More than a quarter-million student loan borrowers in Illinois recently received an urgent email from federal education officials telling them they must choose a new repayment plan, and soon, as the most affordable option disappears July 1.
The Saving on a Valuable Education, or SAVE, plan began in early 2024 under former President Joe Biden. That year, nearly 8 million borrowers enrolled in the plan nationwide, including around 273,000 in Illinois, and many borrower advocates saw it as a step forward in tackling the student debt crisis. But several states challenged the plan, and their lawsuit led to its elimination.
Critics of that decision fear the end of the SAVE plan will hurt student borrowers who are already struggling to stay afloat as gas, groceries and rent prices rise. And they worry the change will especially affect Black borrowers, women and lower-income borrowers, who were expected to benefit the most from the plan, according to a report by the University of Pennsylvania.
“When you’re thinking about people on SAVE, it’s people who literally couldn’t afford other options,” said Alex Lundrigan, the federal policy manager at Young Invincibles, an organization that advocates for college students and recent graduates. “They’re choosing between loans and eating.”
The Chicago Sun-Times spoke with Lundrigan and another advocate for student borrowers to find out what Illinois borrowers should know about the upcoming changes and what steps they can take next.
Why is the SAVE plan ending?
Missouri and six other Republican-led states filed a lawsuit challenging the plan, claiming the Biden administration overreached in implementing it without congressional approval and that it was another attempt by the administration to cancel billions in student debt. The Biden administration paused payments for borrowers on the SAVE plan for nearly two years while the case worked its way through the courts. In March, a federal court approved a settlement that officially ended the SAVE plan.
Advocates for student borrowers worry the end of the SAVE plan will especially affect Black, low-income and female borrowers, as they were expected to benefit most from the more affordable repayment plan. In 2023, protesters outside the Supreme Court drew attention to the racial and gender disparities in student loan debt.
Jacquelyn Martin/AP
Student debt experts say the end of the SAVE plan, coupled with the rising cost of living, could make it much harder for some borrowers to repay their loans.
“I think it’s going to make the overall student debt crisis much larger,” said Natalia Abrams, president of the nonprofit Student Debt Crisis Center, which advocates for student loan borrowers. “We fear that we’ll see many more people default on their student loans, just purely from all this chaos and confusion.”
Many Illinois borrowers are already struggling to make their student loan payments. Across the state, more than 234,000 borrowers had missed nine months or more of payments and defaulted on their student loans as of December, according to the Federal Student Aid office.
When do I have to find a new plan?
Borrowers on the SAVE plan have likely already received at least one message from the U.S. Department of Education warning them that the SAVE plan is ending this summer.
But there’s still time to weigh the options and pick a new plan. Starting July 1, federal student loan servicers, like Nelnet, MOHELA and Aidvantage, will send their own notices letting borrowers know they have 90 days to select a new plan. Your deadline to choose a new plan will be included in that notice.
Lundrigan recommends keeping an eye on both your email and physical mailbox for important messages from loan servicers.
Borrowers can switch to a new plan at any time, but some may want to wait until the SAVE plan’s replacement, the new income-driven Repayment Assistance Plan, opens July 1.
What are the other repayment options?
There are four choices for SAVE plan borrowers. If you don’t pick one of these options, you will automatically be enrolled in one of two plans that are based on loan balance, not income, and that will likely cost more than other options.
The new Repayment Assistance Plan will be available starting July 1. This is similar to other income-based options, where payments range from 1% to 10% of your adjusted gross income. The more money you make, the higher the share of your income you’ll pay.
The existing Income-Based Repayment plan requires borrowers to pay 10% of their discretionary income for 20 years, if they took out their loans on or after July 1, 2014. For older loans, borrowers must pay the same percentage for 25 years. After that, the remaining loan balance is forgiven.
But the Income-Based Repayment plan won’t be an option for people taking out new loans after July 1 of this year, so keep that in mind if you’re planning to go back to school or consolidate old student debt.
The remaining two options, the Pay as You Earn plan and the Income-Contingent Repayment plan, will end by July 2028. You can still choose these plans, but you’ll have to switch your repayment plan again before they end in two years.
When you pick a plan, make sure you take the rest of your financial situation into account, like if you have Parent PLUS loans or are part of the Public Student Loan Forgiveness program.
What should borrowers know about the new Repayment Assistance Plan?
The new Repayment Assistance Plan is similar to other income-driven plans, but there are notable differences.
One of the biggest changes is that borrowers with low or no income must pay at least $10 each month. SAVE and other income-driven plans don’t have a minimum payment.
Borrowers also have to make payments for up to 30 years, after which their debt will be forgiven. That means borrowers on this plan will have to make payments for five to 10 years longer than other income-driven plans.
Another thing to be aware of is the “income cliff” that could leave borrowers on the hook for higher payments when they recertify their loans each year, Lundrigan said. Because of how the payment brackets are calculated, even a small increase in income could bump up your monthly payment significantly.
“For some people, that can be the difference between putting money in their savings or not,” Lundrigan said.
How do I choose a new repayment plan?
Lundrigan recommends starting by taking stock of your goals when it comes to paying down your student debt.
“Am I trying to just weather the storm, or am I comfortable and can afford a higher monthly payment to make progress on my loans?” Lundrigan said.
After that, it’s time to do some math. Abrams recommends using the Federal Student Aid loan simulator to understand your specific situation and get personalized comparisons.
“It’s such a case-by-case basis,” Abrams said. “I wish I could say [a certain plan] is best for everyone, but that’s just not the case. … That’s why everyone should start at the simulator.”
What assistance is available if I can’t afford payments on my new plan?
One option is putting your loans into forbearance, Lundrigan said. Forbearance allows borrowers to pause payments for up to nine months, which can buy time to catch up on other bills before resuming student loan payments.
“You’re kicking the can down the road in a sense,” Lundrigan said. But it can help if “you just need a little time to get some relief and get things in order.”
But there are strings attached. Loan interest still accrues while loans are in forbearance, and time spent in forbearance doesn’t count toward the required repayment timeline to get certain loans forgiven.
Still, forbearance is a better option than delinquency or default, Abrams said. Under those options, “pretty quickly, your credit gets hit.”
For more help, Lundrigan suggests reaching out to the New York-based Education Debt Consumer Assistance Program, which has experts available to answer questions about the end of the SAVE plan and other student borrowing topics.
Locally, the Illinois Student Assistance Commission offers loan repayment and forgiveness programs, including for teachers and behavioral health care professionals. The Illinois attorney general’s office Student Loan Helpline offers free resources to borrowers, too.
Mary Norkol covers higher education for the Chicago Sun-Times in partnership with Open Campus.