If you have federal student loans and you have spent the last couple of years not thinking about them, that was by design — and it is over. The SAVE plan, which parked more than 7 million borrowers in a 0% interest forbearance with no required payments, has been unwound. Interest has been running on those balances since August 1, 2025, and the plan's forbearance officially wound down by September 30, 2026. The Education Department has emailed SAVE borrowers to choose a new repayment plan, and the fine print matters: once your servicer's notice reaches you, you have roughly 90 days to make a choice. Miss it and you are not left alone — you are swept into the Standard Plan, which can mean the highest monthly payment of any option. Here is what actually changed, what it is costing you, and how to choose on purpose instead of by default.
What actually changed — the short version
SAVE (Saving on a Valuable Education) was blocked by the courts in 2024 and put into a forbearance that charged 0% interest and required $0 payments. That was the holding pattern millions of borrowers lived in. Two things have since ended it. First, interest came back: starting August 1, 2025, SAVE balances began accruing again, even though payments were still paused. Second, the plan is being retired entirely. Under the 2025 budget law, SAVE and the other older income-driven plans are being phased out, and borrowers are being moved off them.
The replacement framework is already live. As of July 1, 2026, new borrowers choose between just two tracks — a fixed Standard Plan and a new income-driven option called the Repayment Assistance Plan (RAP). Existing borrowers coming off SAVE get a wider menu for now, including the Income-Based Repayment (IBR) plan, but the window to use some of those older plans is closing. The practical message from the Department of Education, and from state attorneys general who have urged borrowers not to wait, is the same: pick a plan yourself, soon.
The number that's been quietly growing: about $3,500 a year
A 0% forbearance felt like a gift, and in a sense it was. But the moment interest resumed, the meter started running again — and for most borrowers it is not a small number. Analyses at the time interest switched back on pegged the average cost at more than $3,500 per year, or roughly $300 a month, in freshly accruing interest on SAVE balances. That is interest building on a balance you may not have touched since 2024.
Even for borrowers whose payments are still technically paused, the balance has not stood still. More than a year of accrual sits on top of the principal now. And the new federal interest rate backdrop is not cheap: undergraduate Direct loans disbursed for the 2026–2027 year carry a 6.52% fixed rate, a touch higher than the prior year. The takeaway is simple — the cost of doing nothing is no longer zero, and it compounds every month you delay choosing a plan that actually fits your income.
Your four real options coming off SAVE
- Repayment Assistance Plan (RAP) — the new income-driven plan, open to all Direct Loan borrowers. Your payment is a tiered share of your adjusted gross income, there is a $10 minimum floor, and any remaining balance is forgiven after 360 qualifying payments (30 years). Its signature feature: making your full on-time payment reduces your principal even in months when the payment doesn't cover all the accruing interest — the plan absorbs the difference, which prevents the runaway-balance problem older plans were infamous for.
- Income-Based Repayment (IBR) — the surviving legacy income-driven plan. It can offer a lower payment than RAP for some borrowers and keeps a 20- or 25-year forgiveness timeline, but the enrollment window for new entrants has been tightening, so don't assume it will be available indefinitely.
- Standard Plan — fixed monthly payments over a set term (commonly 10 years, up to 25 for larger balances). It pays the loan off fastest and cheapest in total interest, but the monthly payment is the highest of the bunch. This is also the plan you get dumped into automatically if you don't choose, which is exactly why a passive borrower can be blindsided by a large bill.
- Tiered / graduated-style Standard — payments that start lower and step up over time. It can ease the transition if your income is rising, but you pay more interest overall than on the flat Standard Plan.
How RAP turns your income into a payment
RAP is built around your adjusted gross income (AGI), and the formula is a published ladder. Find your AGI band and that's the share of income your annual payment is based on, divided into 12 monthly installments — then reduced by $50 per month for each dependent, with a hard floor of $10 a month if your income is very low.
- AGI of $10,000 or less: a flat $10 per month
- $10,001–$20,000: 1% of AGI
- $20,001–$30,000: 2%
- $30,001–$40,000: 3%
- $40,001–$50,000: 4%
- $50,001–$60,000: 5%
- $60,001–$70,000: 6%
- $70,001–$80,000: 7%
- $80,001–$90,000: 8%
- $90,001–$100,000: 9%
- $100,001 and above: 10%
- Then subtract $50 per dependent per month, down to the $10 floor.
Run your own numbers before you commit
A quick example shows why the plan you pick matters. A borrower with an $80,000 AGI and no dependents lands in RAP's 7% band — roughly $5,600 a year, or about $467 a month. The same borrower on a 10-year Standard Plan for a $45,000 balance at 6.5% would owe closer to $511 a month. Add one dependent and the RAP payment drops by $50, widening the gap. Flip the facts — a small balance and a solid income — and Standard can actually be the cheaper lifetime choice because you clear the debt before interest piles up.
There is no single right answer; it depends on your balance, your income, your family size, and whether you are chasing forgiveness or a fast payoff. Before you accept whatever your servicer defaults you into, model the monthly payment and the total interest for each plan side by side.
The 90-day clock — and the extension wrinkle
This is the part that catches people. When your servicer sends the notice to choose a new plan, you have about 90 days to act. Do nothing and you are not kept in limbo — you are enrolled in the Standard Plan, which may carry the steepest monthly payment of any option and can hit a stretched budget hard. Some SAVE borrowers reported receiving short deadline extensions of up to roughly 30 days in late September 2026 as servicers worked through the volume, but an extension you can't count on is not a plan. Treat the date on your own notice as real.
One more thing worth knowing while you decide: the federal tax exemption that made forgiven student debt tax-free at the federal level lapsed at the end of 2025, so balances forgiven starting in 2026 may be treated as taxable income. It doesn't change which repayment plan is right for you today, but it is a reason to understand the long-run math rather than banking everything on an eventual write-off.
What to do this month
Don't wait for the default. Log in to StudentAid.gov, confirm which servicer holds your loans, and check whether your transition notice has already been sent — that notice, not a news headline, starts your personal 90-day clock. Then compare at least two plans (RAP against Standard, and IBR if you still qualify) on monthly payment and total interest before you choose. Choosing on purpose almost always beats being auto-enrolled.
The SAVE forbearance did borrowers a real favor for a while, but it also lulled a lot of people into treating their loans as someone else's problem. That era is finished: interest has been accruing for over a year, the plan is gone, and the Education Department has handed more than 7 million borrowers a decision with a deadline attached. The good news is that the new RAP plan is genuinely more forgiving than the plans it replaces — it caps payments at a share of income, protects you from runaway interest, and forgives what's left after 30 years. The bad news is that none of that helps if you let the clock run out and get swept into a Standard payment you didn't budget for. Spend 20 minutes this week: find your balance, estimate your payment under each plan with our Student Loan Calculator, and make the choice yourself before the default makes it for you.
