Student Loan Repayment Plan Denied? What to Know in August 2025

Ever since President Trump signed the One Big Beautiful Bill Act into law on July 4, 2025, student loan borrowers have faced major confusion about what comes next for their repayment plans.

One of the biggest impacts of the Big Beautiful Bill on student loans is the elimination of the Saving on a Valuable Education (SAVE) repayment plan. Those currently on the SAVE plan will have some major decisions to make, and just as notably, those who have applied for the SAVE plan should expect to receive a student loan repayment plan denial in the coming weeks.

So what should you do if you’re currently on the SAVE plan, and what’s the best move if your student loan repayment plan application gets denied? We’ll explore these questions below.

Table of Contents

1. What’s going on with the SAVE plan?
   1. Why is the SAVE plan going away?
2. What to do if you’re currently on the SAVE plan
3. What to do if you receive a student loan repayment plan denial
4. How to manage higher student loan payments
   1. Reduce your discretionary spending
   2. Save money in a high-yield savings account
   3. Pick up a part-time job or side gig
   4. Pay down debt efficiently
   5. Sign up for autopay

What’s going on with the SAVE plan?

The One Big Beautiful Bill Act paves the way for the elimination of the SAVE plan (as well as many other income-driven repayment plans); in addition, a spokesperson for the Department of Education has now called the SAVE plan “illegal.”

Why is this so problematic? According to a report by POLITICO, roughly 31% of outstanding income-driven repayment plan applications are for the SAVE plan. The Education Department plans to deny all 460,000 of these applications.

Many applicants may not be aware they applied for the SAVE plan, as they simply requested the plan with the lowest possible payment. The SAVE plan, which capped payments at 5% of a student’s discretionary income, would have provided that lowest possible payment.

Why is the SAVE plan going away?

As part of the One Big Beautiful Bill Act, most of the federal government’s current income-driven repayment plans will be eliminated, including the:

• Income-contingent repayment (ICR) plan
• Pay as You Earn (PAYE) plan
• SAVE plan

The income-based repayment (IBR) plan will remain, though it will be modified a bit to expand eligibility. Depending on when you took out your loans, IBR caps your payments to 10% or 15% of your discretionary income.

Anyone who is on the ICR, PAYE, or SAVE plan eventually must change plans to one of these three options:

1. The IBR plan
2. The Standard Repayment Plan, which is also being modified to extend payment terms beyond 10 years.
3. The new Repayment Assistance Plan (RAP), coming July 1, 2026. RAP is a new income-driven repayment plan that, like SAVE, adjusts student loan payments to the borrower’s income, but it will require everyone to pay at least $10/month. Interest not covered by the monthly payment will be waived, like SAVE currently does.

This move will need to happen by July 1, 2028, at the latest, or existing loans will be automatically moved to the RAP (Direct Loans) or the IBR plan (Federal Family Education Loans and Direct Consolidation Loans that repaid a Parent PLUS loan).

Those on the SAVE plan are in more of a pickle. The Biden-era plan was in administrative forbearance (and continues to be) because of court battles over the plan’s legality, meaning borrowers haven’t had to make payments for months. During this time, the interest rate has been 0%—so borrowers have been in a sort of repayment limbo.

However, starting Aug. 1, 2025, interest on loans under the SAVE plan began accruing interest again, even though payments didn’t resume. 

What to do if you’re currently on the SAVE plan

If you’re still enrolled in the SAVE plan, you don’t have to make any payments. However, interest will accrue. This is bad for two reasons:

1. Because payments haven’t resumed, you’re missing out each month on progress toward loan forgiveness.
2. Your overall total due will start to balloon quickly.

Thus, you should take action soon. You can:

• Apply to switch to another IDR plan or the Standard Repayment Plan.
• Refinance your federal loan with one of the best student loan refinance companies, if you don’t think you’ll qualify for loan forgiveness and won’t qualify for IBR. Prequalify with Credible to preview rates and comparison shop, or check out top-rated lenders like SoFi and ELFI. (But remember: IBR eligibility requirements are now more lax, so it’s worth looking into that first.)
• Pay off your student loans with a lump sum, if you have the money available.

The first option is probably the most practical route for most borrowers. To switch from SAVE to a new repayment plan, you can apply online or contact your loan servicer.

If you’re looking for income-driven repayment, remember that ICR and PAYE will be phased out by July 2028. It may only make sense to switch to one of them if the payments are more manageable than standard repayment and you will pay off your balance before you’re forced to switch plans again.

Expect delays, however. Because interest is accruing in the meantime, I recommend making payments toward federal loans on the SAVE plan if you’re able, even though they aren’t required. Even if the amount is small, it’ll save you money on interest in the long run.

If you are currently on the SAVE plan, I recommend ensuring your information is current, revisiting your budget to make any necessary adjustments, and meeting with a financial professional, such as a counselor, advisor, or planner, to develop a long-term repayment strategy tailored to your goals.  

What to do if you receive a student loan repayment plan denial

If you’ve recently applied for an income-driven repayment plan and specified that you want the lowest possible payment, you are likely among the 460,000 borrowers who will receive a student loan repayment plan rejection. So what should you do?

Reapply for a different IDR plan. Again, remember that switching to PAYE or ICR is really just a stop-gap until they are phased out, so your best bet is to apply for IBR if you expect to be making student loan payments beyond July 1, 2028.

How to manage higher student loan payments

Regardless of the plan you end up on in place of SAVE, monthly payments will likely be higher than what they would have been on the SAVE plan—potentially by hundreds of dollars—so you’ll need to adjust your budget to accommodate the higher student loan payments. That’s easier said than done, of course, but there are ways to manage.

Here are some tips for managing higher student loan payments:

Reduce your discretionary spending

If you’re living paycheck to paycheck, you have probably already cut as much discretionary spending as possible. But when faced with the threat of higher student loan repayments each month, it’s worth reviewing again. Here are some of the easiest discretionary expenses to cut:

• Streaming services
• Gym memberships
• Eating out 
• “Fun” purchases, like concerts, video games, and new clothes

Save money in a high-yield savings account

If you keep money in a savings account, make sure you’re earning more than the national average interest rate (0.38%). Some high-yield savings accounts pay from 3% to 4% APY (annual percentage rate).

For instance, if you have $500 set aside for emergencies and you let it sit for a year, here’s how much you’d earn in interest, depending on the bank account’s APY:

APY	1-year earnings
0.01%	$0.05
0.38%	$1.90
3.00%	$15
4.00%	$20

Pick up a part-time job or side gig

Getting a part-time job on weekends or joining the gig economy (rideshare driver, food delivery, dog sitter, etc.) can help generate extra income to cover the increase in your student loan payment.

Pay down debt efficiently

If you have multiple federal student loans with various interest rates, you’ll obviously need to make the minimum payment on each every month. But if you have extra cash to pay down your debt, focus on the highest-interest loan first.

When that’s paid off, put all extra funds toward your second-highest, and so on. This is called the debt avalanche method and will save you more money in the long run.

Sign up for autopay

Finally, the federal government offers a 0.25% student loan interest rate discount if you enroll in automatic payments. Unfortunately, this won’t actually lower your monthly payment (you’ll just pay a little more toward the principal instead), but it will save you money in the long run.

I encourage clients on income-driven repayment plans to regularly revisit their budgets and reduce discretionary spending where possible, focusing on items they can temporarily live without. If their payments are increasing, we discuss the potential need to draw from savings, if available, and explore side income opportunities that align with their lifestyle, emphasizing that this doesn’t need to be a permanent solution. Additionally, since payments are based on income, contributing more to pre-tax accounts, such as an employer-sponsored retirement plan, HSA, or FSA, can be a strategic way to reduce adjusted gross income and potentially lower future student loan payments.