New federal law begins phasing out the Biden administration’s SAVE repayment program, requiring many borrowers to choose new repayment plans in the months ahead. Some could see monthly payments increase by more than $100, depending on their financial circumstances.

ANN ARBOR – A sweeping overhaul of the federal student loan repayment system begins July 1, setting in motion changes that could eventually increase monthly payments for thousands of Michigan borrowers.

At least 140,000 Michigan residents enrolled in the Biden administration’s SAVE income-driven repayment program while enrollment remained open, according to the Michigan College Access Network (MCAN). Because enrollment was suspended during court challenges, the organization says that figure likely understates the total number of Michigan borrowers currently enrolled in SAVE.

While borrowers will not see higher payments overnight, the U.S. Department of Education will begin implementing a transition away from the SAVE program under legislation approved by the Republican-controlled Congress and signed into law by President Donald Trump. Borrowers will receive notices explaining their repayment options and deadlines for selecting a new plan.

Some borrowers could see monthly payments increase by more than $100 under the new repayment system, although the exact amount will depend on income, family size, loan balance and the repayment plan they ultimately select. Others may see smaller changes or little change at all.

Michigan residents collectively owe an estimated $51.6 billion in student loan debt, making the state one of the nation’s largest student loan markets. An estimated 1.4 million Michiganders carry student loan debt, according to national education data.

“It’s hard to track down solid numbers, but at least 140,000 Michiganders enrolled in SAVE while registration was open, which would be roughly 10% of all borrowers,” said Ty Forquer, Strategy Manager for Strategic Engagement at the Michigan College Access Network.

Why the Rules Are Changing

The changes are part of the One Big Beautiful Bill Act, approved largely along party lines by the Republican-controlled House and Senate and signed into law by President Donald Trump.

The legislation replaces major portions of the Biden administration’s SAVE repayment program with a new repayment framework intended to simplify federal student loan repayment and reduce long-term costs to taxpayers.

Supporters argue the previous system placed too much of the financial burden on taxpayers while creating multiple overlapping repayment plans that confused borrowers.

Critics counter the changes will increase monthly payments for many working families and make higher education less affordable.

What Borrowers Need to Know

Beginning July 1, the federal government starts implementing the largest overhaul of student loan repayment in years.

Among the major changes:

  • The SAVE repayment program will be phased out over time.

  • A new Repayment Assistance Plan (RAP) becomes the primary income-driven repayment option for future borrowers.

  • Students taking out new federal loans will have fewer repayment choices than previous borrowers.

  • Parent PLUS borrowers lose some repayment flexibility available under previous rules.

  • Borrowers enrolled in automatic payments become eligible for a larger interest-rate discount.

Borrowers currently enrolled in SAVE should closely watch for communications from their loan servicer and the U.S. Department of Education explaining available repayment options and applicable deadlines. Many borrowers will have a limited window to select a new repayment plan before being placed into a default option.

Michigan Economy Could Feel the Impact

The student loan changes extend beyond household budgets.

Economists say higher monthly debt payments leave consumers with less money to spend on housing, automobiles, restaurants, retail purchases and other sectors that drive Michigan’s economy.

Young professionals working in healthcare, education, manufacturing, government and technology could be among those most affected.

“This isn’t just a higher education story,” said [Michigan economist or financial aid expert]. “If thousands of Michigan residents have less disposable income each month, local businesses will eventually feel that impact as well.”

Parents Also Face Changes

Families relying on Parent PLUS loans to help pay college expenses also will see new restrictions.

Future Parent PLUS borrowers will have fewer opportunities to qualify for income-driven repayment options than under previous federal rules.

Financial aid professionals encourage parents to carefully review repayment options before borrowing.

What Borrowers Should Do

Experts recommend borrowers:

  • Log into their Federal Student Aid account.
  • Verify their contact information.
  • Watch carefully for notices from their loan servicer.
  • Compare repayment options before deadlines arrive.
  • Contact their loan servicer with questions rather than waiting until payments change.

Ignoring notices could result in borrowers being placed automatically into repayment plans that may carry higher monthly payments.

Looking Ahead

Although the transition begins July 1, the repayment overhaul will unfold over the coming months as borrowers receive notices and select new repayment plans.

For Michigan’s approximately 1.4 million student loan borrowers, financial aid experts say the most important message is simple: pay attention to communications from your loan servicer. The choices borrowers make during the transition could affect their monthly budgets for years to come.