Nicholas Kent, a U.S. Department of Education official, highlighted that nearly 7 million federal student loan borrowers remain in the SAVE repayment plan, which is now defunct due to legal challenges. Borrowers in this plan are not making progress towards loan forgiveness and are seeing their debts increase as interest accrues.
Since the program's introduction in 2023, only about 300,000 borrowers have exited, leaving many at risk of unaffordable payments once the plan is terminated. The Education Department has indicated that borrowers will have a 90-day window to transition to a new repayment option, but they may face delays due to a backlog of over 530,000 applications for new plans.
If borrowers do not leave SAVE, they could be moved to the Standard Repayment Plan, which may be unaffordable for many, leading to potential delinquency and default. The typical SAVE enrollee has a loan balance of approximately $57,000 with a 6.7% interest rate, resulting in an increase of over $2,500 in debt since interest resumed in August.
This situation underscores the urgency for borrowers to act before the impending deadlines