Last Updated:
Indian students are not eligible for US loan plans like SAVE or RAP. But as education loans surge and overseas study gets costlier, America’s student debt crisis offers key lessons
Under Trump’s RAP, borrowers will have to make monthly payments of $10 regardless of how much they earn or how many dependents they have. (AFP Photo)
For 7 million Americans, student loans have become a lifelong financial burden. Now, with the Trump administration effectively ending former President Joe Biden’s student loan repayment plan, that burden could become even heavier.
As a federal appeals court scraps the SAVE (Saving on a Valuable Education) repayment plan, millions of borrowers will have to find new ways to repay their student debt. The move not only deepens America’s student debt crisis but also signals Washington’s shift towards stricter repayment rules.
Although US federal financial aid programmes are not available to Indian students, the development still offers an important lesson: what happens when higher education becomes increasingly dependent on debt.
What Was The SAVE Plan?
Launched by the Biden administration in 2023, SAVE was designed to make student loan repayment more affordable, particularly for low- and middle-income borrowers.
The programme linked monthly repayments to a borrower’s income and significantly reduced payment burdens for many households. It also prevented unpaid interest from accumulating when borrowers made their required monthly payments, helping stop loan balances from growing even when borrowers were struggling financially.
For some low-income borrowers, SAVE also created faster pathways to loan forgiveness. Supporters argued that the programme addressed a growing crisis in which many Americans were carrying student debt for decades after graduation.
At its peak, nearly seven million borrowers enrolled in the programme.
Why Did The Courts Strike It Down?
The programme quickly became the target of legal challenges led by Republican-controlled states. Republican attorneys general first challenged the plan during Biden’s tenure. But when Donald Trump took the office in January 2025, his administration stopped contesting the suit and agreed to the settlement.
The court had initially dismissed the lawsuit, saying there was no case if both parties agreed. But after the appeals court intervened, the judge ultimately agreed to vacate the rule.
Critics argued that the Biden administration had exceeded its authority by creating repayment benefits that effectively transferred large costs from borrowers to taxpayers without explicit approval from Congress.
A federal appeals court eventually sided with those arguments, ruling that key parts of the programme could not stand. According to legal experts cited by PBS, the decision effectively ends SAVE and leaves borrowers looking for alternative repayment options.
The ruling represents a significant victory for critics of broad student loan forgiveness and a major defeat for Biden’s efforts to reduce student debt burdens.
What Happens To Millions Of Borrowers Now?
The collapse of SAVE has left borrowers navigating a confusing transition. Many people who enrolled in the programme expected lower monthly payments and eventual debt relief. They must now move to alternative repayment plans or wait for new guidance from federal authorities.
For some borrowers, monthly payments could increase substantially. Others may face uncertainty about how previous payments made under SAVE will be treated in the future.
Financial advisers in the US are urging borrowers to closely monitor federal announcements and carefully evaluate repayment options, as the rules governing student debt continue to evolve.
After 90 days of non-payment, the government considers borrowers delinquent, and after 270 days, they are in default. “That can have huge consequences, largely on people’s credit scores”. On average, people see a three-digit credit score drop from a delinquent student loan, said lending expert Kate Wood.
If you are pursuing income-driven forgiveness, which is plan-dependent but generally forgives your loan balance after 20 to 25 years of payments, “you should switch over ASAP because you’re just losing time,” Betsy Mayotte, founder at The Institute For Student Loan Advisors, said, as quoted by PBS, adding the months borrowers spent in SAVE forbearance will not count towards forgiveness.
The uncertainty comes after years of pandemic-era payment pauses, forgiveness programmes and shifting repayment regulations that have already left many borrowers confused about their obligations.
What Is Trump’s New Approach?
The end of SAVE is also tied to a broader policy shift under President Trump. The administration is moving towards a new repayment framework centred on a Repayment Assistance Plan (RAP) and other revised income-based repayment structures. While payments would still be linked to earnings, the terms are expected to be less generous than those offered under SAVE.
Under the new approach, borrowers may continue receiving some income-based protections, but they could remain in repayment for much longer before becoming eligible for loan forgiveness. The plan goes into effect on July 1, 2026.
The current loan system’s standard repayment plan requires fixed monthly income over 10 years. But Trump’s ‘One Big Beautiful Bill’ (OBBB) scraps that design and introduces the tiered repayment schedule based on borrowers’ loan balances.
Under RAP, borrowers will have to make monthly payments based on their income. However, unlike existing income-driven repayment programmes, everyone will be required to pay at least $10 a month, regardless of how much they earn or how many dependents they have. The repayment amount will be calculated based on a borrower’s income, with a small deduction of $50 for each dependent.
For example, say your adjusted gross income (AGI) is $45,000 per year and you have one child. Your payment would be set at 4% of your income or $1,800 per year ($150 per month). But, because you have a dependent child, your payment is reduced by $50 per month, so your monthly payment amount would be $100.
The RAP waives interest that accrues if your payment amount does not cover the full amount, but borrowers will be in repayment for 30 years.
Nearly 42 million people had outstanding federal student loans in 2025. Of those, roughly 12.3 million, which is 29% of borrowers, are currently enrolled in an IDR plan.
The broader philosophy is different as well. Rather than focusing on large-scale debt cancellation, the emphasis is increasingly shifting towards ensuring borrowers repay a greater share of what they owe.
Is America Moving Away From Student Loan Forgiveness?
The collapse of SAVE reflects a deeper political divide over higher education financing.
For years, Democrats argued that rising tuition costs and stagnant wages had created an unsustainable debt burden for young Americans. Meanwhile, Republicans have generally argued that widespread debt forgiveness unfairly benefits college graduates at taxpayers’ expense and encourages universities to continue raising tuition fees.
The result is a growing shift away from expansive forgiveness programmes and towards stricter repayment expectations.
That debate has become increasingly important because the scale of the problem is enormous. Americans collectively owe around $1.7 trillion in student debt, making it one of the largest categories of household debt in the country.
Why Should Indian Students Care?
The issue may seem uniquely American, but it carries important lessons for India. Education loans are growing rapidly in India as more students pursue higher education, especially overseas degrees.
According to Reserve Bank of India data, outstanding education loans from banks rose nearly 15% year-on-year to Rs 8.58 lakh crore in FY26, up from Rs 7.46 lakh crore in FY25. The rise reflects both increasing education costs and growing demand for foreign degrees.
Nearly 33% Indian students took education loans, while 28% were dependent on scholarships, and the remaining relied on self-funding or parental support, according to the findings of the Transnational Education Report (2024-25) released by upGrad.
A weaker rupee, rising tuition fees and tighter post-study work visa policies in several countries have increased the financial risks associated with overseas education for many Indian students.
Financial experts increasingly advise students to carefully evaluate expected salaries, employment prospects and repayment obligations before taking on large education loans.
What To Keep In Mind When Applying For Student Loan In 2026?
Amid a weaker rupee, rising tuition fees and tighter post-study work visa rules in countries such as the US, UK, Canada and Australia, Indian families have no choice but to reassess how much debt they can realistically take on.
Financial experts now advise students to “borrow conservatively” and avoid basing repayment plans on optimistic assumptions about landing high-paying jobs overseas. Instead, families are being encouraged to calculate whether loans can still be repaid if graduates return to India and earn local salaries.
Experts also warn that many students underestimate the true cost of studying abroad. Beyond tuition fees, expenses such as accommodation, health insurance, visa charges, travel, study materials and currency fluctuations can significantly increase the overall financial burden.
A depreciating rupee can make foreign education substantially more expensive over the duration of a course. For example, a programme costing $100,000 becomes considerably costlier when the rupee weakens against the dollar. As a result, advisers recommend keeping a contingency buffer, opting for rupee-denominated loans where possible and carefully evaluating the long-term return on investment before committing to large education loans.
Stay Ahead, Read Faster
Scan the QR code to download the News18 app and enjoy a seamless news experience anytime, anywhere.
