On March 27, 2026, the U.S. Department of Education announced next steps for borrowers who are currently enrolled in the Saving on a Valuable Education (SAVE) Repayment Plan, which is being discontinued. The Department is sending guidance to the 7.5 million borrowers currently enrolled in SAVE on what they need to do next.1 Here are the details.
Background
In August 2023, the Department launched the most generous federal student loan income-driven repayment plan to date: the Saving on a Valuable Education (SAVE) Plan. It replaced the Revised Pay As You Earn (REPAYE) Plan.
The SAVE Plan was structured to be implemented in two phases, with some benefits taking effect immediately and others scheduled to go into effect in 2024. Two key benefits scheduled to take effect in July 2024 were undergraduate loan payments capped at 5% of discretionary income (10% for graduate loans) and a faster path to loan forgiveness.
Almost immediately after SAVE was introduced, it faced legal challenges. In early 2024, several states joined one of two lawsuits challenging SAVE on the grounds that the Department of Education was overstepping its authority and that the plan needed to go through Congress. Then in June 2024, before the key provisions related to lower monthly payments and faster loan forgiveness were set to kick in, two separate federal courts blocked those provisions from taking effect. In response, the Department placed all borrowers enrolled in SAVE into administrative forbearance, during which time, borrowers were not required to make any payments and interest would not accrue.
In early August 2024, a federal appeals court in Missouri blocked SAVE in its entirety. The Department of Education (under the Biden Administration) challenged that ruling, but in late August 2024, the U.S. Supreme Court refused to lift the injunction that had blocked SAVE, meaning that key provisions of the plan were on hold while the legal process played out in lower courts. On March 10, 2026, the U.S. Court of Appeals for the 8th Circuit officially vacated the SAVE Plan.2
In the middle of this legal wrangling, the One Big Beautiful Bill Act (OBBBA) was passed in July 2025 and contained a provision to eliminate the SAVE Plan by July 1, 2028, along with the Pay As You Earn (PAYE) Repayment Plan and the Income Contingent Repayment (ICR) Plan. OBBBA also created two new student loan repayment plans effective July 1, 2026: the Tiered Standard Repayment Plan and the Repayment Assistance Plan, discussed below.
What happens now?
In their recent announcement, the Department of Education stated that borrowers currently enrolled in SAVE will need to transition to a different repayment plan of their choice in the coming months, which could include the new Tiered Standard Repayment Plan or Repayment Assistance Plan. The guidance sent to borrowers will include information on how borrowers can enroll in a different plan and will preview upcoming changes to student loan repayment options.
Starting July 1, 2026, federal loan servicers will begin issuing additional notices to borrowers still enrolled in SAVE, instructing them to transition to a different repayment plan “within 90 days.” Borrowers who do not enroll in a different plan within this time frame will be automatically enrolled in either the original Standard Repayment Plan (with a repayment term of 10 years for all loan balances) or the new Tiered Standard Repayment Plan.
Borrowers can visit the federal student loan website for the latest information and updates, or they can try contacting their loan servicer to discuss their options.
Tiered Standard Repayment Plan
Under the federal government’s original Standard Repayment Plan, fixed monthly payments are spread over 10 years, regardless of the loan balance amount. Under the new tiered plan, borrowers will pay a fixed amount each month over a fixed period of time, the length of which depends on the outstanding loan balance as follows:
- Less than $25,000 — 10 years
- $25,000 to less than $50,000 — 15 years
- $50,000 to less than $100,000 — 20 years
- $100,000 and over — 25 years
There is no prepayment penalty; borrowers can pay off their loans early.
Repayment Assistance Plan
The Repayment Assistance Plan (RAP) is an income-based repayment plan where monthly loan payments are based on a borrower’s adjusted gross income (AGI) as follows:
- $10,000 or less — flat payment of $10 per month ($120 per year)
- $10,001 to $20,000 — 1%
- $20,001 to $30,000 — 2%
- $30,001 to $40,000 — 3%
- $40,001 to $50,000 — 4%
- $50,001 to $60,000 — 5%
- $60,001 to $70,000 — 6%
- $70,001 to $80,000 — 7%
- $80,001 to $90,000 — 8%
- $90,001 to $100,000 — 9%
- $100,001 and over — 10%
Payments are applied first to interest, then fees, then principal. If the required payment is less than any new interest that accrues, the extra interest is waived. After 30 years of on-time payments, all remaining debt is forgiven. (Current income-based plans forgive remaining debt after 20 or 25 years.)
For single borrowers, only the borrower’s AGI is used to determine the monthly payment. For married borrowers, joint AGI is used if the couple files a joint federal income tax return; if they file separate returns, only the borrower’s AGI is used. For borrowers with dependents, the monthly payment will be reduced by $50 for each dependent listed on the borrower’s federal income tax return.
The plan is open to borrowers with undergraduate and graduate loans, and payments made under RAP qualify for the federal Public Service Loan Forgiveness (PSLF) program.
A pause on wage garnishment for defaulted loans
In April 2025, a few months before OBBBA was passed, the Department of Education announced that it would resume collection efforts on defaulted federal student loans starting in May 2025 by referring such borrowers to a federal debt collection service (the Treasury Offset Program) administered by the Treasury Department. This included the possibility of wage garnishment. (The federal government hadn’t collected on defaulted loans since March 2020, when the pandemic ushered in a series of pauses on repayment and collection efforts.)
In January 2026, the Department of Education announced that it was delaying involuntary collection efforts on defaulted student loans, including wage garnishment, saying that the “temporary delay” would enable the Department to implement major student loan repayment reforms and give borrowers more options to repay their loans.3
1–3) U.S. Department of Education, March 27, 2026, January 16, 2026
2) CNBC, March 10, 2026
This content has been reviewed by FINRA.
Prepared by Broadridge Advisor Solutions. © 2026 Broadridge Financial Services, Inc.