confused

June 24 (UPI) — On July 1, student loan servicers will begin notifying borrowers enrolled in SAVE repayment plans that they must switch to a new plan and borrower advocates warn that what comes next will likely be an increase in defaults and delinquencies.

Not all borrowers will receive a notice on July 1. In fact, many will not. The notices will be staggered across the millions of people enrolled in the SAVE program over the coming months. Once a borrower receives their notice, the clock starts on a 90-day window for them to enroll in an eligible repayment plan.

If a SAVE enrollee fails to switch to another repayment plan, they will be automatically enrolled in a standard repayment plan, which will carry a higher monthly payment requirement. In many cases, that plan will not be their most affordable option.

Betsy Mayotte, president and founder of the Institute of Student Loan Advisors, told UPI that the borrowers her organization hears from are more frequently expressing confusion over which plan is best for them.

“We’ve seen borrowers whose SAVE payment was $40 and their next lowest payment on a new plan is $400,” Mayotte said.

For many borrowers, they will be able to switch plans directly on the Federal Student Aid website. In most cases, this will be the simplest way to switch, Mayotte said. However, in some cases, this can create problems with unduly high payment requirements due to a glitch in the Department of Education’s website.

People who are married with both spouses having student loans may be assigned double the payment when applying through the Federal Student Aid site, Mayotte said. What the partners would pay together is misapplied to each spouse, effectively doubling their required payments.

What is supposed to happen, Mayotte said, is that the spouses apply together and their payment is “portioned out” considering both of their loans and incomes. Instead, the glitch is causing the amount not to be portioned, requiring each spouse to make that full payment.

Mayotte added that this glitch is not obvious to the borrower when they go through the application process, meaning it can fly under their radar.

In these cases, borrowers are advised to discuss their repayment options directly with their student loan servicer.

Borrowers who do not have new student loans after July 1 will continue to have access to the old income-driven repayment plans until July 1, 2028, when those programs end.

July 1 also brings about the deadline for Parent PLUS loan borrowers to consolidate their loans to be eligible for enrollment in an Income-Driven Repayment plan. New Parent PLUS loans taken out after this deadline, or loans that are not consolidated before it, will not have access to Income-Driven Repayment plans.

For Parent PLUS loans that have been consolidated, borrowers must enroll in an Income-Driven Repayment plan by July 1, 2028, or they will forfeit their eligibility.

Beginning with the coming school year, Parent PLUS loans will be capped at $65,000 total per student with two parents. Each student will have a separate $65,000 cap.

With the SAVE plan’s end, Mayotte said she expects defaults and delinquencies to rise. She said the borrowers who have historically been least likely to default are those who have made 12 to 24 payments consecutively on time.

The COVID-19 pandemic took about 40 million people out of that habit, Mayotte said.

“We had 3 million default in the last quarter of 2025,” she said. “I think the SAVE transition is going to continue that trend because people have no plan they can afford.”

“There are two big factors,” Mayotte continued. “One is lifestyle creep. They haven’t had to pay for two years and lifestyle creep happens. The other thing that’s happened is they were told their payment was going to be ‘x’ on SAVE and they made other financial decisions around that. If you’re told your payment’s going to be $100 on SAVE and then you budget to buy a house — all of the sudden your payment is not $100 a month, it’s $400 a month, you can’t take back that mortgage.”

Meanwhile, the cost of living has increased on all fronts in the United States.

“Payments are resuming at a higher rate for borrowers at the same time health insurance has gone up, gas prices, groceries, produce has gone up like 43% in the last three months,” Mayotte said. “It’s like a perfect storm, especially for low-income and middle-class families as far as expenses go.”

Amy Czulada, senior adviser for outreach and engagement with the Student Borrower Protection Center, told UPI that the difference between the SAVE plan and the next most affordable plans available for enrollees is “astronomical.”

The Trump administration is launching the Repayment Assistance Plan on July 1. It is a new income-based repayment plan approved by Congress last summer. It and the Income-Based Repayment plan will be the only plans based on income available to borrowers starting July 1, 2028, and the only plans for borrowers with new loans after July 1 this year.

About 3 million borrowers are enrolled in income-driven repayment plans that will sunset in 2028.

In its analysis of the RAP plan, the Student Borrowers Protection Center estimates that the average borrower with a college degree will pay more than $4,000 per year more in student loan payments.

“The difference in payments is just beyond anything folks are able to handle at the moment,” Czulada said.

The Student Borrower Protection Center, a student loan borrower advocacy organization, warns that the deadline for borrowers to pick new plans threatens to push borrowers back into a “broken and corrupt servicing system.”

The organization published its report “Repeat Offenders” earlier this month, detailing allegedly illegal acts and practices carried out by student loan servicers that exploit borrowers. Practices such as deliberately long wait times on phone calls, not providing borrowers with all the relevant information they need to plan their payments, illegally denying applications for affordable payment plans and deceiving borrowers to collect maximum interest rate charges.

The report also highlights that student loans changing hands across servicers, along with shifts in the Department of Education, creates opportunities for borrowers to be taken advantage of, have applications lost, payment histories misapplied and other shortfalls in service to borrowers.

“Folks often think they are conversing directly with the Department of Education,” Czulada said. “So there’s a lot of white labeling going on where these contractors are the ones interfacing with, but folks don’t necessarily know or understand that.”

Federal management of student loans is currently being moved from the Department of Education to the U.S. Treasury Department.

“What that has led to is that there’s not really a functioning federal student aid office that can take complaints and really dive into what the issues are,” Czulada said. “Borrowers are left really susceptible to all these practices and limited oversight and accountability.”

In March, the Government Accountability Office issued its review of Federal Student Aid’s monitoring of student loan servicers. It found that the FSA had stopped reviewing the accuracy of servicers’ records in February 2025, because of a lack of staff.

The Department of Education and other government agencies reduced staff broadly in 2025 under recommendations by the Trump administration’s short-lived Department of Government Efficiency, led by the world’s first trillionaire Elon Musk.

Nelnet and Mohela are the largest loan servicers contracted with the Department of Education.

Nelnet manages more than 12 million accounts worth more than $480 billion. It has received $3.1 billion in payments from the department since 2009.

In 2024, a Senate investigation found that more than 1.4 million duplicate student loan records appeared on borrowers’ credit reports when loans were transferred from Mohela to Nelnet. Earlier that year, the company was fined $1.8 million by the attorney general of Massachusetts for failing to keep borrowers in affordable repayment plans, stopping them from progressing toward student loan forgiveness.

Czulada said during the pandemic student loan servicers notoriously allowed borrowers to defer payments or enter forbearance rather than informing them about repayment options that would have counted toward loan forgiveness.

Mohela manages more than 7 million student loan accounts worth more than $318 billion and has received $1.54 billion in payments from the Department of Education since 2011. At least 347,000 of its borrowers are at least three payments behind and more than 75,000 defaulted last year.

More than 41,000 complaints were issued against the company by borrowers last year.

Mohela is rated by FSA as the servicer with the longest wait times for borrowers calling its service lines. Borrowers wait for 13 minutes on average to connect with a representative at Mohela and about 14% abandon their calls before reaching someone.

When callers do get through, Czulada said they are often redirected to other representatives or sent to webpages that do not function.

The American Federation of Teachers filed a lawsuit against Mohela in 2024 and has amended its complaints as recently as January. It alleges that the servicer and five more of the biggest student loan services have engaged in a call deflection scheme and have systemically delivered poor service to customers trying to stay in compliance with loan repayments.

“These companies are just continuing to get more money from the Department of Education for giving us the same terrible service over time,” Czulada said. “This has been really harmful to a lot of people. Like millions of people. Nothing is better evidenced by that than having almost 10 million people in default right now and almost another million careening towards default. In 2020 we also had a record number of people in default before the pandemic began. Moving back to the status quo is also not really an option.”