Amended lawsuit filed: Four student loan borrowers argue that the Education Department's termination of SAVE and REPAYE is unlawful. They seek loan forgiveness for eligible borrowers and a transfer to REPAYE instead of being forced out.\n- **New deadline confirmed**: The Education Department stated in a June 26 legal filing that SAVE borrowers do not need to switch plans until **September 29, 2026 at the earliest**, with most receiving even more time due to a wave-based transition.\n- **Grad PLUS eliminated**: Starting July 1, 2026, federal graduate student loans are capped at $20,500–$50,000 per year, replacing the previous full-cost Grad PLUS program.\n- **Private lenders filling the gap**: States, universities, and private companies are stepping in with new loan products. However, critics warn that nearly 40% of graduate students have subprime or no credit history, making them ineligible for private loans.\n- **Why this matters**: Millions of borrowers face higher monthly payments, loss of forgiveness progress, and potential denial of access to graduate education — especially first-generation and low-income students.
The SAVE (Saving on a Valuable Education) plan, launched in 2023 under the Biden administration, was designed to be the most affordable income-driven repayment option. However, a group of Republican-led states sued to block it, leading to an Eighth Circuit injunction in 2024 that froze the plan and placed millions of borrowers in involuntary forbearance.
In March 2026, the Education Department — now under Secretary Linda McMahon — entered into a settlement agreement terminating both SAVE and its predecessor, REPAYE. Starting in July, the department planned to notify borrowers to select a new plan within 90 days or be automatically placed in the Standard plan.
The amended lawsuit filed on June 23, 2026, challenges this approach. The plaintiffs argue that:
Congress authorized the termination of SAVE but set a phase-out deadline of 2028 — not immediate termination.
Borrowers who reached 20- or 25-year repayment thresholds during the period SAVE was not blocked should receive loan forgiveness.
All remaining SAVE borrowers should be moved to REPAYE, not kicked off entirely.
The department's "shadow repeal" of REPAYE bypassed proper rulemaking procedures.
The Education Department has filed a motion to dismiss, arguing that the court must apply the law as it exists today — and that law no longer authorizes SAVE or REPAYE.
In a legal filing on June 26, 2026, the Education Department clarified that no SAVE borrower will be required to switch plans before September 29, 2026. Because the transition happens in waves, most borrowers will get even more time. Previously, the department had stated that notices would begin on July 1, giving borrowers 90 days to act.
Borrowers should note: If no plan is selected within the window, the department will automatically place borrowers in the Standard plan or a new tiered Standard plan — which could mean significantly higher monthly payments.
Starting July 1, 2026, the Grad PLUS program — which covered the full cost of attendance for graduate students — is eliminated and replaced with annual loan caps of $20,500 to $50,000 depending on the program. This has created a funding gap for students in high-cost programs.
Who is stepping in?
Delaware: invested $800,000 in GradBridge, a start-up offering loans at 18–23% interest to students who narrowly miss eligibility for traditional lenders.
Many universities: have named preferred private lenders.
Some colleges: are developing their own lending programs.
The access problem: According to research from American University, at least 25% of postbaccalaureate students will need private loans — but nearly 40% of those have subprime credit (below 670) or no credit history. Without a co-signer, these students will likely be denied.
Conservative policy experts argue this is intentional, designed to ensure loans only go to those who can repay. Student advocates counter that it unfairly burdens low-income and first-generation students who rely on graduate education for socioeconomic mobility.
Data point: A cost-comparison tool by Leadership Brainery found that over 70% of 13,594 analyzed programs fall below the new federal loan limits, suggesting many graduate programs remain affordable — but the remaining 30% could face enrollment declines or closures.
When do I need to leave the SAVE plan by?
The earliest date is September 29, 2026. The Education Department will send notices in waves, so most borrowers will have more time. Check your loan servicer communications for your personal deadline.
What happens if I don't choose a new plan?
You will be automatically placed in the Standard Repayment Plan or a new tiered Standard plan, which could result in significantly higher monthly payments.
Can I still get loan forgiveness under SAVE?
The amended lawsuit argues that borrowers who met the 20- or 25-year forgiveness threshold before SAVE was terminated should still receive forgiveness. However, the Education Department disputes this. Monitor the lawsuit's progress for updates.
I'm a graduate student. How much can I borrow in federal loans now?
Starting July 1, 2026, the cap ranges from $20,500 to $50,000 per year depending on your program, replacing the previous Grad PLUS program that covered full cost of attendance.
Will private lenders approve me if I have bad credit?
Not necessarily. Private lenders use strict underwriting criteria. Nearly 40% of graduate students needing gap funding have subprime or no credit. Options include finding a co-signer, seeking institutional aid, or exploring state-backed programs — though interest rates can be high (18–23% in some cases).
Act when notified: Wait for your loan servicer's notice, but once received, act within the 90-day window to choose a plan that fits your budget. Do not ignore the communication.\n- **Explore all options first**: Before turning to private loans (which can have rates as high as 23%), exhaust federal loans, institutional grants, scholarships, and employer tuition assistance.\n- **Monitor the lawsuit**: The amended complaint could result in a court order preserving REPAYE or granting forgiveness. Stay informed through reliable sources.\n- **Who this affects most**: Borrowers in SAVE forbearance, graduate students in high-cost programs, first-generation and low-income students, and anyone nearing the 20- or 25-year forgiveness threshold.\n- **Prepare for higher payments**: Under the Standard plan or other IDR options, monthly payments are likely to increase compared to SAVE's reduced rates.
The student loan landscape is shifting rapidly. Do you think the courts will side with borrowers and restore REPAYE, or is the termination of these plans irreversible? How are you preparing for the July changes? Share your thoughts below and share this article with others who need to stay ahead of this trend!
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*Do you think returning to a private-lender model for graduate education will improve or harm access? Let us know!*
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