Student-loan borrowers are coming up on the first deadline to transition off a key repayment plan.
Beginning July 1, borrowers who were enrolled in SAVE — the Biden-era plan that allowed for lower payments — began receiving notices with a 90-day timeframe to transition off the plan after the Trump administration eliminated it.
That set the deadline for the first batch of borrowers at the end of September. However, those borrowers then received a “final notice” that they had 30 more days to select a new plan or be automatically placed in a standard or tiered plan, the most expensive options.
With that extension, November 1 is expected to be the first deadline, during which borrowers could be involuntarily moved to a more expensive plan.
An Education Department spokesperson confirmed to Business Insider that nearly 2 million borrowers — out of 7.5 million on SAVE — have selected a new plan.
“Borrowers who have not switched plans should take immediate action by visiting StudentAid.gov and selecting a new repayment plan today,” the spokesperson said, and did not comment on how quickly borrowers would be placed in a standard plan.
Other borrowers have received their “final notice” in waves from different federal servicers. The Education Department has recommended that borrowers enroll in its new Repayment Assistance Plan, an income-driven plan that took effect July 1. Borrowers who enrolled in the plan over the past few months said that it’s less generous than SAVE, with some seeing their payments spike hundreds of dollars.
The SAVE transition — and accompanying higher payments — come at a time when student-loan defaults are at a record high. Recent data from Federal Student Aid showed that 9.3 million borrowers are in default, with an additional 1.3 million set to default over the next six months. Borrowers facing higher bills have said they’re worried about the consequences of default, which include the seizure of wages and federal benefits, like Social Security.
“When I saw how much the payment is expected to be, I freaked out for a whole week,” said Cristian Barcenas, a borrower transitioning off SAVE. “I, under no circumstances, want to default.”
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