President Donald Trump’s student loan reforms are taking effect, leaving federal borrowers with a reshaped set of repayment options.
The One Big Beautiful Bill Act created two new payment plans, which were introduced on July 1. At the same time, the Department of Education has begun sending notices to millions of borrowers about the defunct Savings on a Valuable Education (SAVE) program, giving them 90 days to switch to a different plan. For many, that will likely result in higher monthly payments.
Amid the wave of regulatory changes, experts tell Money that borrowers – especially those in SAVE – need to plan strategies now to ensure they are enrolled in the best program to repay their long-term goals, whether that’s getting the lowest monthly payment possible or taking advantage of loan forgiveness.
“The biggest mistake I see is borrowers not doing anything with their student loans,” says Glenn Sanger-Hodgson, an advisor at Student Loan Planner.
“This is mainly those in the SAVE program who are waiting to be foreclosed on but also includes borrowers who chose a different repayment plan years ago and who have recently inspected vehicles,” he adds.
The clock lends them to SAVE
After years of legal battles, the SAVE program was officially struck down in court in March. For months, Trump’s Department of Education has been encouraging SAVE borrowers to switch to another program and start making payments. But many borrowers decided to hold on as long as possible.
That’s because they didn’t have to make payments from July 2024, when borrowers were forgiven while court cases were pending.
Last summer, interest started accruing on SAVE loans again – but payments remained frozen. Despite this encouragement, many borrowers became angry. According to government data, about 7 million borrowers remained in the program as of the end of June.
Now the Department of Education has started sending 90-day notices to SAVE borrowers with the conclusion: Switch from SAVE or we will switch you.
“Based on Department of Ed guidelines, if you don’t pay attention, they will put you in the regular program,” said Betsy Mayotte, president of the Institute of Student Loan Advisors (TISLA). “And that will be – for many people – very expensive.”
Plus, you lose potential progress toward loan forgiveness by defaulting on the program, according to Adam Minsky, a student loan attorney. (Even if you make voluntary payments during the LINGA forbearance period, they are not included in your payment history for forbearance.)
Not everyone at SAVE got the 90-day notice, either, Minsky said. The department is sending them in waves, and you may not get a warning until the end of the year.
To ensure you receive timely notification, be sure to keep your contact information up-to-date with your loan officer and on StudentAid.gov.
In most cases, experts say, there is no reason to wait for the letter. Interest is already increasing.
“Whether you received the notice or not,” Mayotte said, “you should check what programs you qualify for and see which one best fits your current budget and your long-term student loan repayment plan.”
He notes that the only situations where it makes sense to wait are when borrowers can’t afford the monthly payments or need to prioritize high-interest loans before starting repayments.
Toeing the line for potential legal backlash, as some social media lenders hope, is not a smart strategy, experts warn.
“SAVE doesn’t just come back,” he said, adding a harsh reality borrowers should be prepared for: “For most people, they’re not going to be able to find a plan that’s even close to what their SAVE payment was.”
All that said, Sanger-Hodgson says not to panic. There is still plenty of time to find the best course of action.
How to find the right payment plan
If you have a federal loan issued before July 1, you have several payment options available that new borrowers don’t have access to. Two of these options are income repayment plans (IDR) that expire in 2028, but they are still accepting applications as long as all your loans are repaid before July. Additionally, you can join the newly created Recovery Assistance Program, an income-driven program created by the Trump administration.
Here is a summary.
‘Fixed payment’ plans
Fixed payment plans are payment schedules designed to pay off your loan over a fixed period of time, usually 10 to 25 years. Older loans retain their eligibility for “regular,” “extended” and “graduate” programs.
- Standard payment plan: Payments are a fixed amount based on a 10-year payment schedule.
- Extended payment plan: For larger loans ($30,000 or more), payments are a fixed amount based on a 25-year payment schedule. (Consolidated loans can be for up to 30 years.)
- Graduate program: Payments start low and increase typically every two years based on a 10- or 25-year payment schedule. (Consolidated loans can be for up to 30 years.)
Mayotte notes that these plans are non-forgiving, and payments made on them don’t always count toward your payment history if you were to switch to a plan with a forgiving component. However, they can result in lower monthly payments compared to income-driven plans depending on your income and loan balance.
New loans (defined as those issued after 1 July 2026) do not have access to these options. The new installment plan is an automatic option, which sets fixed payments over a 10- to 25-year payment schedule based on the loan amount.
Income-driven payment plans
As the name suggests, income-driven payment plans base your monthly payments on your income, usually between 10% and 20% of your so-called discretionary income. Discretionary income is the amount left over after basic expenses are calculated (basically, subtracting the portion of your state’s poverty line from your annual payment).
These programs also offer loan forgiveness for outstanding debt after making timely payments for a certain period of time.
- Income Based Repayment (IBR): For loans taken out between July 2014 and July 2026, payments are based on 10% of discretionary income. Any remaining balance after 20 years of on-time payments is forgiven. For loans taken out before July 2014, payments are based on 15% of discretionary income, and balances are forgiven after 25 years of repayment. Payments are limited, so they will not exceed the amount you would pay under a standard 10-year payment plan. This program will do it not sunset in 2028.
- Income-Contingent Repayment (ICR): Monthly payments are based on 20% of discretionary income, and remaining balances are forgiven after 25 years of repayment. This program I will sunset in July 2028.
- PAYE: Monthly payments are based on 10% of discretionary income, and remaining balances are forgiven after 20 years of payments. Payments are limited and will not exceed the amount you would pay under a standard 10-year payment plan. This program I will sunset in July 2028 again.
- Repayment Assistance Plan (RAP): RAP bases payments on adjusted gross income instead of income above the protected limit. The rate increases from 1% to 10% as income increases, with a minimum payment of $10 and a monthly reduction of $50 for each eligible loyal customer. After 30 years of on-time payments, the outstanding balance is forgiven. If the monthly payment amount does not include the loan interest, the remaining interest is waived so that the balance does not grow over time. Both new and old student borrowers can sign up. Parent borrowers are not eligible for RAP.
Each program has its own unique pros and cons, and experts recommend using a student loan repayment calculator to find the best option for your situation. The Department of Education has its own calculator. Student loan advice groups like TISLA and Student Loan Planner offer their free calculations too.
Factor in Public Service Loan Forgiveness
Another consideration for the repayment plan is whether your goal is to qualify for Public Service Loan Forgiveness (PSLF).
PSLF extends forgiveness to borrowers who work for the government or an eligible non-profit organization for at least 10 years and make 120 periodic payments on an eligible repayment plan. All income-driven payment plans (including RAP, IBR, ICR and PAYE) are considered eligible plans, as is the standard 10-year payment plan. However, some fixed payment plans do not count towards the PSLF.
But forgiveness should not be the only consideration.
“I want to remind people that we are all caught up in the word forgiveness,” said Mayotte. “But the name of the game is not forgiveness – you pay less in your pocket in the long run.”
