WASHINGTON, July 7, 2026, 09:04 EDT
- Over 7.5 million SAVE borrowers now have 90 days to pick a plan.
- Grad PLUS loans go away for new borrowers, who instead get federal loan caps—$20,500 and $50,000 a year for graduate and professional students.
- Private lenders could see more borrowers apply, though the federal loan book already carries high default risk.
Forced moves off the Saving on a Valuable Education repayment plan are dividing risk and opportunity in U.S. student credit. Federal loan servicers now face the first wave of extra admin work, while private lenders could see more demand from grad borrowers who hit federal loan caps. The Education Department said servicers started sending out notices July 1, giving SAVE plan borrowers 90 days to pick a new plan or be put on the Standard or new Tiered Standard plans if they don’t respond.
The numbers are big on top of what’s already a strained federal loan book. Federal Student Aid reported 42.6 million people held $1.7 trillion in federal student loans as of March 31. That included 40.9 million federally managed accounts totaling more than $1.64 trillion. About 9 million borrowers owing $220 billion were in default. The SAVE plan counts over 7.5 million borrowers, or close to 80% of the number in default.
| Investor data point | Confirmed figure | Investor read |
|---|---|---|
| Borrowers leaving SAVE | More than 7.5 million | Pushes borrowers to contact servicer, triggers repayment process |
| Total federal student loans | 42.6 million recipients; $1.7 trillion | Big consumer credit exposure |
| Federal default portfolio | About 9 million borrowers; $220 billion | Collections activity, credit stress already elevated |
| Fresh federal limits for grad and professional loans | $20,500 and $50,000 yearly; $100,000 and $200,000 max | Private lenders may fill gap for expensive graduate programs |
The news is more important for firms in the lending space than schools running campuses. Borrowers who go past federal limits can turn to school support, use cash, skip the plan, or go for private loans. Public lenders are set to benefit most if more students apply for private credit. If students rely more on school aid, some pricier programs might face tuition pressure.
| Public exposure | Latest relevant data | Investor read |
|---|---|---|
| Nelnet NYSE:NNI | Loan Servicing and Systems brought in $127.8 million in Q1; it handled $525.7 billion for 15.5 million borrowers as of March 31 | When contact volumes go up, it can strain servicing and staff |
| Maximus (NYSE:MMS) | The Aidvantage business does servicing for Federal Student Aid, including billing, payments and help with plans | SAVE shifts keep borrowers within federal servicer systems |
| SoFi Technologies NASDAQ:SOFI | Student loan origination hit $2.6 billion for Q1, up 119% versus a year ago | New grad caps might bring more demand, but conversion still hinges on credit quality |
| SLM Corp, known as Sallie Mae NASDAQ:SLM | Private education loan originations were $2.9 billion in Q1, up 5%. Graduate loans rose 14% | Stock has most direct listed private-student-loan exposure |
Servicing is a short-term risk. The Government Accountability Office said Federal Student Aid works with five loan servicers, and four of them failed accuracy standards before FSA halted checks on accuracy and call quality in February 2025 because of staff cuts. Wrong records can mean borrowers get incorrect bills or the wrong repayment status, GAO said.
The private lender numbers are clearer but cover less ground. SoFi’s personal loans made up most of its first-quarter loan volume again, despite higher student-loan originations. At Sallie Mae, first-quarter approvals had an average FICO of 754 and 95% were co-signed, so not all new demand turns into actual booked loans.
Sallie Mae CEO Jonathan Witter said in April the company is seeking “long-term growth opportunities in private education lending.” That’s the public-company angle with the new caps: less federal money at the edge, and more loans underwritten privately for students colleges still aim to bring in. Q4 Capital
The cap is sending price signals to schools. The Los Angeles Times said UC Irvine’s business school cut MBA tuition and Santa Clara University’s law school raised scholarships after the federal loan limit changed. “It will not lock everybody out,” UC Berkeley professor Jennifer Delaney said. Sandy Baum, a nonresident senior fellow at the Urban Institute, said the limits were needed, but she called the law “not well thought out.” Los Angeles Times
Litigation over professional degrees is making the size of the addressable market uncertain. With a court stay in place, Federal Student Aid says for now that registered nursing, nursing practice, physical therapy, occupational therapy, and physician assistant programs count as professional degrees, but theology, theological studies, and pre-theology do not. The Education Department said the list could shift as litigation continues.
Religious colleges will have their own earnings test. Under the final rule, programs lose Direct Loan access if they fail this test in two out of three award years. The rule kicks in on July 1, 2027. Inside Higher Ed said a little over 5% of programs are set to fail, based on current numbers. The Education Department projects 9% of undergrad religious-studies programs and 6% of grad programs would fail the test. Philip Dearborn, who heads the ABHE Commission on Accreditation, said, “We really don’t know what the impact is going to be.” Federal Register
New York Attorney General Letitia James said PAYE and ICR are still options for borrowers whose latest loan is from before July 1, but these plans need to be swapped for something else by July 1, 2028. For those taking out loans on or after July 1, her July 6 consumer alert said the main choices are the Repayment Assistance Plan and the Standard plan.
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