Student Loan Alert: Strategic Moves to Make as SAVE Ends

Millions of federal student loan borrowers are facing a new financial reality as the SAVE (Saving on a Valuable Education) plan effectively ends. As of August 1, 2025, interest has begun accruing again for the 7.7 million borrowers who enrolled in the program. Originally intended as a relief measure under the Biden administration, SAVE provided generous benefits—most notably, a payment cap based on 5% of discretionary income and interest waivers for those who couldn’t make full payments.  

However, legal challenges have dismantled key elements of the plan, forcing the Department of Education to halt its expansion. Borrowers can remain in forbearance under SAVE for now, but interest will accrue as of August 1st. Furthermore, under the Trump administration’s new legislative package  SAVE, along with other plans like PAYE and ICR, will be phased out for new borrowers by July 1, 2026. Existing enrollees must shift into a legally compliant repayment plan, such as the Income-Based Repayment (IBR) plan or the new Repayment Assistance Plan (RAP), by July 1, 2028.  

Based on the changes in store, student loan borrowers should consider taking the following proactive steps: 

1. Compare Your Repayment Options  

Borrowers evaluating next steps must carefully compare available repayment plans. The most immediately accessible option is IBR, which now includes expanded eligibility due to recent policy updates. Unlike in the past, there is no longer a requirement to demonstrate partial financial hardship to enroll. IBR caps payments at 10% of discretionary income for most borrowers (or 15% for older loans) and offers loan forgiveness after 20 or 25 years, depending on when the loan was issued.  

By contrast, the Repayment Assistance Plan (RAP) is a forthcoming option, set to launch in July 2026. RAP is designed to cap monthly payments between 1% and 10% of income and stretches repayment terms out to 30 years. While it may offer lower upfront payments for some borrowers, total repayment costs could be higher due to the extended timeline and interest accrual. For borrowers pursuing forgiveness through the Public Service Loan Forgiveness (PSLF) or other federal programs, IBR remains the more strategic choice.  

2. Estimate New Payment and Budget Accordingly 

The first step for any borrower is to estimate what their new monthly payment will look like. Tools like the StudentAid.gov Loan Simulator allow borrowers to input their income, family size, and loan information to compare different plans, including IBR, RAP (when available), and standard repayment options. This is especially important because monthly obligations under IBR can be nearly double those under SAVE for many individuals.  

From there, borrowers need to decide whether to remain in forbearance, switch repayment plans, or, if financially feasible, pay off their loans. Staying in SAVE forbearance might delay required payments, but interest will start accruing, and months spent in forbearance won’t count toward forgiveness programs like Public Service Loan Forgiveness (PSLF). Switching to IBR now can preserve progress toward forgiveness and help prevent balances from growing uncontrollably, though borrowers must be prepared for the higher monthly costs.  

Budgeting becomes crucial in this transition. Borrowers should assess their cash flow and make adjustments to absorb the upcoming increase in student loan payments. This may involve cutting discretionary spending, reprioritizing financial goals, or adjusting savings plans. For borrowers not relying on federal protections, refinancing might seem appealing but it’s important to weigh this option carefully. While refinancing through a private lender could lower interest rates, it also eliminates eligibility for federal relief programs, forgiveness, and flexible repayment options.  

3. Understand the Broader Financial Impact 

The financial ripple effect of higher student loan payments cannot be ignored. For many families, these added costs will impact their ability to contribute to retirement accounts, build emergency savings, or make progress toward major life goals such as homeownership or funding a child’s education. Some households may be forced to scale back on extracurricular activities or delay family plans as cash flow tightens.  

This situation underscores the need for a comprehensive financial strategy. Borrowers should work with an advisor to reassess their financial roadmap, ensuring that debt repayment doesn’t derail other long-term objectives. Thoughtful prioritization is key—some may need to pause non-essential investments temporarily, while others can make small adjustments across multiple spending categories to stay on track.  

4. Tax and Forgiveness Considerations  

In this new repayment landscape, borrowers should also revisit how their student loans affect their tax strategy. The student loan interest deduction may still apply for those within income limits, offering some relief. It’s also vital to understand how income is calculated for IBR and RAP eligibility adjusted gross income (AGI) is the benchmark, so managing taxable income through retirement contributions or other means can help optimize repayment amounts.  

For those pursuing Public Service Loan Forgiveness, IBR remains a qualified plan. It’s essential to confirm that monthly payments are being applied correctly and that employment certification is up to date. Meanwhile, borrowers waiting for forgiveness under the paused SAVE program may experience delays, but the Department of Education has indicated that excess payments will be refunded once systems are fully updated.  

A new Factor to Consider

A new factor to consider is the PSLF Buyback program. This program was introduced to help borrowers who lost PSLF credit due to certain deferments or forbearances (like the SAVE plan situation). It essentially allows you to “buy back” those non-qualifying months by making a lump-sum payment later, so they count toward your 120 months

Financial Outcome Comparison:

• Scenario A (Switch Now): You switch to IBR/PAYE now and make 60 payments of (for example) $200 each over 5 years. That’s $12,000 out-of-pocket over time. At forgiveness, any remaining balance (with accrued interest) is $0 to you, forgiven by PSLF.

• Scenario B (Stay & Buyback): You stay in forbearance for 5 more years (60 months). Interest accrues on your say $50k loan, growing it, but you ignore that for now. You reach 120 months of employment. You then apply for buyback. The servicer calculates your IDR payment for those 60 months would have been ~$200 on average. You must pay a lump sum of $12,000. After paying, those 60 months count, bringing you to 120 qualifying payments at once, and PSLF forgives the now-larger balance. Out-of-pocket: $12,000 (lump sum at the end).

• In both scenarios, you paid $12,000 in total. In B, you got to hold onto that money longer (till year 10) which could be an advantage (you could invest or use it in the meantime), but you also had to come up with it all at once.

• The big difference is in timing and risk: Scenario A spreads the cost and ensures you’re done by year 10. Scenario B delays the cost (good if you have other priorities now) but concentrates it at the end and carries risk if something changes.

So, should you consider staying on SAVE and using buyback?

It can be a viable approach if:

• You are certain you will stay in public service for the full 10 years and complete PSLF.

• You prefer not to or cannot pay now but expect to be able to pay later (perhaps expecting higher earnings down the road or having savings by then).

• You understand the process and are comfortable navigating the buyback request when the time comes.

However:

• If you can afford payments now without undue hardship, making them (and avoiding the lump-sum scenario) might be simpler and less stressful.

• Any unforeseen event (job change, emergency, program glitches) could leave you with a larger balance and no forgiveness if you haven’t been making progress.

• The buyback doesn’t save you money on required payments; it just postpones them. You’re basically deferring your IDR payments to the end.

✅ Monotelo Strategic Checklist  

Action	What to Do
1. Estimate Your Payment	Use the Loan Simulator with your current income and familial data
2. Decide on a Plan	Compare IBR vs. RAP (once available), or consider full payoff or refinancing
3. Budget Ahead	Adapt cash flow now to prepare for rising payments
4. Preserve Forgiveness Paths	If eligible for PSLF, confirm repayment counts under IBR or RAP
5. Make Tax-Eligible Moves	Leverage deductions and keep annual income documentation updated

Conclusion  

The end of the SAVE interest pause marks a pivotal moment for student loan borrowers. With interest resuming as of August 1, those who take proactive steps now will be best positioned to manage higher monthly payments without jeopardizing their financial stability. Whether it’s switching to IBR, adjusting your budget, or exploring tax-smart strategies, careful planning can help you weather this transition and stay aligned with your broader financial goals.  

At Monotelo, we believe in helping you make confident financial decisions even in uncertain policy environments. If you’re unsure how these changes affect your specific situation, schedule a consultation with one of our advisors. Together, we can create a plan that balances loan repayment with your long-term financial success. 

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