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Student Loan – 460,000 Student Loan Borrowers Denied Lower Repayment Plans – What It Means for You
Table of Contents
Introduction
The U.S. Education Department is set to reject 460,000 student loan borrowers who applied for the lowest monthly repayment option under an income-driven plan. This decision affects nearly 31% of the 1.5 million backlogged applications, leaving many borrowers uncertain about their repayment future.
With the SAVE Plan (Saving on a Valuable Education) blocked by courts since June 2024, the Biden administration’s key student loan relief program is no longer available. As a result, borrowers who selected the lowest payment option will be denied, forcing them to reconsider their repayment strategies.
This article explores:
- Why 460,000 student loan applications are being denied
- The impact of the SAVE Plan’s suspension
- Alternative repayment options under the Trump administration’s new policies
- Expert insights on how this affects long-term loan forgiveness
- Steps borrowers can take to navigate these changes
Why Are 460,000 Student Loan Borrowers Being Denied?
The Education Department confirmed that 460,000 federal student loan borrowers will be denied the income-driven repayment (IDR) plan they applied for. These borrowers selected the lowest monthly payment option, which was tied to the SAVE Plan.
Since federal courts blocked the SAVE Plan in June 2024, loan servicers can no longer process applications for this program.
“Loan servicers cannot process these applications as SAVE is no longer an option, as it is illegal,” an Education Department spokesperson told POLITICO.
Key Reasons for Denial:
- SAVE Plan is Frozen – The Biden-era program, which capped payments at 5% of discretionary income for undergraduates and 10% for graduates, is currently inactive due to legal challenges.
- Backlog of 1.5 Million Applications – The sheer volume of pending IDR applications has delayed processing, and now nearly a third will be rejected.
- Trump Administration’s New Policies – The current administration is phasing out older repayment plans in favor of two new simplified options.
What Was the SAVE Plan, and Why Was It Blocked?
The SAVE Plan was introduced under President Biden to ease the burden of student loan repayments by:
- Capping monthly payments at 5% (undergrad) or 10% (grad) of discretionary income
- Forgiving remaining balances after 10-20 years of payments
- Preventing interest accumulation if monthly payments didn’t cover accruing interest
However, Republican-led lawsuits argued that the plan was too costly for taxpayers and overstepped executive authority. In June 2024, federal courts halted the program, leaving millions in limbo.
What Happens to Borrowers Already on SAVE?
- Forbearance Status – Borrowers previously enrolled in SAVE are in a temporary payment pause while courts decide the program’s fate.
- Transition to New Plans – The Education Department plans to move SAVE borrowers to different repayment options by Fall 2024.
New Student Loan Repayment Plans Under Trump’s Administration
The Trump administration is rolling out two new repayment plans as part of broader reforms to simplify student loan repayment.
1. Fixed Repayment Plan
- Flat monthly payments over a 10-year term
- No income-based adjustments
- Aimed at borrowers who prefer predictable payments
2. Income-Based Simplified Plan
- Single repayment option replacing multiple IDR plans
- 10-15% of discretionary income, depending on loan type
- 20-year forgiveness timeline
The goal is to reduce complexity and cut administrative costs, but critics argue it may eliminate more generous terms offered under SAVE.
How This Affects Long-Term Loan Forgiveness
One major concern is that time spent in SAVE forbearance does not count toward loan forgiveness. This means:
- Borrowers may pay more over time if their payments are recalculated under a different plan.
- Those expecting 20-year forgiveness may face delays.
“If their income has shifted in the last year, it’s going to result in a higher payment,” said Persis Yu, deputy executive director of the Student Borrower Protection Center. “Since this time hasn’t counted toward cancellation, people will ultimately pay more.”
Expert Recommendations for Borrowers
- Reapply for a Different IDR Plan – Since SAVE is unavailable, borrowers should explore other income-driven plans like REPAYE or PAYE.
- Check for Eligibility Under New Plans – The Trump administration’s upcoming options may offer better terms for some.
- Consider Refinancing – Private lenders may offer lower rates, but this forfeits federal protections.
- Monitor Legal Developments – If courts revive SAVE, borrowers may reapply.
Conclusion: What Borrowers Should Do Next
The rejection of 460,000 student loan applications highlights the ongoing turbulence in federal student loan policies. With the SAVE Plan blocked and new repayment options emerging, borrowers must stay informed and proactive.
Key Takeaways:
✔ 460,000 borrowers will be denied the lowest payment option due to SAVE’s suspension.
✔ The Trump administration is introducing two new repayment plans to replace existing options.
✔ Borrowers in SAVE forbearance won’t get credit toward forgiveness during the pause.
✔ Reapplying for a different IDR plan or exploring new options is crucial.
For the latest updates on student loans, repayment plans, and forgiveness programs, stay tuned to trusted financial news sources.