SAVE Plan Borrowers: What to Know Before Switching Income Driven Plans

Federal student loan borrowers enrolled in the SAVE plan need to act before interest starts accruing again on Aug. 1, 2025, since the program is being phased out and forbearance will eventually end for everyone still in it.

Why the SAVE Plan Is Going Away

The SAVE plan, formally known as Saving on a Valuable Education, has been tied up in litigation for months, and the Trump administration confirmed in July 2025 that interest will resume on SAVE balances starting Aug. 1. That does not mean payments are due immediately. Borrowers in SAVE forbearance will not be required to make payments until that forbearance actually ends, which the Department of Education has now scheduled for July 1, 2026. At that point, anyone still parked in SAVE gets a 90 day window to pick a new repayment plan.

The bigger structural change comes from the One Big Beautiful Bill Act, which orders the Education Department to shut down not just SAVE but also the Income Contingent Repayment (ICR) and Pay As You Earn (PAYE) plans. The original deadline was July 1, 2028, though the department has since moved its own internal timeline for SAVE up by two years. Borrowers left in ICR or PAYE when those plans disappear will be automatically shifted into a new option called the Repayment Assistance Plan, or RAP.

What Borrowers Can Do Right Now

The Department of Education is currently processing applications for three income driven repayment plans, and switching into one of them is the most direct way to keep progress toward forgiveness moving. Income Based Repayment (IBR) requires either 10% or 15% of discretionary income, spread over 20 or 25 years depending on when the loans were taken out, and payments never exceed what the standard 10 year plan would charge. The partial hardship requirement that used to gatekeep IBR has been dropped, so borrowers who were shut out before may now qualify.

ICR charges the lesser of 20% of discretionary income or a fixed 12 year payment adjusted for income, with a 25 year term. PAYE caps payments at 10% of discretionary income, never more than the standard plan amount, over a 20 year term. Forgiveness under ICR and PAYE has been paused, similar to SAVE, but payments made under any of the three still count toward eventual IDR forgiveness once a borrower enrolls in an IDR plan. IBR forgiveness was also paused temporarily so the department could correct payment records affected by the court injunction against SAVE, but as of April 2026 all IDR forgiveness processing is back up and running.

Borrowers can run the numbers through the Federal Student Aid office's Loan Simulator before deciding anything, then apply for a new plan by logging into their Federal Student Aid account.

Comparing the Repayment Plans

Parent PLUS Borrowers Face a Separate Deadline

The Big Beautiful Bill law adds a specific squeeze for parent PLUS borrowers. To keep access to IBR once the other plans vanish, they must consolidate their loans by July 1, 2026, and be enrolled in an IDR plan by July 1, 2028. Miss those dates and a parent PLUS borrower could lose access to income driven repayment altogether. Direct consolidation loans that repaid a parent PLUS loan, along with Federal Family Education Loans, will be shifted into IBR rather than RAP when ICR and PAYE go away.

How RAP Compares to Switching Now

RAP, once it launches in July 2026, will stretch payments over 30 years and calculate them from adjusted gross income rather than discretionary income, after subtracting $50 per dependent. It carries a minimum payment of $10 even for borrowers earning below the poverty line, a feature none of the other plans share. In exchange, RAP forgives any interest a borrower's payment does not cover and knocks up to $50 off the principal balance in months when the payment falls short of covering it.

Because RAP is based on AGI instead of discretionary income, it will likely cost more than IBR for a lot of borrowers, particularly those with lower earnings. Someone close to qualifying for forgiveness under an existing IDR plan or through Public Service Loan Forgiveness may be better off switching to IBR now and finishing the job rather than waiting to see how RAP shakes out. Borrowers with more time left on their loans might consider staying in SAVE until closer to the July 2026 deadline, then comparing RAP against IBR directly once RAP numbers are actually available.

There is a wrinkle worth watching for anyone who lets income based payments lapse because their earnings rose. Under IBR, borrowers can still reach forgiveness even after their payment amount catches up to the standard plan rate, but the larger monthly payment often means the balance gets paid off before the forgiveness clock runs out. Letting unpaid interest capitalize during that stretch generally costs more over time, so borrowers expecting income growth should weigh that tradeoff before committing to a plan.