Student Loans: Update on Major Change Coming This Month

Student loan borrowers on the SAVE plan could be dealing with a major change this month.
While borrowers under the Biden-era plan have been in limbo because of legal challenges, the resolution to plan litigation is likely to be announced by next week.
Why It Matters
President Donald Trump’s One Big, Beautiful Bill Act opted to phase out SAVE by July 1, 2028, but borrowers hoped to stay on the plan for another two-plus years. A decision is likely arriving in just days. The plan allowed borrowers more affordable payment options and student loan forgiveness in less than 20 years in many cases.
What To Know
While 8 million borrowers were enrolled in SAVE, they were put in involuntary forbearance for 15 months because of the ongoing litigation.
“You are in a general forbearance, unless you obtained a different status [for example, deferment], because your loan servicer is not currently able to bill you at an amount required by the court injunction,” the Education Department said in guidance for SAVE plan borrowers affected by the litigation. “You will be in this forbearance until servicers are able to accurately calculate monthly payment amounts or the court reaches a decision on the availability of the SAVE Plan. Borrowers will be informed of any further change to this litigation-related forbearance.”
Time spent in forbearance doesn’t count toward student loan forgiveness for either income-driven repayment plans or the Public Service Loan Forgiveness option.
“Before the lapse in appropriations, the parties were engaged in settlement discussions,” attorneys for the states in opposition to SAVE and the Trump administration said in a joint status report last month. “The lapse in appropriations delayed those discussions, but they have since resumed. Nevertheless, the parties need a brief period of additional time to conclude their discussions, finalize an agreement, and reduce it to a fully executed writing. The parties thus propose to file their next joint status report in three weeks, on or before December 15, 2025.”
Anyone on SAVE should treat the next few weeks as a “wake-up call,” Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, told Newsweek.
With SAVE now legally blocked and interest having restarted on August 1, borrowers could face increased monthly payments and have years of planned relief undone, he added.
“For many low- and moderate-income borrowers, that means higher monthly bills, interest accrual, and a longer route to forgiveness,” Ryan said. “What was once marketed as relief is now back to business as usual. For borrowers building financial stability around promised relief, this change could be a harsh reset.”
What People Are Saying
Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek: “Even though loans under the SAVE plan remain in forbearance, interest began accruing again in August. If Republicans get their way, borrowers may soon be limited to only the IBR or RAP plans, both of which require much longer repayment periods before forgiveness, and past forbearance periods may not count toward that forgiveness timeline.”
Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek: “If SAVE is formally shut down, many borrowers will be pushed into older repayment options like IBR, PAYE, or ICR, plans that almost certainly equate to higher monthly bills. Federal law is already set to phase out SAVE, PAYE, and ICR by 2028, replacing them with a new Repayment Assistance Plan that could permanently reshape how Americans repay student debt. And while it’s not clear if all students will see higher payments as the result of this switch, many more than likely will because of more stringent rules put on the assistance plan process.”
Michael Ryan told Newsweek: “If you’re on SAVE, treat the coming months as a planning window. Run the numbers on alternate plans. Compare income-based repayment options. Don’t assume $0 payments or frozen interest will bounce back.”
What Happens Next
A final settlement agreement could be filed by December 15, based on previous statements from Trump’s administration attorneys.
If SAVE disappears, people under the plan will likely have to choose a different repayment plan, and that would likely include higher monthly payments.
“Republicans emphasize personal responsibility and will push to see these loans repaid,