The SAVE Plan Is Dead — What Veterinarians Need to Know and Do Right Now

If you have federal student loans — and especially if you’re currently enrolled in the SAVE (Saving on a Valuable Education) repayment plan — there are important changes happening this year that require your attention and, in many cases, immediate action.

What’s Happening

The SAVE plan has been permanently terminated following a court settlement earlier this year between the Department of Education and the State of Missouri. The more than 7.5 million borrowers still enrolled — many of whom have been in administrative forbearance since mid-2024 — are now being directed to choose a new repayment plan.

The Department of Education began sending initial email notices in late March 2026. Starting July 1, 2026, loan servicers will issue formal 90-day notices requiring borrowers to select a new plan. Borrowers who do not act by approximately September 30, 2026 will be automatically placed into the Standard Repayment Plan or the new Tiered Standard Plan — which for many means significantly higher monthly payments and no path to loan forgiveness.

For those who had $0 monthly payments under SAVE, this could mean going from paying nothing to hundreds of dollars per month. And once enrolled in the Standard Plan, failure to make payments starts the clock toward delinquency and potentially default.

The Key Dates

• Now through June 2026: Initial email notices from the Department of Education are being sent to all 7.5 million SAVE borrowers. These are informational, but they signal what’s coming.
• July 1, 2026: Loan servicers begin issuing formal 90-day notices. Borrowers will be contacted in waves, with those enrolled in SAVE the longest hearing from their servicers first. The new Repayment Assistance Plan (RAP) also becomes available on this date.
• ~September 30, 2026: Borrowers who have not selected a new plan will be automatically enrolled in the Standard Repayment Plan or the new Tiered Standard Plan. This is the effective end of the SAVE forbearance.

Why Aren’t Borrowers Being Automatically Placed Into an Income-Driven Plan?

This is a fair question — and one that consumer advocates have raised. The Department of Education could have chosen to automatically move borrowers into the most affordable alternative plan. Instead, borrowers who miss the 90-day window will be defaulted into the Standard Plan, which typically carries the highest monthly payment and does not qualify for IDR forgiveness (though the 10-year standard does qualify for PSLF).

The bottom line: borrowers who want to remain on an income-driven repayment plan must proactively apply. The government will not do it for them.

What Plan Should Borrowers Switch To?

This depends on when the borrower first took out federal student loans — a detail that matters more than most people realize.

If the first federal loan was disbursed on or after July 1, 2014 — the borrower qualifies for “New IBR”:

Switching to Income-Based Repayment (IBR) now is the recommended move. New IBR has the same core terms as PAYE — payments are 10% of discretionary income, capped at the 10-year Standard Repayment amount, with forgiveness after 20 years. The critical difference is that IBR is permanent. It has its own statutory authority under 20 U.S.C. § 1098e and was not affected by the SAVE litigation or the One Big Beautiful Bill Act’s plan phase-outs. PAYE, by contrast, closes to new enrollments by July 1, 2027, and is fully eliminated on July 1, 2028. Going straight to IBR means one switch with no second transition needed.

Additionally, the partial financial hardship requirement that previously limited IBR eligibility was removed by the One Big Beautiful Bill Act, effective July 4, 2025. This means borrowers at any income level can now enroll, regardless of whether their calculated IBR payment exceeds the Standard 10-year amount.

If the borrower first took out loans between October 2007 and June 2014 — they qualify for PAYE but only “Old IBR”:

This is where the decision gets more consequential, and where many veterinarians fall given typical vet school borrowing timelines. The difference between PAYE and Old IBR is significant:

• PAYE: 10% of discretionary income, forgiveness after 20 years
• Old IBR: 15% of discretionary income, forgiveness after 25 years

On a large veterinary school balance, that 5% difference in the payment calculation and the 5-year difference in the forgiveness timeline can translate to tens of thousands of dollars over the life of the loan.

For borrowers in this situation, switching to PAYE first as a bridge strategy — rather than going directly to Old IBR — is worth serious consideration. Here’s why:

1. Lower monthly payments. Paying 10% vs. 15% of discretionary income is a meaningful reduction in cash flow each month, especially on balances of $150,000 or more.
2. Shorter forgiveness timeline. PAYE offers forgiveness after 20 years compared to 25 years under Old IBR. Qualifying payments from prior IDR plans — including time on SAVE — carry over, so borrowers are not starting from zero.
3. More favorable interest capitalization treatment. PAYE has a capitalization cap: when leaving the plan, only an amount equal to 10% of the original loan balance at the time of PAYE enrollment can capitalize. Under Old IBR, all unpaid interest capitalizes when the borrower leaves or loses partial financial hardship status. For borrowers with large balances where monthly payments don’t fully cover accruing interest, this protection can prevent balances from ballooning at the point of transition.
4. PAYE serves as a bridge, not a permanent home. Yes, PAYE is being phased out — new enrollments close by July 1, 2027, and the plan is fully eliminated on July 1, 2028. But borrowers can use PAYE to make forgiveness-eligible payments until then and switch to IBR or RAP at that point. Forgiveness progress carries over completely. The PAYE bridge keeps payments lower, the forgiveness timeline shorter, and capitalization exposure minimized during the interim.

A note for borrowers pursuing Public Service Loan Forgiveness (PSLF):

For those pursuing PSLF, the capitalization issue is less relevant since PSLF forgives the entire remaining balance after 120 qualifying payments, tax-free. Whether interest capitalizes along the way has no effect on the amount forgiven — PSLF wipes the slate clean regardless.

However, the lower monthly payment under PAYE (10% vs. 15% of discretionary income) still saves real money each month leading up to forgiveness. Over several years of payments, that difference adds up. Both PAYE and IBR qualify for PSLF, and switching between them does not reset the qualifying payment count.

One practical consideration: borrowers close to reaching 120 PSLF payments should time any plan switch carefully. Servicers may place accounts in processing forbearance during the transition, and payments made during that forbearance period generally do not count as qualifying PSLF payments.

If already in IBR:

Stay put. Switching out of IBR triggers interest capitalization on all unpaid interest, and switching back later would trigger it again. There is no advantage to leaving IBR for borrowers already enrolled, and the disruption could cost money and qualifying payment months during processing.

How to Switch — Step by Step

1. Log in to StudentAid.gov and navigate to the Income-Driven Repayment Plan Request application.
2. Submit the application and select IBR or PAYE based on the guidance above. Note that borrowers do not need to specify “Old IBR” vs. “New IBR” — the application simply says “IBR,” and the servicer will automatically place the borrower in the correct version based on loan disbursement dates.
3. Consent to IRS data sharing when prompted. This allows the Department of Education to pull federal tax information directly from the IRS, which significantly speeds up processing. This step is critical — an Education Department official has clarified that applications submitted without federal tax information (FTI) are not being processed. Borrowers who previously submitted an application without FTI should reapply with it rather than waiting.
4. Save all confirmations. Keep a copy of the application confirmation, any updated loan summary, and all correspondence from the servicer. These records are important for resolving disputes about application dates, payment amounts, or qualifying payment credit.
5. Be prepared for a processing wait. Servicers may place accounts in a processing forbearance while the application is reviewed. The initial 60-day processing forbearance counts toward PSLF and IDR forgiveness. If processing takes longer (which is expected in many cases), a general forbearance will follow — interest is waived during this period, but it does not count toward PSLF or IDR forgiveness.

Why Borrowers Should Act Now, Not Later

The processing backlog is real, and it’s about to get much worse. As of February 28, 2026, there were 576,609 pending IDR applications — down from a peak of nearly 2 million in April 2025, but still significant. During February, servicers processed about 329,000 applications while receiving about 243,000 new ones.

Here’s the math that should concern every SAVE borrower: when 7+ million borrowers are directed to submit applications this summer, experts estimate it could take servicers well over a year — possibly over two years — to work through the volume at current processing rates. One student loan expert estimated that if the backlog grows to around seven million, it could take 25 months or more to clear.

Getting an application in now — before the formal July 1 notices go out — puts borrowers at the front of the queue and is the single most important step to take.

The good news: the application doesn’t need to be fully approved within the 90-day window. Having it submitted should protect borrowers from being auto-enrolled in the Standard Plan, even if processing takes longer.

One More Important Consideration: Taxes on Forgiveness

The temporary federal tax exemption for student loan forgiveness, enacted under the American Rescue Plan Act, expired at the end of 2025. Starting in 2026, IDR forgiveness is once again treated as taxable income at the federal level. State tax treatment varies.

This means that when loans are forgiven under an IDR plan (whether after 20 or 25 years), the forgiven amount could generate a significant tax liability — sometimes referred to as a “tax bomb.” For borrowers with large balances, this can be a six-figure tax event. PSLF forgiveness, by contrast, remains tax-free.

This is something borrowers should plan for well in advance. Strategies such as setting aside funds in dedicated savings or investment accounts, adjusting withholding, and timing Roth conversions can help mitigate the impact when that day comes. A financial advisor familiar with student loan planning can help model this out based on individual circumstances.

The Bottom Line

Every borrower’s circumstances are different — loan types, balances, disbursement dates, employment, forgiveness timelines, and broader financial goals all factor into the right decision. But the one thing that applies to everyone still on the SAVE plan is this: do not wait. The processing backlog is real, the deadlines are firm, and the cost of inaction — being placed on the Standard Plan with no path to forgiveness — is steep.

Borrowers who want personalized guidance on how these changes affect their specific situation should reach out to a qualified financial advisor or student loan professional. The Veterinarian Financial Advisor Network is a great place to start!

Andrew Langdon, CFP®, CSLP®, EA, MBA

VetWorth

Disclaimer: This article is for informational purposes only and does not constitute tax, legal, or student loan advice. Student loan regulations are evolving rapidly, and individual circumstances vary. Readers should verify all information with their loan servicer and consult with a qualified professional before making changes to their repayment plan.