administration’s illegal student loan bailout agenda,” Deputy Secretary of Education Nicholas Kent said in a statement. “For years, borrowers have been trapped in a confusing cycle of uncertainty, but the Trump Administration’s policy is simple: If you take out a loan, you must pay it back.
When Alexis Arredondo graduated with a degree in microbiology from the University of California, Los Angeles, in 2024, he had difficulty finding full-time work in research or public health. Instead, he began working part-time and freelancing for nonprofit organizations in Southern California.
A first-generation college student, he took on approximately $40,000 in student debt and enrolled in the SAVE plan upon graduation. Now, he said, he has to choose between paying more per month, which would be difficult to afford, or a longer repayment period, which would increase the amount he pays in interest.
“It’s very difficult to know where I’m going to be able to get this money,” he told The Associated Press.
The SAVE plan was one of several initiatives launched by former President Joe Biden, a Democrat, to reduce Americans’ student debt burden.
The SAVE plan offered more lenient terms than other repayment plans, reducing loan payments to just 5% of the borrower’s discretionary income and offering forgiveness to borrowers who made payments for at least 10 years and originally borrowed $12,000 or less.
Although court challenges played out, borrowers enrolled in the plan were not required to make payments. But the debt balances began to accumulate interest after a court ruling last summer that blocked implementation of the SAVE plan, meaning some students will see increases in the amount they owe.
Borrowers have felt whiplash as challenges to the SAVE plan have reached the courts, said Mike Pierce, executive director of the Student Borrower Protection Center.
“Time and time again, education officials from both parties made promises to fix the broken student loan system and called student debt a crisis,” he told The Associated Press. “And yet today these same borrowers are being told it’s time to pay and they have no good options.”
Starting July 1, the Department of Education said a new income-based repayment plan called the Payment Assistance Plan will be an option for borrowers. The plan links monthly payments based on the borrower’s income and number of dependents with fixed terms and payment terms of between 10 and 25 years.
Last year, the Trump administration and Congress made several changes to student loan repayment options that will take effect over the next two years. For one thing, new student loans will no longer have the option to be deferred due to unemployment or economic hardship.
“You’re talking about a pressing current affordability crisis and you eliminated the most affordable plan option,” said Alexander Lundrigan, policy and advocacy manager at Young Invincibles, an advocacy group.
Earlier this month, the U.S. Court of Appeals for the Eighth Circuit struck down the SAVE plan. Notices from the Department of Education to borrowers starting Friday will direct them to enroll in a plan and resume payments as soon as this summer.
Loan servicers will contact borrowers in stages, with a new group hearing back every two weeks. Those who have been enrolled in the SAVE plan the longest will be the first to receive notices.