A borrower earning $45,000 a year with $35,000 in federal student loan debt could pay roughly $350 to $400 a month under the government’s default repayment schedule. Under an income-driven plan, that same borrower might owe closer to $150 to $200. The difference is real, and it kicks in on July 1, 2025, when the Department of Education will automatically assign the Standard Repayment Plan to any Direct Loan borrower who has not actively selected a different option.
That gives you roughly 51 days to make a choice. If you do nothing, the government makes it for you, and it picks the plan with the highest monthly bill.
Why the default plan costs more each month
Under 34 CFR 685.210, when a borrower entering repayment does not select a plan, the Secretary of Education assigns the Standard Repayment Plan. The structure is straightforward: fixed monthly installments calculated to pay off the balance in about 10 years. That compressed timeline means you pay less total interest over the life of the loan, but the monthly obligation can be steep, especially for borrowers whose income has not caught up with their debt.
The payment estimates above come from the federal Loan Simulator on StudentAid.gov, which lets you plug in your actual balance, income, and family size to compare plans. Federal Student Aid states plainly that borrowers who do not choose a repayment option are placed on the standard schedule automatically, and that this schedule “will likely require a higher monthly payment than other available plans.” Loan servicer MOHELA echoes this on its repayment portal, noting that borrowers who fail to select another option “will be placed on this plan.”
This is not discretionary. It is automatic. And it applies specifically to Direct Loan borrowers entering repayment or transitioning out of a grace period, deferment, or forbearance without a plan on file. If you are already on an income-driven plan and making payments, you will not be reassigned.
The income-driven alternatives worth knowing
The federal repayment menu includes several income-driven repayment (IDR) plans that cap your monthly payment as a percentage of discretionary income. As of June 2025, the main options that remain open to new enrollees are:
- Income-Based Repayment (IBR): Caps payments at 10% of discretionary income for borrowers who first took out loans on or after July 1, 2014, and at 15% for those who borrowed earlier. Forgiveness comes after 20 or 25 years of qualifying payments, respectively.
- Pay As You Earn (PAYE): Caps payments at 10% of discretionary income with forgiveness after 20 years. Eligibility is limited to borrowers who were new as of October 1, 2007, and who received a disbursement on or after October 1, 2011.
- Income-Contingent Repayment (ICR): Caps payments at 20% of discretionary income or the amount you would pay on a fixed 12-year plan, whichever is less. Forgiveness after 25 years. This is also the only IDR plan available to Parent PLUS borrowers, but only after they consolidate into a Direct Consolidation Loan.
Other non-IDR options exist as well. The Graduated Repayment Plan starts with lower payments that increase every two years, and the Extended Repayment Plan stretches payments over up to 25 years. Neither is assigned by default, and neither offers a forgiveness component.
The SAVE plan is still blocked by litigation
The SAVE plan (Saving on a Valuable Education), which replaced the earlier REPAYE plan and was designed as the most generous IDR option, remains unavailable. Federal courts blocked key provisions of SAVE in 2024 following legal challenges led by a coalition of Republican-led states (the consolidated cases are commonly referenced as Kansas v. Department of Education and Missouri v. Biden). As of June 2025, new enrollments in SAVE are paused, and borrowers who were already enrolled have been placed in an interest-free forbearance while the litigation continues.
That forbearance creates its own problem. Months spent in forbearance generally do not count toward IDR forgiveness or Public Service Loan Forgiveness (PSLF). Borrowers who were relying on SAVE for a lower monthly payment and a path to forgiveness need to weigh whether switching to IBR, PAYE, or ICR now would restart qualifying-payment clocks or preserve progress. Federal Student Aid posts updates on the SAVE litigation on its website, and borrowers should check there before making a decision.
If you were counting on SAVE, you need a backup plan before July 1.
What happens if you miss the deadline
Missing July 1 does not permanently lock you into the Standard plan. You retain the right to switch afterward. But the process is not instant. Changing plans typically requires submitting an application through your loan servicer, providing income documentation, and waiting for processing, which can take several weeks. During that window, you owe the Standard plan’s higher monthly payment. If you cannot afford it, missed or late payments can damage your credit and, over time, push your loans toward delinquency or default.
That risk is compounded by potential servicer backlogs. Borrowers who wait until late June to submit a plan-selection request may find themselves competing with a wave of last-minute applications at MOHELA, Aidvantage, Nelnet, or EdFinancial. Processing delays during previous repayment transitions (including the restart after the pandemic-era payment pause) left some borrowers stuck in limbo for weeks. There is no public indication from the Department of Education that servicers have been given additional staffing or resources to handle a surge around this deadline.
Parent PLUS borrowers face a narrower path
If you hold Parent PLUS loans, your IDR options are more limited. Parent PLUS borrowers cannot enroll directly in IBR, PAYE, or the paused SAVE plan. The only income-driven option available is ICR, and only after consolidating into a Direct Consolidation Loan. That consolidation resets any progress toward forgiveness, so parents who have already been making qualifying payments under PSLF or another program should calculate the tradeoff carefully before consolidating.
The Standard plan default still applies to Parent PLUS borrowers who do not select an alternative. If the Standard payment is unaffordable, consolidation into ICR may be the only route to a lower monthly bill, but it needs to be initiated well before July 1 because consolidation processing adds additional time.
How to lock in your plan before July 1
- Run your numbers now. Use the federal Loan Simulator to compare monthly payments and total costs under each available plan. Input your actual balance, income, and family size. Do not guess.
- Check which plans you qualify for. Not every borrower is eligible for every IDR plan. PAYE has borrowing-date requirements. IBR terms differ depending on when you first took out loans. ICR is the only IDR option for consolidated Parent PLUS loans.
- Submit your selection early. Contact your loan servicer or use the online portal at StudentAid.gov to formally choose your plan. Do not wait until the last week of June. Processing delays during previous transitions have left borrowers in limbo, and there is no guarantee a last-minute submission will be completed before July 1.
- Get written confirmation. After submitting, follow up with your servicer to verify your selection has been processed. Save any confirmation emails or reference numbers.
- Watch the SAVE litigation. If SAVE was your preferred plan, keep checking Federal Student Aid’s website for court updates. If the injunction is lifted before July 1, you may be able to enroll. If not, pick the best available alternative now and plan to switch later if SAVE reopens.
The cost of waiting is not theoretical
The regulation is clear: inaction triggers the most expensive monthly payment among the government’s standard fixed-term options. But the regulation also gives you the power to choose something different. Every week you delay shrinks the processing window and raises the odds that you end up on a plan you did not pick, paying a bill you cannot comfortably afford. Fifty-one days sounds like plenty of time. For a federal bureaucracy processing millions of accounts, it is not.
Vince Coyner is a serial entrepreneur with an MBA from Florida State. Business, finance and entrepreneurship have never been far from his mind, from starting a financial education program for middle and high school students twenty years ago to writing about American business titans more recently. Beyond business he writes about politics, culture and history.
