About 8 million federal student loan borrowers had hopes of smaller monthly payments and lower lifetime costs when the Biden administration rolled out the Saving on a Valuable Education (SAVE) repayment plan in 2023. But with SAVE officially shot down, you may be worried about how your monthly payments could change.
Under income-driven repayment (IDR) plans, many borrowers who fell below certain income levels have had their payments lowered to $0 per month since March 2020. The new formula for monthly payments under SAVE would have extended that reality to millions more. With SAVE’s demise, borrowers already in SAVE stand to see increases in their monthly payments.
“The payment is likely going to go up for borrowers enrolled in SAVE,” confirmed Elaine Rubin, a student loan policy expert for Edvisors and CNET Money expert review board member.
Experts don’t expect the payment pause to lift any sooner than December of this year, and some predict borrowers won’t be required to make payments until mid-2026. Regardless of when payments resume, you should be prepared to face higher monthly payments.
What are my payment options when SAVE ends?
With SAVE off the table, you’ll eventually need to switch to another repayment plan. You currently have three other options for income-driven repayment: Income-Based Repayment, Pay As You Earn and Income-Contingent Repayment.
“Each plan has its own eligibility rules and repayment formula,” says student loan lawyer Adam Minsky. “Many borrowers will have higher monthly payments under these plans compared to the SAVE plan.”
Alternatively, you could choose a plan that doesn’t base payments on your income. These include the standard plan, graduated repayment and extended repayment. If you’re enrolling in the Public Service Loan Forgiveness plan, you’ll need to choose an income-driven repayment plan and not a standard plan.
How much will my student loan payment increase?
Most SAVE borrowers will see their payments increase on other payment plans, including IDRs. How much they might increase varies based on your income, household size and debt.
To help you get an idea of how much your student loan payment might rise when the SAVE payment pause ends, I reviewed different options available for a single filer who makes $60,000 a year and has a $30,000 student loan balance at a 6.53% interest rate, using Federal Student Aid’s Loan Simulator tool.
Under SAVE, you would pay approximately $217 per month or less. Under other plans, you could see your payments rise from $70 to $370 per month. There are two situations where you could lower your monthly payment, but you’d be nearly doubling the amount you’d pay over the lifetime of your loan. Here’s what it looks like.
Income-Contingent Repayment
The Income-Contingent Repayment plan sets your monthly payments to 20% of your discretionary income or what you’d pay on a fixed 12-year plan, whichever is less. Using the $30,000 loan example, here’s what repayment would look like on ICR:
- Monthly payment: $290
- Total to be paid: $43,919
- End of term date: September 2037
If you qualify for PSLF, you’d pay $35,389 on this plan before getting your remaining balance of $7,884 forgiven in April 2035.
Income-Based Repayment
The Income-Based Repayment plan sets your monthly payments to 10% of your discretionary income if you borrowed loans after July 1, 2014. If you borrowed before that date, your payment would be set to 15%. This plan has a cap on payments — if your income increases, your payments will never be higher than what you’d pay on the standard 10-year plan.
Here’s what the payments on that $30,000 loan would look like on IBR:
- Monthly payment: $312
- Total to be paid: $41,473
- End of term date: August 2035
If you qualify for PSLF, you’d pay $40,259 on this plan before getting your remaining balance of $1,198 forgiven in April 2035.
Pay As You Earn
The Paye As You Earn plan sets your payments to 10% of your discretionary income. Like IBR, your payments on PAYE will never go higher than what they’d be on the standard plan.
According to the loan simulator, your payments would be the same on PAYE as on IBR based on the $30,000 loan example.
- Monthly payment: $312
- Total to be paid: $41,473
- End of term date: August 2035
This is the last plan on this list that qualifies for PSLF. The forgiveness amount would be the same as the IBR plan.
Standard Repayment
The standard plan doesn’t base your payments on your income. It gives you a fixed payment over 10 years.
- Monthly payment: $341
- Total to be paid: $40,932
- End of term date: April 2035
Graduated Repayment
The graduated repayment plan has you pay off your loans over 10 years, too. However, payments start out lower and increase every couple of years. While your payment would start out lower, you’ll see it jumps significantly over time. This plan is best for anyone starting out in a new career who expects to make significantly more money as they progress.
- Monthly payment: $196 – $589
- Total to be paid: $43,916
- End of term date: April 2035
Extended Repayment
You can qualify for this plan if you owe at least $30,000. It has fixed payments and spans 25 years. You’d see a lower monthly payment with this plan, but since you’re spreading out your payments over two and a half decades, you’ll end up paying double the amount you borrowed.
- Monthly payment: $203
- Total to be paid: $60,937
- End of term date: April 2050
Note: The above payment options could change in the future. Republicans on the House Education Committee recently introduced a proposal that would eliminate many of the plans above for new borrowers and replace them with two options: a Standard Repayment Plan and a Repayment Assistance Plan. The standard plan would have fixed payments ranging from 10 to 25 years, while the Repayment Assistance Plan would base payments on a borrower’s total adjusted gross income and waive monthly unpaid interest.
Should SAVE borrowers refinance with a private student loan?
Refinancing a loan can be helpful for creditworthy borrowers who can qualify for a low interest rate — but experts generally warn against refinancing if you have federal student debt.
Rubin doesn’t recommend refinancing if you’re counting on federal student loan benefits, working toward PSLF, enrolled in an income-driven repayment plan or living paycheck-to-paycheck. For most borrowers who were enrolled in SAVE, refinancing with a private lender won’t make sense.
“Even if you’re comfortably making payments, if something were to happen, you might find yourself locked into a very challenging situation,” Rubin previously told CNET.
When you refinance with a private lender, you’re giving up your federal student loan benefits. That means you won’t qualify for financial hardship assistance, federal payment pauses, federal loan forgiveness or similar benefits. Once you’ve refinanced with a private lender, you can’t reverse the process.
How to prepare for a bigger student loan payment
Borrowers in SAVE may not have owed any money on their student loans since March 2020 when the first federal forbearance period started. As SAVE makes its way through the courts, experts expect repayment to resume at the end of this year or sometime in 2026.
Depending on your income and family size, that could mean fitting a sizable bill into your monthly budget. To prepare for that, Rubin recommends:
- Use the Department of Education’s loan simulator to estimate the size of your monthly payment.
- Speak with a trusted, nonprofit source, such as Edvisors or The Institute of Student Loan Advisors, for advice on applying for and choosing the best repayment plan for your financial circumstances.
- Talk to a student loan advisor and an accountant about potential tax strategies to lower your adjusted gross income (used to calculate payments in some cases).
- Review your current finances to find places to cut or move costs (for instance, eliminating subscriptions, slowing other debt repayment or reducing your savings contributions).
