Federal SAVE Plan Termination Creates Mass Delinquency Risk for Income-Driven Borrowers

Student loan borrowers with SAVE student loan repayment plans got some bad news recently. SAVE, which stands for Saving on a Valuable Education, will be coming to an end following a judgment from the U.S. Court of Appeals for the 8th Circuit on March 9.

The SAVE plan was introduced by the Biden administration in 2023 and was heralded for the its low monthly payments. But unfortunately for borrowers, President Trump’s “big beautiful bill” will phase out the SAVE plan on July 1, 2028, CNBC reports. 

More than 7 million student loan borrowers are enrolled in the SAVE plan. During legal challenges to the SAVE plan, student loan borrowers were placed on forbearance so they were not required to make monthly payments but their loans did continue to accrue interest, according to CNBC.

“In the coming weeks, the Department will issue clear guidance on next steps for borrowers enrolled in the illegal SAVE Plan, including details regarding how borrowers can move into a legal repayment plan,” Undersecretary of Education Nicholas Kent said in a statement to CNBC.

Monthly Student Loan Payments Will Rise

With the end of the SAVE plan, millions of borrowers will see a dramatic increase on their student loan monthly payments. The National Consumer Law Center estimates that monthly student loan payments could quadruple following the end of the SAVE plan.

“It’s shocking that even as borrowers struggle with an affordability crisis, the Department of Education agreed to scrap the most affordable option for repaying federal student loans,” said Abby Shafroth, Managing Director of Advocacy at the National Consumer Law Center. 

“Families relied on the SAVE plan to afford student loan payments while managing the rising costs of rent, groceries, childcare, and healthcare. By eliminating SAVE, the Department is pulling the rug out from under these families and raising their bills while people struggle to afford the basics.“

Borrowers Struggle With Student Loan Payments and Servicing

Many student loan borrowers are struggling to make payments. About 42% of borrowers said they make tradeoffs between making student loan payments and covering their basic needs, according to a survey from The Institute for College Access and Success (TICAS) and Data for Progress. 

Twenty percent of surveyed borrowers are in delinquency or default on their student loans. And according to 2025 fourth quarter data from the Federal Reserve Bank of New York, about 1 million student loan borrowers are in default, more than 120 days past due on their student loans.

Some student loan borrowers are having a tough time dealing with their loan servicer, according to The Institute for College Access and Success survey. Sixty-one percent of those surveyed have communicated with their loan servicer to resolve an issue with their account, and 48% encountered long wait times to access help to do so.

Twenty-four percent said their loan servicer provided them with inaccurate information, and 11% said the balance shown on their account is incorrect. 

Impact of Student Loan Delinquencies for Subprime Lenders

The 1 million borrowers in default on their student loan obligations has big credit consequences for them and for subprime lenders. Student loan defaults can lead to other financial struggles for borrowers, including damaged credit scores, wage garnishments, and the seizure of tax refunds.

These 1 million borrowers represent for subprime lenders a new share of the subprime market and will likely qualify for subprime rates for credit cards, auto loans, housing, and personal loans should they apply.

Credit card spending in particular may rise as borrowers struggle to pay higher student loan payments and make ends meet.

How many of the more than 7 million student loan borrowers in SAVE plans will default on their loans remains to be seen. But it is likely that student loan borrowers will face significantly higher student loan payments when they move to new student loan plans. 

Whether high payments lead to missed payments and delinquencies or defaults will be something to watch over the coming year. 

The Bottom Line

Following a court judgment on March 9, the SAVE repayment plan is set to come to an end with borrowers having to switch to other student loan plans with higher monthly payments. The SAVE plan is known for low monthly payment, and a switch to a plan with a much higher monthly rate may be difficult for borrowers to manage. 

Already, about 1 million student loan borrowers are in default on their student loans as of the fourth quarter of 2025. These borrowers are a new market for subprime lenders offering credit cards, auto loans, housing, and personal loans.