As President Donald Trump enters his second term, the future of the Saving on a Valuable Education (SAVE) repayment plan is hanging in the balance. The plan, which was introduced during the Biden administration, was designed to help student loan borrowers by offering affordable, income-driven repayment options. But with a potential policy shift on the horizon, borrowers are wondering whether the program will be repealed—and what that could mean for their monthly payments.
What Is the SAVE Plan, and Why Is It at Risk?
The SAVE plan was launched to make student loan repayment more manageable for low- and middle-income borrowers by capping monthly payments at a percentage of discretionary income and limiting interest accrual. However, with the Trump administration in office, there’s growing concern that the program could be repealed or significantly altered.
The SAVE plan is currently facing legal challenges, and many experts believe the administration may not defend it in court. Jessica Thompson, senior vice president at The Institute for College Access & Success, suggests that the Trump administration is unlikely to support the program as it was originally designed.
What Happens if the SAVE Plan Is Repealed?
If the Trump administration successfully rolls back the SAVE plan, borrowers could face several challenges:
- Higher monthly payments: Without the plan’s income caps, borrowers—particularly those with lower incomes—could see their payments increase significantly.
- More interest accumulation: The SAVE plan prevents unpaid interest from piling up if borrowers make their minimum payments. Repealing it could lead to ballooning loan balances over time.
- Longer forgiveness timelines: The plan is designed to forgive remaining balances after 20 or 25 years of qualifying payments, but a repeal could extend that timeline or make forgiveness harder to achieve.
- Widening financial gaps: Experts warn that repealing the plan could disproportionately affect minority borrowers and those with lower incomes, potentially worsening existing wealth disparities.
What Are Your Options if the SAVE Plan Is Canceled?
Borrowers who depend on the SAVE plan should explore alternative options, such as:
- Pay As You Earn (PAYE): This plan caps monthly payments at 10% of discretionary income and offers forgiveness after 20 years of payments.
- Revised Pay As You Earn (REPAYE): Similar to PAYE, this plan is available to more borrowers but has different forgiveness and interest rules.
While these options may not be as generous as SAVE, they can still provide relief to those struggling with repayment.
What Borrowers Should Do Now
- Stay informed: Keep track of policy updates through reliable news sources and the Department of Education’s website.
- Contact your loan servicer: Your loan servicer can help you explore repayment options and ensure you’re on the best plan for your situation.
- Consider financial counselling: Consulting a financial advisor can help you navigate any changes and make informed decisions about your student loans.
