SAVE Is Dead: What 7.5 Million Borrowers Do Now

Becca HartwellHmm

MayaOkay, okay, okay. Welcome back to Money Unlocked. I'm Becca Hartwell here with my co-host Maya and today's episode genuinely one of the most urgent ones we've ever done. This is the story you need to know. I do not say this lightly. If you have federal student loans, you genuinely need to hear this before July. So get this. According to CNBC and the U.S. Department of Education, more than seven point 7.5 million borrowers are being kicked off the SAVE plan, and a 90-day clock starts on July 1st. That's not a lot of time. And if you do nothing, deadpan, you get auto-enrolled into a plan that will probably cost you more every month, like significantly more, which is exactly the trap. Right, right, right. So today we're walking through it all. IBR, the new RAP plan.

Speaker 3Mm-hmm.

MayaWhat those actually mean for your wallet month to month. We've got a real scenario with a real income number so you can see exactly how these plans stack up. No jargon, I promise, just the numbers that actually matter. Plot twist, there's also a backlog situation because of course there is, that makes waiting until August a really bad idea. Oh, you're going to love this part. The servicer backlog is already over. For 576,000 applications. That number matters because it means waiting doesn't save you time. And we're covering PSLF because if you're working in public service, your forgiveness path is still there. But there are some real traps we need to talk through. Plus, default and wage garnishment. It restarted in 2026. And if that's your situation, there are exits, all three of them. them. We'll walk through each one. And we close with something you can actually use, an action plan, things you can do this week seriously. All right, Maya, let's get into it. Segment one is up right now and listen close. Okay, so here's the situation. Seven and a half million people are about to get a letter that basically says your student loan repayment plan is gone. Pick a new one or we'll pick one for you. And unlike the other stories I cover, this one has a hard deadline that hits everybody at the same time, no exceptions. Wait, for real? Seven and a half million people? That's not a small number we're talking about here. For real, according to CNBC and the U.S. Department of Education, the SAVE plan, which stood for Saving on a Valuable Education, is officially dead. A federal appeals court vacated it in March, a settlement between the Trump administration and Missouri sealed it, and now it's over. Okay, but here's what I need to know. What actually happens if somebody just ignores the notice and hopes it goes away? So glad you asked, because that is absolutely the wrong move, and I've watched enough financial stories tank people's lives to know this one's actually dangerous. Starting July 1st, loan servicers send out 90-day notices. If you do nothing within that window, you get auto-enrolled. Into what? Either the standard repayment plan or the new tiered standard plan, and both will almost certainly cost more per month. month, then saved it. Wait, so doing nothing literally costs you money? That's actually wild. Doing nothing costs you money. Think of it like your phone company canceling your plan and saying, hey, you've got 90 days to pick something new or we'll just pick the priciest option on the menu for you. Except this isn't about your phone bill. This is your actual financial life. Yeah, okay, that's actually a perfect way to frame it because it's exactly what's happening. And here's the thing. A lot of these borrowers have been in a payment pause since summer 2024 when courts first blocked SAVE. So payments are resuming and a forced plan switch is happening at the exact same time. It's a double hit.

Speaker 4Oof, that's a lot landing at once.

MayaYeah, yeah, yeah. And here's a mistake I see people make. And I mean constantly, assuming that pause counted toward loan forgiveness, the system's designed to be confusing, and then people just stop paying attention. For most programs, those months did not count. Seriously? All that time just frozen and it doesn't count towards anything? CNBC reported it directly. Borrowers in safe forbearance were not making

Speaker 4Wow.

Mayaprogress towards forgiveness. including under Public Service Loan Forgiveness. Hmm. So the pause wasn't free. It just looked free. Exactly. Okay, so what can you do this week? And I mean this week, log in to studentaid.gov. Confirm you're on SAVE. That's step one. Don't wait for the letter. Don't put this off.

Speaker 4Simple enough.

MayaOnce you know where you stand, the next question is, what are the actual options? Because there are a few, and they are not all equal. So with all that context in mind, let's get into the actual options. Maya, real talk, which plan are we actually talking about here?

Speaker 4Okay, so I have the most relatable question here. Say I make $45,000 a year. I owe $35,000. Which plan do I actually pick?

MayaThat's exactly the right question. So your first stop is income-based repayment. or IBR. It's the plan most existing borrowers should look at first. And I say most because so many people skip straight to whatever's trendy instead, and that's how they end up with worse deals.

Speaker 4What's the plain English version, like translate that for someone who didn't study finance?

MayaIBR takes 10% of your income above a poverty level floor, so it's not 10% of your whole salary. It's 10% of the part above that threshold. And that distinction trips people up constantly. I mean constantly. At $45,000, your payment could be roughly $200 a month.

Speaker 4Wow.

MayaForgiveness comes after 20 years, which is a real timeline. Wait, that's way less than I expected, honestly. Right? And here's the good part. If your income drops, your payment can drop to zero. Zero. Literally zero.

Speaker 4Okay, so then what's RAP? Because I keep hearing it described as like, it's the SAVE replacement.

Becca Hartwelland people get excited. Oh, this is where it gets good. And by good, I mean slightly sneaky. The Repayment Assistance Plan, RAP, launches July 1. It's the only income-based option for loans taken out after that date, and people are treating it like the new hotness, which is exactly wrong. So it's not actually a SAVE upgrade. Got it. It is not. CNBC quoted higher education expert Mark Kantrowitz directly: "Most borrowers will be better off in IBR than RAP; forgiveness in twenty years under IBR versus thirty under RAP. That's a full decade longer of your life paying for school. Ten extra years, like an entire extra decade of payments? Yeah, yeah, yeah.

MayaRight.

Becca HartwellHere's how RAP works, though. It charges 1% to 10% of your total income with a $10 monthly minimum. At $45,000, your bill might actually be a little lower each month than IBR, which makes people think it's better. Spoiler, it's not. So lower payment, worse deal? For most. Most people, yes. Credible cited Kantrowitz on this, too. Lower monthly payments under RAP for incomes under $75,000, but higher total cost over the life of the loan. So it feels better short-term, which is exactly the trap, and people fall for it constantly. One upside, RAP cancels any interest your payment doesn't cover, so your balance can't spiral. Okay, so what happens if someone just... does nothing. They get auto-enrolled somewhere bad, right? They land on the tiered standard plan. Fixed payments, no income adjustment, no forgiveness path. The amount you owe determines how long you pay, up to 25 years. No flexibility if your income tanks. That's the auto-enrollment trap, and it catches people all the time. So the biggest mistake is thinking RAP is basically SAVE 2.0 and getting excited about it.

Speaker 3About it.

Becca HartwellExactly; and the action for this week is to go to studentaid dot gov and run the Loan Simulator. Compare your estimated payment on IBR versus RAP, side by side. Today, not next week. Five minutes, that's Genuinely all it takes to figure this out. Speaking of timing, though, knowing which plan beats doing nothing is half the battle. But when you actually apply matters just as much. Much. You're running out of time here. Like this week running out. Oh no, no, no!

Speaker 4Right? Why is that a problem?

Becca HartwellBecause the 90-day window is not three months of breathing room. It's three months that includes however long it takes your application to actually process, and people massively underestimate that part.

Speaker 4And processing is not instant.

Becca HartwellAccording to CNBC, the Education Department had over 576,000 repayment plan applications. still pending as of late February.

Speaker 4Wow.

Becca HartwellThat was before seven million SAVE borrowers all needed to switch at the same time, so now imagine that backlog.

Speaker 4So the backlog is about to get way worse.

Becca HartwellThat's the fear, yeah. The Institute for College Access and Success flagged that some borrowers have been waiting more than six months for resolution. Six months, Maya, while the clock's ticking.

Speaker 4Six months, and the deadline window is three?

Becca HartwellExactly. So you do the math on that one. Okay, but wait, so IBR is available right now, like today? Yes, the Education Department confirmed it. You do not have to wait for July 1. IBR is open now. RAP opens July 1, but IBR you can apply today, which means you should.

Speaker 4So the earlier you get in line, the shorter your wait.

Becca HartwellAnd here's the thing the CNBC piece flagged: when you apply through studentaid.gov, there's an option to authorize IRS data access so the department can pull your income directly. This is not a minor detail. That speeds up processing? Measurably. Submitting your own pay stubs manually puts you in a longer queue. Letting them talk to the IRS directly is faster, unless your most recent tax return doesn't reflect Reflect what you're making now, like if you just got a raise or took a pay cut. So know yourself here.

Speaker 4Hmm, good caveat.

Becca HartwellSo, the concrete action this week: if IBR is your plan, go to studentaid.gov today-not August,

Speaker 4Right.

Becca Hartwellnot when you get the letter: today. Check the IRS data authorization box. You cannot wait on this.

Speaker 4And if you're not sure whether IBR is your plan?

Becca HartwellThat's what the Loan Simulator we mentioned last segment is for. Or run the numbers first, then apply.

Speaker 4Got it.

Becca HartwellNow, speaking of stakes, there's one group of people for whom the timing of all this is especially loaded. Public Service Loan Forgiveness, which is the stakes we actually need to talk about. The people for whom the wrong plan choice isn't just more money, it's years of forgiveness credit at risk. And that's a whole separate conversation we need to have right now, because this one hits differently for that group.

Speaker 4For that group. So if you're a teacher, a nurse, a social worker counting on PSLF, hear me out, because this section is genuinely for you. The stakes here are different.

Becca HartwellOkay, first thing, and I want to be really clear on this. PSLF is still alive. The program still forgives whatever balance you have left after 120 qualifying payments. Nobody came in and eliminated it.

Speaker 4Right, right. The problem is...

Becca HartwellThe plan you pay under matters, and SAVE was a qualifying plan. So if you were sitting in SAVE forbearance, those months almost certainly did not count toward your 120, and most people have no idea.

Speaker 4Wait, seriously? All that time just gone?

Becca HartwellNot necessarily gone. There's something called PSLF buyback. You can make a lump sum payment equal to what you would have owed. have owed during those months, and they count. But—and this is the part people miss—buyback is only available once you're close enough that buying back those months actually pushes you to 120. So if you're still years away from 120, buyback doesn't help you yet. Get on IBR or RAP now and start building qualifying payments. Exactly. And here's the common mistake I see constantly: auto enrollment. If you do nothing and get dropped off, Dropped onto the standard repayment plan, your payments technically qualify for PSLF But the loan pays off before you hit one twenty, you get no forgiveness-you just paid it off, which is the trap. Congrats on paying your loan, I guess. Yeah. So IBR and RAP both qualify. Just do not let standard happen to you by accident. That's not a mistake you can fix. Okay, here's one more thing, and this one hits differently if your employer is a non-profit doing immigration work, gender-affirming healthcare, or anything politically contested right now. And I say that as someone who spent years covering policy battles. battles. Yeah, there's a new rule taking effect July 1, 2026. The Department of Education can now revoke PSLF employer eligibility based on what they're calling a substantial illegal purpose. The American Bar Association flagged multiple lawsuits already filed against it, so it may not survive. But right now, it's happening. So if your employer fits any of those categories and And I'm serious about this. Certify your employment now.

MayaYeah.

Becca HartwellLock in your payment credit before July 1st because your past payments are protected even if the rule changes later. Your action for this week is log into the PSLF help tool at studentaid.gov and certify your employment if you haven't done it recently. Five minutes. Do it now, not later.

MayaAnd speaking of situations that feel urgent... We really need to talk about what happens if payments have already stopped entirely, because default is stress on a completely different level. Mm-hmm. Okay, shifting gears. If you haven't made a payment in a while and you're listening to this with your stomach in knots, this part is for you. I mean it. No judgment. This actually happens to a lot more people than you think. Not at all. And here's the situation you're in. Wage garnishment for defaulted federal loans restarted this year, according to NPR and CBS News. The Department of Education can take up to 15%

Speaker 5of your income.

Mayapercent of your take home pay. No court order needed. It just happens.

Becca HartwellWait, no court at all? They just go straight to your employer and start taking money?

MayaStraight to your employer.

Becca HartwellWow.

MayaAnd they have to leave you with at least $217.50 a week. But that's not a lot of cushion. That's barely getting by.

Becca HartwellYeah. And that's the kind of thing you definitely want to know is coming. So what's the actual move here?

MayaHere's the thing most people don't know, and I mean don't know because they're avoiding looking at it: you get a thirty day notice before garnishment starts. That window is your last shot to object or negotiate. It's do or die time.

Becca HartwellOkay, and what's the common mistake people make?

MayaIgnoring it. Because it feels overwhelming, and the notice goes to your last known address. and the government only has to prove they sent it, not that you opened it. So people just pretend it's not happening.

Becca HartwellSo the REAL action is open your mail. Seriously. Update your address at studentaid.gov right now. Don't let this thing sneak up on you. Seriously. Now, if you're already in default, there are three ways out, and you need to know these. Walk us through them. Path one, loan rehabilitation. Nine affordable monthly payments over ten months. Payments can be as low as five dollars based on your income, which means this is actually accessible. Five dollars a month? Like actually Genuinely five dollars? Five dollars. And here's why rehabilitation is the one most people sleep on. It wipes the default from your credit report entirely, like it never happened. That's huge.

MayaConsolidation doesn't erase it from your record, Right? Right. Path two is Consolidation, which gets you out of default faster, sometimes within weeks, but that default mark stays on your credit history. It's the faster route. So rehabilitation is slower but actually cleans your record. Consolidation is faster but the damage stays. That's the real difference.

Becca HartwellThat's the trade-off, yeah. Path three is paying the full balance. Which, for most people listening, probably isn't happening today. And that's real.

MayaRight.

Becca HartwellSo if you want a fresh start, you do rehab. If you need the collection stopped yesterday, consolidation gets you out faster. Exactly. And the action item this week, go to studentaid.gov and check your status. If you think you might be in default, call the Default Resolution Group at 1-800-612-1155. Do it today.

MayaSo that number one more time.

Becca Hartwell1-800-612-1155. Free, they actually know what they're talking about, and they'll walk you through what makes sense for your situation. Do it before you need to, because once that garnishment notice lands, the clock is already ticking, and your options get smaller. Alright, game plan time. Everything we cover today comes down to a few straightforward moves, and I mean straightforward moves, but you have to actually do them, not just listen and move on.

MayaYes. And honestly, this is where it gets good because none of this is hard. You just have to actually do it.

Becca HartwellStep one, log in to studentaid.gov and check your current plan and your loan balance. You might be genuinely surprised, especially if you have loans. have loans from different years. Some may open up options you didn't know you had. And people miss that constantly.

MayaRight. And while you're there, seriously, don't skip this step. Run the loan simulator. It shows your IBR payment clearly. RAP isn't in the simulator yet, but there's a free calculator at EDCAP.com that lets you compare both numbers side by side.

Becca HartwellThat's the move. Don't just assume you know. Run the numbers yourself. Actually check. Now, if you have Parent PLUS loans, I need you to actually stop what you're doing and listen. And I'm not exaggerating. RAP is not available to you. Income-driven repayment happens only if you consolidate into a Direct Consolidation Loan, and the disbursement deadline is June 30, 2026. Not the application deadline. The disbursement deadline. line. According to TateESQ.com, processing takes four to eight weeks, so if you haven't filed yet, you are cutting it dangerously close. We're talking urgency here, like this week close. Yeah, yeah, yeah. And missing that date means no income-based repayment, no path to forgiveness. That door- closes permanently, and it doesn't reopen. Okay, one more thing before we let you go, and this one I've literally seen people derail their finances. Scams. Oh, here's something people fall for constantly. Switching your repayment plan costs nothing. Your servicer handles it for free at studentaid.gov. If someone calls you offering to switch your repayment for a fee, that is a scam. Hang up immediately. No question. It's truly incredible that people charge for something the government does for free. Yeah, every single time. And people keep paying for it, which is the part that gets me. So here's what I want you to know. You just sat through this whole episode, which means you actually know more about this than most people with student loans do. And that's real. That matters. There is still time.

MayaYeah.

Becca HartwellThe window is open right now. Right now, log in, run the sim, pick a plan. Five minutes this week could genuinely change what you pay for the next 20 years. That's not exaggeration. That's just math. And you've got this. OK, so what an episode. If your brain is a little full right now, that is completely on purpose because this stuff matters and people have been getting it wrong for months, right? And honestly, sorry, let me back up. What really stuck with me most is what you said about the auto enrollment trap. If you do nothing, they just pick the most expensive plan for you. The phone plan analogy. Yeah, that's the one. And the bigger takeaway here is simple. The 90-day window is not free time. The backlog is real, and every week you wait costs you. So the one thing we need you to walk away with? Just log into studentaid.gov before July 1st. Seriously, just confirm where you stand. That's it. That's step one. Don't wait for July. We said it like four times, and we meant it. It every single time because you will wait and then regret it. And look, if this episode actually helped, share it with someone who's been putting it off. You know who I mean. We're here every Tuesday. Thanks for listening to Money Unlocked. Log in to studentaid.gov this week. Seriously. We'll see you next week.