End of Biden-era SAVE plan among federal student loan changes coming July 1

(ABC 36 NEWS NOW via LEX NEWS) — Major changes to federal student loans take effect July 1 under the One Big Beautiful Bill Act, eliminating certain loan programs and limiting new borrowers to two repayment plans.

The Saving on a Valuable Education plan, known as SAVE, ends July 1. More than 7 million borrowers are still enrolled in the Biden-era repayment plan.

Ashley Spalding from the Kentucky Center for Economic Policy said the change leaves borrowers with fewer choices.

“Folks are gonna have fewer options, those who have the SAVE program have to switch.”

More than 43 million Americans hold student loans, and outstanding debt exceeds $1.7 trillion, according to the U.S. Department of Education. A report from Student Loan Borrowers Assistance says about 20 percent of Kentucky borrowers participate in an income-driven repayment plan.

Spalding said the financial consequences could be significant.

“It’s gonna mean higher education is even less affordable and that too many people are going to default on their student loans who would not otherwise.”

Borrowers currently enrolled in SAVE must switch to a new plan. Those newly applying for student loans will not have the SAVE option.

New borrowers will have two repayment plans available. The Standard Plan uses fixed monthly payments over 10 to 30 years, depending on the loan. The new Repayment Assistance Plan, or RAP, is income-driven, with payments ranging from 1 to 10 percent of adjusted gross income.