Student loan borrowers exiting SAVE may face sharply higher payments if they don’t take action soon

Student loan borrowers exiting SAVE may face sharply higher payments if they don't take action soon. Millions of student loan borrowers could see their monthly bills skyrocket if they don't move into an affordable repayment plan soon. Here's what to know.

What happened

Skip NavigationMarketsBusinessInvestingTechPolitics & PolicyVideoWatchlistInvesting ClubPROLivestreamMenuKey PointsA Trump administration deadline for millions of student loan borrowers to exit the SAVE plan is quickly approaching. Deadline to exit SAVE varies across borrowers Federal student loan servicers are staggering their notices to borrowers regarding the 90-day window to exit the SAVE plan. Oscar Wong | Moment | Getty ImagesMany federal student loan borrowers could see their monthly bills double or even triple in the coming weeks if they don't exit a now-defunct affordable repayment plan.

The Biden administration-era income-driven repayment plan SAVE offered very low monthly payments to many loan holders but was ultimately overturned by Republican-led legal challenges and legislation. 9 million borrowers were still in SAVE as of March, with an average debt of close to $55,000, according to an analysis by higher education expert Mark Kantrowitz. Meanwhile, the Missouri Higher Education Loan Authority, or Mohela, announced that borrowers can expect their alerts into October. To apply for a new income-driven repayment plan, borrowers can log into studentaid. gov or their loan servicer's website and fill out the application.

The wider picture

While the SAVE plan calculated payments based on 5% of a borrower's discretionary income, the standard plans divide borrowers' debts into fixed payments over a set period. That's because the Department of Education will automatically enroll borrowers in a standard repayment plan that includes fixed monthly payments. Earlier this year, the Trump administration alerted borrowers that they'd have roughly 90 days to transition from the Saving on a Valuable Education, or SAVE, plan to another program. That period began July 1 for some SAVE borrowers, meaning their deadline is just days away, on Sept.

Because of these rolling timelines, borrowers should check their loan servicer accounts immediately to confirm their deadlines. To avoid missing their notice, borrowers should make sure their contact information is current with their servicer and on their studentaid. gov account, Zampini said. "Payments for some borrowers could double or triple," Kantrowitz said. Mark Kantrowitz Borrowers who enroll in one of the Education Department's other income-driven repayment plans can secure lower monthly payments than they would under the standard options.

What has been reported

For example, a new IDR plan launched in July — the Repayment Assistance Plan, or RAP — caps monthly payments between 1% and 10% of a borrower's earnings and offers loan forgiveness after 30 years. According to an analysis provided to CNBC by student loan advisory platform Summer, a two-person household earning just over $50,000, with $60,000 in student debt at a 6. Servicers have been notifying their borrowers in waves, so many borrowers have more time. Many SAVE enrollees haven't had to make a payment in over two years, as lawsuits against the plan unfolded.

Meanwhile, their debts have swelled with interest, and their progress in loan forgiveness programs has stalled. Borrowers have been slow to leave the plan: around 7. Many of these borrowers may be taking an "ostrich approach," Kantrowitz said. " Here's what the remaining SAVE enrollees need to know about what comes next.

What happens next

The earliest date borrowers must exit the program is Sept. However, the department noted that most borrowers will receive additional time. Most borrowers should receive their notices by email, but some may get a letter in the mail, said Michele Zampini, associate vice president of federal policy and advocacy at The Institute for College Access & Success, or TICAS. Borrowers can opt in to allow the department to get their income information directly from the IRS for faster application processing.

Doing nothing may leave you with huge bill Borrowers who do not select another repayment plan within 90 days of being notified will be placed in either the Standard Repayment Plan, or the new Tiered Standard Plan, which rolled out on July 1. "It's better to be financially prepared than surprised by a much higher payment," Williams said. Those who don't switch to another affordable repayment plan in the coming weeks could see their bills double or even triple, consumer advocates warn.