TAMPA, Fla. — Millions of Americans with federal student loans are adjusting to significant changes in repayment as the Biden administration’s SAVE repayment program has ended, leaving many borrowers to choose a new payment plan while default rates continue to climb.
According to data from the Office of Federal Student Aid, roughly one in five federal student loan borrowers are now in default, representing more than $233 billion in delinquent debt. With the expiration of the SAVE repayment plan on July 1, borrowers are being encouraged to act quickly to avoid financial penalties.
Under the current federal repayment system, borrowers have two primary repayment options: An income-based repayment plan or an income-contingent repayment plan. While the income-contingent option can offer loan forgiveness after 20 to 25 years of qualifying payments, that program is also scheduled to phase out in 2028.
After years of pandemic-era payment pauses and temporary relief programs, many borrowers are finding it difficult to resume monthly payments.
“Everything was on hold for five years, so then when all of the payments started coming they weren’t prepared to make those three, four, five hundred dollar payments, so it definitely became a hardship,” said Jackie Duran, president of the U.S. Student Loan Center in Tampa.
Borrowers previously enrolled in the SAVE plan now have 90 days to select a new repayment option. While federal officials say the updated system is intended to simplify repayment choices, financial counselors say many borrowers remain uncertain about which programs they qualify for.
“Find out who has your loan. Get professional help if you need it,” Duran said. “Get answers fast. Don’t wait, because the sooner you do it, the more options you have.”
Falling behind on student loan payments can carry lasting financial consequences. Borrowers who default may face wage garnishment, federal tax refund offsets, and damage to their credit scores, making it more difficult to qualify for future loans or other forms of credit.
With repayment requirements now back in effect, financial experts recommend that borrowers contact their loan servicer as soon as possible to discuss available repayment options before missing payments.
Meanwhile, some members of Congress are pursuing legislation aimed at making student loan repayment more affordable.
Rep. Anna Paulina Luna is co-leading legislation that would reduce federal student loan interest rates to 2%, significantly lowering the total amount borrowers would repay over the life of their loans.
“People who are taking out that debt essentially are being basically forced into what I would consider a lifetime of payment,” Luna said. “It’s obviously not zeroing out someone’s debt, but it is providing a realistic pathway for them being able to pay it back.”
Several proposals addressing student loan interest rates have been introduced in Congress, and supporters say there appears to be bipartisan interest in pursuing reforms. However, similar efforts have been introduced for more than a decade without becoming law.
Borrowers already in repayment are encouraged to contact their loan servicer immediately to review available repayment plans and enroll in a new option before the 90-day transition period expires.
Those seeking additional guidance or assistance with federal student loan repayment options can visit the U.S. Student Loan Center at www.usstudentloancenter.org for more information.
