Student loan borrowers on the now defunct federal SAVE plan now face a deadline for selecting a new repayment plan.
If a borrower doesn’t act by the deadline later this year, they will be automatically switched to a new plan.
In a March 27 announcement, the U.S. Department of Education (the Department) said it is now issuing guidance to all borrowers enrolled in the ‘Saving on a Valuable Education’ (SAVE) Plan, directing them to exit the plan and enter a different federal student loan repayment plan. The guidance is being sent to the 7.5 million borrowers who enrolled in the SAVE Plan.
Earlier this year, a court ended the SAVE Plan by approving a settlement between the Department and the State of Missouri, which was announced in December. As part of the joint settlement, the Department said it will not enroll any new borrowers in the SAVE Plan, deny any pending applications, and move all SAVE Plan borrowers into legal repayment plans.
“Today’s guidance, which every borrower enrolled in the defunct SAVE Plan will receive over the next week, puts the Biden Administration’s illegal student loan bailout agenda to rest once and for all,” said Under Secretary of Education Nicholas Kent. “For years, borrowers have been caught 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. Borrowers currently enrolled in the illegal SAVE Plan will be given at least 90 days to enter a legal repayment plan of their choice, including the new Repayment Assistance Plan, which will launch on July 1.”
In the guidance, the Department provides information on how borrowers can enroll in a new, legal federal student loan repayment plan and previews upcoming changes to student loan repayment options.
Starting on July 1, federal loan servicers will begin issuing notices to borrowers, instructing them to exit the SAVE Plan and enroll in a new repayment plan within 90 days. Borrowers who do not transition plans within the 90-day period communicated by their servicer will be automatically enrolled into either the Standard Repayment Plan, or the new Tiered Standard Plan that will be available beginning July 1. Servicers will notify borrowers of their specific 90-day deadline.
