Nearly 460,000 Student Loan Repayment Plans
Denied: What Borrowers Should Know in 2025
Washington,
D.C., July 19, 2025 In a major setback for federal student
loan borrowers, the U.S. Department of Education is preparing to reject nearly 460,000 repayment plan applications.
These applications were part of the income-driven
repayment (IDR) system, which helps struggling borrowers make
affordable monthly payments.
According to internal documents first reported by POLITICO, these denials represent about 31% of a 1.5 million application backlog. Most of the affected borrowers had selected the lowest monthly payment option, unknowingly choosing a plan that’s currently on hold the SAVE Plan.
What Is the SAVE Plan and Why Was It Blocked?
The SAVE Plan introduced under President Joe
Biden’s administration aimed to reduce monthly payments significantly:
·
5%
of discretionary income for undergraduate loans
·
10%
for graduate loans
But in June
2024, federal courts blocked
the SAVE Plan, declaring it illegal
under current education laws. Since then, loan servicers cannot process
applications for SAVE, leading to automatic denials for those
who selected it.
“Loan servicers cannot process these applications as SAVE is no longer an option, as it is illegal,” a Department of Education spokesperson told POLITICO.
What Happens to Borrowers in SAVE Now?
Borrowers who already enrolled in the SAVE
Plan have been placed into forbearance a temporary pause in repayment while the court battle continues.
The Department of Education says it plans to transition SAVE borrowers into new plans by Fall 2025. However, they are also urging affected individuals to explore other repayment plans immediately, especially if their income has changed.
New Repayment Plans Replacing SAVE
As part of new reconciliation legislation
introduced under President Donald
Trump’s administration, the Education Department is overhauling
the student loan repayment system.
The agency plans to:
·
Eliminate
the complex matrix of IDR options
·
Introduce two
simpler repayment plans
·
Focus on cost-saving
strategies for taxpayers
Officials argue this will make repayment more straightforward and less confusing for borrowers.
Experts Raise Red Flags
Student loan advocacy groups and servicer
experts are worried. They say many borrowers didn’t realize they were applying
for the SAVE Plan they simply chose the lowest payment option available at
the time.
“It’s a bit of a struggle to understand if
they intended to apply for SAVE,” said Scott Buchanan of the Student Loan
Servicing Alliance.
Meanwhile, debt relief advocates like Persis Yu of the Student Borrower Protection Center
are warning about long-term financial impacts.
“Since this time hasn’t counted toward cancellation, it means people will be paying more over the life of the loan,” she said.
What Should Borrowers Do Now?
If your repayment application was denied, don’t panic. Here’s a quick guide on what you can do:
| Step | What You Should Do |
|---|---|
| Recheck your application | Log in to your loan servicer’s portal |
| Reapply for another plan | Choose a plan other than SAVE |
| Contact support | Speak with a representative at MOHELA or Aidvantage |
| Check income updates | If your income changed, re-calculate your payment |
| Educate yourself | Visit studentaid.gov to understand your options |
Impact at a Glance
| Metric | Details |
|---|---|
| Total Borrowers Denied | 460,000 |
| Total Backlog | 1.5 million |
| SAVE Plan Status | Blocked since June 2024 |
| Expected Transition | Fall 2025 |
| President | Donald Trump |
FAQ: Common Questions About This Update
Q1. Why
was my student loan repayment plan denied?
A: Most denials are due to the
SAVE Plan being blocked by the courts. If you selected the lowest payment
option, your application likely targeted SAVE by default.
Q2. Can
I apply again?
A: Yes. You can reapply for a
different Income-Driven Repayment plan that’s still active.
Q3. Will
I lose progress toward loan forgiveness?
A: Time spent in SAVE
forbearance does not count toward
forgiveness. Re-enrolling in an active plan will help resume progress.
Q4. Will
I owe more now?
A: Possibly. If your income
increased or you delay choosing a new plan, your new monthly payments may be
higher.
Q5. Is
SAVE ever coming back?
A: That depends on the court
decision, expected later this year. For now, it remains blocked.
Conclusion
The denial of over 460,000 applications has
left many student loan borrowers in limbo. While the Biden-era SAVE Plan
promised relief, the legal roadblock and policy changes under the Trump
administration have reshaped the future of loan repayment.
For now, borrowers are urged to stay informed, review their options, and reapply for eligible plans to avoid falling behind.
