More than 7 million federal student loan borrowers enrolled in the Biden-era Saving on a Valuable Education (SAVE) plan will soon be forced to switch to a new repayment option, as the Department of Education moves to wind down the program following a legal defeat.
The department announced in December it had reached an agreement with Missouri to end the SAVE plan, which was launched in 2023 and designed to cap monthly payments based on income and family size, sometimes as low as zero. The plan faced immediate legal challenges from seven Republican-led states, including Missouri, home to student loan servicer MOHELA. An appeals court blocked the plan last year, ruling the Education Department exceeded its authority under the Biden administration.
Payments for SAVE enrollees have been paused since July 2024 due to litigation, though interest has been accruing since August 2025. Borrowers now face a critical July 1 deadline to choose a new path.
What Happens on July 1?
Starting July 1, borrowers will receive notices requiring them to select a new repayment plan. If they fail to act, they will automatically be enrolled in one of two new options: the Repayment Assistance Plan (RAP) or the Tiered Standard Plan.
Under RAP, borrowers must make 30 years of payments before any loan forgiveness, with monthly amounts tied to income and dependents. The Tiered Standard Plan extends loan terms from 10 to 25 years depending on the loan balance. Either option could raise monthly payments by hundreds of dollars, according to earlier reporting by The Hill.
After July 1, RAP and the Tiered Standard Plan will be the only repayment options available for new federal student loans.
Are There Alternatives?
Borrowers not taking out new loans can still opt for the Income-Based Repayment Plan (IBR), which caps payments at 10% of discretionary income over 20 years and never exceeds the 10-year Standard Repayment amount. However, IBR is unavailable for certain parent loans, including Direct PLUS Loans and consolidation loans that repaid PLUS loans. Federal Perkins Loans are eligible only if consolidated.
Two additional plans—Pay as You Earn (PAYE) and Income-Contingent Repayment (ICR)—are being phased out by 2028. Borrowers can only enroll in PAYE or ICR if their payments under RAP or IBR would be higher. The Federal Student Aid Office offers a comparison tool online.
Broader Loan Changes Loom
The July 1 changes also include new caps on graduate student borrowing under the One Big Beautiful Bill Act. Graduate students can borrow up to $20,500 annually and $100,000 total, while professional students face limits of $50,000 per year and $200,000 cumulatively. The Graduate PLUS program, which previously allowed unlimited unsubsidized loans, will be phased out.
More than two dozen states and the District of Columbia have sued over these loan limits, arguing they will harm access to higher education. The legal challenge adds another layer of uncertainty to an already turbulent student loan landscape.
For borrowers, the clock is ticking. With automatic enrollment looming and payments set to resume, millions face stark financial choices. As the political battle over student debt continues, the end of the SAVE plan marks a major shift in federal policy.
