Key developments: A federal appeals court struck down the SAVE repayment plan in March, triggering a massive shift for about 7.5 million borrowers. Loan servicers are now emailing borrowers with a 90‑day window to select a new plan, and more than 1.75 million have already moved to alternatives such as Income‑Based Repayment or the new Repayment Assistance Plan (RAP). Roughly half of those exiting SAVE can expect payment hikes of $500 or more, with the median new payment projected at $560—far above the $110 median under SAVE. Borrowers who miss the deadline will be placed in the Standard Repayment Plan, where median monthly payments rise to $674.
Why it matters: The abrupt jump in monthly obligations forces many borrowers into unaffordable payment levels, threatening increased defaults and financial strain. At the same time, the expiration of the tax‑free provision for forgiven debt (which ended in 2025) means that borrowers who eventually achieve forgiveness—especially through Income‑Driven Repayment—will now face a “tax bomb.” Protect Borrowers warns that 2‑3 million borrowers could see tax bills of up to $12,000 over the next decade, compounding the fiscal pressure.
What to watch next: 1) How the Department of Education enforces the 90‑day deadline and whether additional extensions are granted. 2) Legislative or regulatory action to restore tax‑free treatment of forgiven loans, a key demand of advocacy groups. 3) Ongoing delays in Public Service Loan Forgiveness processing, which could further affect borrowers relying on that pathway for relief. [[1]]