The era of the Biden administration’s SAVE student loan repayment plan is coming to an end, as major changes enacted under President Donald Trump’s One Big Beautiful Bill Act take effect July 1 and reshape how millions of people repay their loans.
The changes come after Education Secretary Linda McMahon said the SAVE plan would have cost taxpayers more than $342 billion over 10 years, in a post on X in December.
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SAVE’s roughly 7 million borrowers have until the July deadline to transition to a new student loan plan, or be automatically enrolled in a standard repayment option with higher costs and fewer benefits.
The bill introduces a new Repayment Assistance Plan with loan payments set at about 1% to 10% of income. Loan forgiveness is available after 30 years of payments, which vary based on the borrower’s income level.
The Repayment Assistance Plan will replace previously existing student loan plans, though Alex Beene, who teaches financial literacy at the University of Tennessee at Martin, told Newsweek that RAP’s consolidated income-based repayment plan would now require a minimum monthly payment.
The rule changes also mean stricter borrowing limits.
Parent loans cap at $20,000 per year with a $65,000 lifetime limit for students. Graduate and professional students are limited to about $20,500 yearly, with a lifetime cap of $100,000. Grad PLUS loans are eliminated for new borrowers.
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The changes also give McMahon the authority to disqualify employers regarding the Public Service Loan Forgiveness program if she determines any employers have a “substantial illegal purpose” and provide a 1% interest rate incentive for borrowers enrolled in auto-pay.
Other income-driven student loan plans, such as Pay As You Earn and Income-Contingent Repayment, will be gradually phased out by 2028 and will stop accepting borrowers in July.
Over 40 million Americans have student loan debt.
