The U.S. Department of Education has begun notifying more than 7.5 million federal student loan borrowers that they must resume repayment or be automatically enrolled in new plans, marking a decisive shift away from pandemic-era relief and the now-defunct SAVE program.
The directive, confirmed by officials following a court-approved settlement ending the Saving on a Valuable Education (SAVE) plan, comes as the Trump administration moves to restart collections across a loan portfolio exceeding $1.7 trillion. The changes affect borrowers nationwide, including those in long-term forbearance and millions already in default.
Nicholas Kent outlined the administration's position at the American Enterprise Institute, stating: "What we have been trying to do is explain to borrowers that loan forgiveness is not happening." He added, "Not paying your loans is no longer an option, especially under this administration."
The policy reset targets two distinct borrower groups. Those enrolled in SAVE-many of whom have not made payments during nearly two years of legal uncertainty-must now select a compliant repayment plan. Meanwhile, roughly 8.8 million borrowers remain in default, some having missed payments for more than six years.
Federal loan servicers are expected to begin issuing formal notices on July 1, providing a 90-day window for borrowers to act. Those who fail to choose a plan will be automatically placed into either the Standard Repayment Plan or a newly introduced Tiered Standard Plan.
The administration is also introducing a replacement framework, the Repayment Assistance Plan (RAP), which ties monthly payments to income levels:
- Payments range from 1% to 10% of adjusted gross income
- Minimum monthly payment set at $10 for lowest earners
- Includes government interest subsidies
- Guarantees $50 monthly principal reduction
- Loan forgiveness available after 30 years
Policy analysts note that, despite income-based adjustments, some borrowers could face higher monthly obligations under RAP compared with the previous SAVE structure.
At the same time, operational control over defaulted loan collections is shifting. Under an agreement between the Education Department and the U.S. Department of the Treasury, enforcement responsibilities will increasingly fall to Treasury officials.
Scott Bessent described the move as necessary, stating it would bring "long overdue financial discipline" to what he called a system that had been "badly mismanaged for years." Defaulted borrowers currently account for approximately $180 billion in outstanding debt, or about 11% of the total federal portfolio.
While officials say they will initially prioritize voluntary compliance, enforcement tools remain available. Kent acknowledged that mechanisms such as administrative wage garnishment could be deployed if necessary. "While we have tools like administrative wage garnishment and Treasury offset, we want to make sure that we don't start with those tools," he said. "We are starting with tools that will help borrowers for the long term."
Administrative wage garnishment allows the federal government to seize up to 15% of a borrower's wages or federal benefits without court approval, a measure that had been largely dormant since the pandemic-era pause began in March 2020.
The shift has drawn criticism from lawmakers. Elizabeth Warren and several Senate Democrats described the Treasury transfer as an "illegal scheme," arguing it could create additional bureaucratic hurdles for borrowers already struggling to navigate repayment systems.
