The Trump administration announced a proposed joint settlement with Missouri that would force millions of borrowers in a Biden-era payment pause back to repayment. Student loan borrowers who remain enrolled in the Saving on a Valuable Education (SAVE) plan forbearance will have to select a new repayment option, according to the U.S. Department of Education.
The SAVE plan had been blocked since February, when the 8th U.S. Circuit Court of Appeals sided with Republican-led states that argued former President Joe Biden lacked the authority to establish the student loan relief plan.
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The Saving on a Valuable Education plan, better known as SAVE, was the most flexible and generous of all income-driven repayment plans. The plan promised expedited loan forgiveness and monthly payments as low as $0 for low-income borrowers.
“The law is clear: if you take out a loan, you must pay it back,” Under Secretary of Education Nicholas Kent said in a statement announcing the proposed agreement. “Thanks to the State of Missouri and other states fighting against this egregious federal overreach, American taxpayers can now rest assured they will no longer be forced to serve as collateral for illegal and irresponsible student loan policies.”
The agreement, which is pending court approval, will end the legal battle over SAVE by ending SAVE itself. The Education Department would commit not to enroll more borrowers in SAVE to deny all pending SAVE applications and to move the roughly seven million borrowers still enrolled in SAVE into other repayment plans. However, some of these plans are in flux.
Based on the details, borrowers will likely need to leave the SAVE forbearance early next year, said higher education expert Mark Kantrowitz. That’s sooner than many advocates and borrowers may have expected: President Donald Trump’s “big beautiful bill” set the SAVE program’s expiration date at July 1, 2028.
The GOP stated in its lawsuits that Biden was using SAVE as a roundabout way to forgive student loans after the Supreme Court blocked his sweeping debt cancellation plan in June 2023.
The lawsuits targeted two provisions within SAVE — the monthly payments that were lower than any other federal student loan repayment plan, and the quick debt erasure for those with small balances.
The proposed settlement comes four months after the Education Department resumed charging interest on the loans of borrowers who remained in the SAVE forbearance.
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The agreement was criticized by consumer advocates. Persis Yu, deputy executive director and managing counsel at Protect Borrowers, said it would “strip borrowers of the most affordable repayment plan.” More than 42 million Americans hold student loans and the outstanding debt exceeds $1.6 trillion, according to the Congressional Research Service.