Millions of Student Loan Borrowers Face Sudden Payment Hikes
Over 7.5 million borrowers face sharp payment increases as SAVE plan ends. Experts warn of financial strain.
POLICY WIRE — Washington, D.C. — Over 7.5 million federal student loan borrowers are scrambling to find new repayment options after the SAVE plan was invalidated by a court ruling in March.
The Department of Education will notify these borrowers by December that they have 90 days to select a different repayment plan. A recent analysis from the Student Debt Crisis Center found that roughly half of those affected could see their monthly payments rise by at least $500.
Under the now-ended SAVE plan, the median monthly payment was $110. For some borrowers, this meant paying nothing at all. Now, many face payments as high as $560 per month, with others falling into the Standard Repayment Plan, where the average is $674. One borrower expressed frustration on Reddit, stating, ‘In no universe can I afford this.’ Experts say the shift could be financially devastating for many.
📄 POLICY WIRE WHITEPAPER PUBLISHED: PAKISTAN’S NATIONAL SECURITY POLICY PRIORITIES
There are eight federal repayment plans available, including four with fixed payments over 30 years and four income-driven options. However, most income-driven plans do not offer the same low payments as the SAVE plan, according to a student loan coach. Borrowers must weigh whether they want the lowest possible monthly payment or to pay off their loans faster, as each option comes with trade-offs.
A limited interest subsidy remains in a new repayment assistance plan, which covers unpaid interest for those making smaller payments. While helpful, it does little to ease the burden of much higher monthly costs. Many borrowers are now in a state of panic, unsure how to navigate the changes.
Reporting by Policy-Wire (PW)
