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Texans with college loans are expected to begin or resume making payments later this year after the U.S. Supreme Court struck down President Joe Biden’s plan to forgive up to $20,000 in debt, and after other COVID-era relief ends.
The high court on Friday struck a decisive blow to one of Biden’s signature campaign promises when it declared his debt cancellation program was unconstitutional. The decision, which affects 1.4 million Texans who had already been approved for forgiveness, came a few months before the end of a pause in borrowers’ payments.
But while it will surely cause some financial shock to borrowers who have not been required to make loan payments during the COVID-19 pandemic, other changes are planned for this summer that can reduce monthly payments, stop interest accruals and forgive debts after 10 to 25 years.
And you probably haven’t heard of them.
The Saving on a Valuable Education plan, or SAVE, is an update to the Revised Pay As You Earn plan, or REPAYE. The new program takes effect next year, but several of its features are scheduled to begin before borrowers need to resume their monthly debt payments.
REPAYE is the largest federal income-driven repayment plan — programs that calculate how much a borrower will pay each month based on how much they earn. It has been adopted by 3.3 million borrowers who owe nearly $200 billion, according to March 2023 data from the Department of Education. Those who follow other repayment plans — income-based or not — may switch to REPAYE as long as they comply with the program’s conditions.
Texas residents have the second-highest amount of student debt, behind Californians. Some 3.8 million students owe $33,400 on average. Fewer than 20% of Texas borrowers are on an income-driven repayment plan.
According to groups that advocate for affordable higher education, many students are unaware of this repayment alternative or do not understand it. They believe it needs to be better promoted as it is an effective option for borrowers who struggle to repay loans.
“All of these students should be in the income-driven repayment plan,” said Sandy Baum, an expert on higher education finance and senior fellow at the Urban Institute. “But some of them do not know about it or have faced bureaucratic difficulties getting into the program.”
Here is what you need to know if you are one of the eight in 10 Texans with student loans who are not on an income-based repayment plan.
