Some 8 million student loan borrowers could be forced to restart payments sooner than expected after a federal appeals court upheld an injunction against the Saving on a Valuable Education (SAVE) repayment plan last week.
The court's decision has all but guaranteed the end of SAVE, financial advisors say. The Biden administration introduced the SAVE program in 2023 after failing to achieve broader student loan forgiveness. Under SAVE, borrowers saw significantly smaller monthly payments compared to other income-driven repayment plans and a generous interest subsidy that helped put an end to runaway interest accrual.
After the most recent court ruling, the case will be sent back down to the lower district court for a final ruling. The Trump administration could appeal the case to the Supreme Court, but experts don't expect that to happen.
READ MORE:
Some experts have suggested that student loan holders could be impacted within weeks, while others have said that SAVE borrowers could stay in their current forbearances until early 2026. But regardless of exactly when the program ends, advisors say that financial planners should help borrowers start taking steps now to prepare for payments to restart.
Reach out to the loan servicer
Borrowers are often ill-informed about the repayment options available to them on federal student loans, research from the
READ MORE:
Borrowers can call their loan servicers to get a better idea of the options available to them, but many borrowers leave those calls just as confused as they were to start with, according to Assunta "Susie" McLane, managing director and senior wealth advisor at Summit Place Financial Advisors in Summit, New Jersey.
"A lot of student loan holders don't always understand what they're listening to," McLane said. "So as an advisor, I would say that to the extent that you know that a child, or a client's child, is going through this, offer to get on the phone with them and help them understand those options."
Discuss other repayment options
Even with the SAVE plan likely to disappear, federal student loan borrowers still have an assortment of other repayment plans available to them, depending on their income and family size.
Ethan Miller, founder of Planning for Progress in Washington, D.C., said that it's crucial for advisors to understand the numerous options available to their clients dealing with student loans.
The SAVE program allows for lower monthly payments across a variety of income and family scenarios, estimates from the Federal Student Aid website show. But other income-driven repayment plans can still help keep monthly payments lower than they would be on standard repayment plans.
The big decision advisors have to help their clients make is whether they're going to shift to a new repayment plan now or wait until SAVE, and the current forbearance period, ends.
"Either we're going to wait it out and then do this, or we're actually going to make a change now," Miller said. "Because there's more that's sort of in your control now if you make a change, instead of just waiting for whatever to happen and potentially [see] other avenues be closed at that point."
Determine long-term goals
The cornerstone of any student loan repayment plan going forward should be based on the client's long-term strategy — namely, whether they're planning to repay the loan or seek forgiveness, Miller said.
The most important thing is to identify what is the ultimate strategy that you and your clients are pursuing," Miller said. "A lot of that depends on, you know, what is the loan balance that they have? Is it a $10,000 or $20,000 loan balance, or is it a $200,000, $300,000, $500,000 loan balance?"
READ MORE:
If a SAVE borrower has the money to pay off their loans now, it might be worth letting that money grow in a high-yield savings account until loan forbearance officially ends, Miller said. Others might be better off making the move from SAVE to another income-driven plan now if they're close to achieving the necessary number of payments for loan forgiveness.
Determining that long-term strategy can be complicated by factors beyond the loans themselves. One of Miller's clients who works as a federal employee has been working toward public service loan forgiveness. Now, that strategy could be under threat as they face potential layoffs from the Trump administration, Miller said.
"It's important for advisors to have all the information [about] student loan options, what their clients' ultimate plan is and what might happen over the next few months," Miller said. "I would say no one really knows what's going to happen except that SAVE is probably not going to be around that much longer."
