Student loan borrowers who enroll in autopay could also qualify for a 1% interest rate discount, with the lower rate being in effect till June 30, 2028|jeco|CC BY-NC-SA 2.0
The Department of Education recently announced a three-month extension to its September 29 deadline for federal student loan borrowers to choose a new repayment plan.
More than 7 million borrowers had to choose a new repayment plan as the Trump administration ended the SAVE (Saving on a Valuable Education) program introduced by former President Joe Biden.
The Education Department started sending notifications on July 1, giving borrowers 90 days (until the end of September) to switch. However, the new extension now gives them until December 31.
Student loan borrowers who enroll in autopay could also qualify for a 1% interest rate discount, with the lower rate being in effect till June 30, 2028.
Borrowers who fail to act will automatically move to the new Tiered Standard Repayment Plan, which could lead to higher monthly payments.
Why is the plan ending?
The SAVE plan, introduced during the Biden administration, reduced monthly payments by linking them to borrowers’ income and family size. Some even qualified for $0 monthly payments.
However, the program ended after a federal appeals court ruled against it following a legal challenge by Republican-led states.
Many borrowers who have already switched are seeing much larger monthly bills, making it harder to save money or cover household expenses.
About 50% have moved to the Income-Based Repayment (IBR) plan, while 30% chose the new Repayment Assistance Plan (RAP), which starts payments at $10 a month and forgives remaining balances after 30 years if borrowers meet the requirements.
Education officials are urging borrowers to review their repayment options before the deadline to avoid automatic enrollment and unexpected increases in monthly loan payments.