Broadcast Retirement Network’s Jeffrey Snyder discusses what student loan borrowers should do now that the SAVE Plan has been ended with The Institute of Student Loan Borrower’s Betsy Mayotte.
Jeffrey Snyder, Broadcast Retirement Network
Joining me now is Betsy Mayotte with the Institute for Student Loan Advisors. Betsy, so great to see you. Thanks for joining us this morning.
Betsy Mayotte, The Institute of Student Loan Advisors
Nice to be back.
Jeffrey Snyder, Broadcast Retirement Network
Always great to talk to you. You are the, if I may pay you a compliment, you are the go-to in my book when it comes to student loans, student loan repayment. So we’re really pleased to have you.
Betsy, there’s been quite a few developments on the student loan front. Before we get to the SAVE Act or the SAVE program, let’s talk about delinquencies and what’s going on there.
Betsy Mayotte, The Institute of Student Loan Advisors
Yeah, unfortunately, what I had been predicting since the COVID pauses has come to fruition, which is we are at historic delinquency and default rates for federal student loan borrowers. In the last quarter of 2025 alone, an additional 3.4 million people hit 270 days past due or more, which is when people default. And unfortunately, I do not see that number going down in the near future.
And as you know, defaults can lead to, first of all, it tanks your credit, but it also leads to wage garnishment, tax refund offset, social security offset. So it’s really a troubling development.
Jeffrey Snyder, Broadcast Retirement Network
I would say so. What’s the predominant cause? Is it affordability?
What is it? I mean, there’s obviously lots going on with affordability, gas prices, grocery prices. People have to take their pool of money and allocate it what’s best for their family.
But what’s leading to this?
Betsy Mayotte, The Institute of Student Loan Advisors
So this was sort of a perfect storm. I think one of the biggest reasons was actually the COVID pause. And while that was the right thing to do, what we did is we took 40 million people who are in the habit of making payments on their student loans out of that habit for over three years.
So there’s that. And then in the meantime, there was talk of forgiveness. And then that forgiveness was canceled by the courts.
And there was changes to repayment plans. And as you mentioned, the economy has changed quite a bit. Housing, health care, groceries, all of those are a lot more expensive.
And all of those things together is, I think, what led us to where we’re at with this default data.
Jeffrey Snyder, Broadcast Retirement Network
So Betsy, I guess that leads me to ask, so our audience, if anyone’s going through this, presumably there are people that follow you, what should you be thinking about? Can you approach your lender and try to negotiate some type of, I don’t want to say deal, but I mean, it’s probably best to engage folks in a conversation if you’re in this. 100%.
Betsy Mayotte, The Institute of Student Loan Advisors
So federal student loans, you can’t negotiate. But they do have provisions that most other types of consumer debt don’t have. So if you are in default, meaning that your loan is currently being handled by the Department of Education directly, their collection unit’s called DMCS, you should reach out to them and talk about either rehabilitating the loan, which is where you make nine consecutive on-time payments based on your income, or consolidate the loan out of default.
Both will put the loan back in good standing, and you’ll again be eligible for lower payment options, deferments, that kind of thing. And you shouldn’t wait. The department is currently not garnishing wages.
They announced in January all of a sudden that they were going to pause that, and I suspect they’re going to pause that, speculation on my part, until after the midterms. So I would take this opportunity before they do start garnishing wages again, and they will, to start that rehabilitation or consolidation process. Now, if you haven’t quite defaulted yet, but you are delinquent, contact your loan servicer, and you have options like lower payment options, forbearance, deferment, that kind of thing.
If you’re not sure which is which, if you’re just delinquent or if you’re actually in default, you can log into studentaid.gov, and it’ll tell you whether the loan’s in default or whether it’s still with the servicer.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, well, it sounds like the best thing to do is to act preemptively, make some phone calls. You know, it’s easy to hide your head in the sand when things are kind of coming at you. I understand, I’ve been there, done that, but it sounds like it’s best to kind of interact with the people that make these important decisions to figure out what you can and can’t do.
Betsy, in the time we have, we’ve got about three or four minutes remaining, I want to ask you about a recent appeals court decision. This also has an impact on student loan repayment, student loan forgiveness.
Betsy Mayotte, The Institute of Student Loan Advisors
Yeah, and it’s not good. It’s not unexpected, but it’s not good. So there’s about seven million borrowers that have been in what we’ve been calling save limbo.
The save plan was a repayment plan that the Biden administration tried to introduce that would have given people loan forgiveness in a shorter amount of time and significantly lowered their monthly payments in many cases. Unfortunately, there were 13 state attorney generals that filed a lawsuit against the Biden administration, saying that the plan was unlawful. And the court seemed to be heading in the direction that they agreed with those attorneys generals.
Now, with this new administration, this administration agrees with those attorney generals, and they came up with a settlement. Originally, the court had dismissed the case because of the settlement, saying, we have nothing to rule on because you guys agree with each other now. But there was an appeal to that and the appeal was agreed.
And essentially, the safe plan is officially gone. And what that means for these seven million borrowers is that at some point, probably in the next few months, they’re going to be forced to pick a new plan. And that plan for most will not be nearly as affordable as safe was.
Jeffrey Snyder, Broadcast Retirement Network
So, so, Betsy, they’re going to be in the same circumstances with we just talked about, basically, is that what you’re telling me there?
Betsy Mayotte, The Institute of Student Loan Advisors
Unfortunately, yes. And just to put some perspective on it, I’ve been hearing from lots and lots and lots of borrowers over the past couple days. And these are borrowers who their payment under the safe plan was maybe $60.
And now it’s four or $500. And some of these people, they, you know, they made other financial decisions based on what they thought their payment was going to be under the safe plan. They budgeted for mortgages, rent payments, cars, daycare.
And those are things they can’t go back and change now. And, you know, to be fair to them, historically, this has never happened before where a payment plan was found unlawful. So they had no reason to believe that they were not going to be able to use that plan anymore.
Jeffrey Snyder, Broadcast Retirement Network
Betsy, any chance, I think there’s one level they could possibly go to the Supreme Court with the plaintiffs. Is that what they’re called?
Betsy Mayotte, The Institute of Student Loan Advisors
Except that the plaintiffs that filed the suit to begin with, that’s what they wanted. They were, they wanted the safe plan to go away. The difference is, is that when they filed the suit, it was against the Biden administration who introduced the plan in the first place.
The current administration agrees with the plaintiffs that the plan is unlawful. So no one’s going to be appealing the decision.
Jeffrey Snyder, Broadcast Retirement Network
Yeah, it’s unfortunate. As you were saying, I’ll use paraphrase with your words. It is a perfect storm because I think about not only you talked about groceries, but also don’t forget healthcare costs.
The affordable care subsidy went away or at least hasn’t been extended. So there’s, you know, if you’re expecting one type of loan repayment, now it’s $500. Add to that premium costs for healthcare, which you need to have, or you should have.
It is a perfect storm. Betsy, we’re going to have to leave it there. Thanks again for joining us.
Really appreciate all your insight. You are the go-to when it comes to student loans and we look forward to having you back on the program again very soon. Thank you.