Trump Blocks SAVE Plan for 460K, Student Loan Chaos Grows/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ The Education Department will deny 460,000 income-driven repayment applications linked to the now-blocked SAVE Plan. Borrowers face confusion and higher payments amid legal battles and policy shifts. Advocates warn of long-term financial damage as Trump’s new loan framework takes shape.
Student Loan Repayment Shakeup: Quick Looks
- 460,000 applications for income-based repayment are being rejected.
- Denied borrowers chose the lowest payment plan, formerly the SAVE Plan.
- SAVE capped payments at 5%-10% of discretionary income.
- Courts blocked SAVE in June 2024, declaring it illegal.
- Trump’s new legislation introduces two new repayment plans, phasing out older ones.
- Borrowers currently in SAVE are in temporary forbearance.
- Advocates say this could lead to higher future payments.
- Borrowers are urged to reapply for alternative plans.
Deep Look: Student Loan Borrowers Denied Access to SAVE Repayment Plan
Nearly half a million federal student loan borrowers will be denied access to income-driven repayment under the now-blocked SAVE Plan, marking a significant shift in student loan policy under the Trump administration. Internal Education Department documents reveal that 460,000 borrowers—roughly 31% of the current 1.5 million repayment application backlog—will have their requests rejected.
These borrowers had selected the repayment option offering the lowest monthly payment, which automatically linked them to the Saving on a Valuable Education (SAVE) Plan. The Biden-era initiative was designed to cap monthly payments at 5% of discretionary income for undergraduate loans and 10% for graduate loans. However, the plan was deemed illegal by federal courts in June 2024, effectively halting its implementation.
An Education Department spokesperson confirmed the denials, stating, “Loan servicers cannot process these applications as SAVE is no longer an option, as it is illegal.”
Trump’s Overhaul of Repayment Policy
Under President Donald Trump’s sweeping reconciliation legislation, the student loan repayment system is being overhauled. Two new simplified repayment options are being introduced to replace the current complex array of plans. The administration has long criticized SAVE as a burden on taxpayers, arguing that a simplified structure would be fairer and more transparent.
This transition, however, has created significant confusion among borrowers. Many applicants may not have realized they were enrolling in the SAVE Plan by simply selecting the lowest payment amount available.
“It’s a bit of a struggle to understand whether borrowers were aware they were choosing a plan currently on hold,” said Scott Buchanan, executive director of the Student Loan Servicing Alliance, which represents loan servicers including MOHELA and Aidvantage. “The safest course may be for borrowers to just reapply under a different plan.”
Forbearance and Financial Fallout
Those previously enrolled in SAVE are currently in forbearance as the legal future of the program remains uncertain. The Department of Education has announced plans to transition these borrowers to other repayment options by fall 2025. In the meantime, however, no payments made during forbearance will count toward loan forgiveness milestones.
This delay could lead to higher monthly payments, particularly for borrowers whose income has increased over the past year.
“If their income has shifted, they could face much steeper payments when they resume,” warned Persis Yu, Deputy Executive Director of the Student Borrower Protection Center. “And since time in forbearance doesn’t count toward loan cancellation, they’ll ultimately pay more across the life of the loan.”
The Bigger Picture
This latest move comes as the Biden administration’s past efforts to address student debt through forgiveness and new repayment models continue to face legal and political resistance. Meanwhile, the Trump administration has taken a hardline stance on reforming federal student aid programs and has promoted accountability over forgiveness.
For borrowers, the path forward remains murky. With legal battles over SAVE ongoing and new plans still taking shape, millions are left navigating a repayment landscape in flux.
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