The SAVE Plan Is Gone. Why Are Millions of Borrowers Still Stuck?
For millions of student loan borrowers, the financial landscape shifted dramatically earlier this month. A federal appeals court formally ended the Saving on a Valuable Education (SAVE) plan, an income-driven repayment program from the Biden administration designed to lower monthly payments and accelerate debt forgiveness. The legal roadblock has left a critical question unanswered: what happens to the approximately 7.2 million people still enrolled?
Since July 2024, these borrowers have been in a administrative forbearance—a pause mandated by the courts—meaning no payments are due. However, a silent crisis is unfolding. Interest has been accruing on their debt since August 2024, and any voluntary payments made during this time do not count toward forgiveness under SAVE or the Public Service Loan Forgiveness (PSLF) program. While the current administration has not yet ended this pause, it is widely expected to do so, thrusting borrowers into a new, and potentially costly, repayment reality.
Why the Mass Exodus Hasn’t Happened
It may seem logical for borrowers to rush to a new plan, but several complex barriers are causing a dangerous logjam. “People are staying for a mix of fear, confusion, and systemic hurdles,” explains Nancy Nierman of the Education Debt Consumer Assistance Program in New York.
Key reasons include:
- Payment Shock Fear: Borrowers know that under the next-best available plan, the Income-Based Repayment (IBR) plan, their monthly bills could significantly increase. SAVE capped payments at 5% of discretionary income; IBR uses 10% (or 15% for some older loans). The prospect of a payment doubling is daunting for those on tight budgets.
- Status Confusion: The legal limbo has created widespread uncertainty. Many borrowers are unsure if SAVE is truly gone, if they can switch, or if switching now is even allowed.
- Application Backlog: The U.S. Department of Education has a massive backlog of pending applications for new repayment plans. Some borrowers who applied have seen their requests denied or stalled, leaving them with no active plan and no clear path forward.
The High Cost of Inaction
Remaining in the SAVE forbearance is not a neutral, cost-free holding pattern. The consequences are financial and measurable.
“Their loan debt is quietly growing, and they are not making progress towards any loan forgiveness,” says Scott Buchanan of the Student Loan Servicing Alliance, which represents federal loan servicers.
Consider the numbers. The typical borrower in SAVE holds a balance of about $57,000 with an average interest rate near 6.7%, according to higher education expert Mark Kantrowitz. With interest accruing since August, that debt has already ballooned by over $2,500 in just a few months. This capitalized interest is added to the principal balance, meaning borrowers will then pay interest on the interest—a compounding effect that makes the loan more expensive over time.
Furthermore, every month spent in this limbo is a month of zero progress toward any forgiveness timeline. For those pursuing PSLF, these months do not count toward the required 120 qualifying payments.
Act Now: Navigating the Transition
Experts are unanimous: waiting for the forbearance to be forcibly ended is the riskiest strategy. The primary reason is the processing bottleneck.
“With 7.2 million borrowers filing an income-driven repayment plan request, the Department is unlikely to process them quickly,” Kantrowitz warns. “Borrowers who file the form now will be at the front of the list.” By acting proactively, borrowers can avoid a scenario where the forbearance ends, their application is still pending, and they are forced into an expensive, non-income-driven repayment plan (like the 10-year Standard plan) while they wait.
For those worried about affordability under IBR, there is critical nuance. While the payment percentage is higher, the calculation is based on income and family size. Very-low-income borrowers could still see a nominal payment—Kantrowitz calculates it could be as low as $13 per month for some. The official Federal Student Aid Loan Simulator is the most reliable tool to model your specific situation under IBR and other plans.
Finally, explore all pause options. If you have Direct Subsidized loans and are unemployed, you may qualify for an unemployment deferment, which pauses payments without interest accrual. If your application for a new plan was denied, submit a corrected or new application immediately.
The end of SAVE is a pivotal moment for millions. The choice is clear: proactively seek a new, active repayment plan to stop the silent growth of debt and restart the clock on forgiveness, or risk a larger, more unmanageable balance later.
