The U.S. Department of Education announced a proposed settlement Tuesday that would end the Biden-era Saving on a Valuable Education (SAVE) student loan repayment plan. SAVE, the most generous income-driven plan, offered expedited forgiveness and monthly payments as low as $0 for low-income borrowers. Republican state attorneys general, led by Missouri, sued the administration, arguing the plan was overly generous.
The legal fight left SAVE borrowers in limbo for months; many were not required to make payments during that period after a pandemic pause. Interest on SAVE loans resumed accruing in August. Under Secretary of Education Nicholas Kent said, “The law is clear: if you take out a loan, you must pay it back,” and praised the states for blocking what he called an “egregious federal overreach.”
Under the proposed agreement, pending court approval, the department would stop enrolling borrowers in SAVE, deny all pending SAVE applications and move roughly 7 million borrowers still enrolled in SAVE into other repayment plans. Borrowers would have a limited time to select a new, legal repayment plan, choosing between fixed payment plans or income-driven plans based on income. Some of the alternative plans are also unsettled.
Republicans’ One Big Beautiful Bill Act (OBBBA) created two new plans set to roll out in July 2026: a revised standard plan and a new income-driven option called the Repayment Assistance Plan. SAVE borrowers will be expected to switch plans before then. Under OBBBA, borrowers originally would have had to change plans by July 1, 2028; the settlement accelerates that timeline, but the administration has not provided a specific schedule for transitions.
Moving millions of borrowers to other plans will be a major operational challenge for loan servicers. “It’s gonna be bumpy,” said Scott Buchanan, head of the Student Loan Servicing Alliance, noting many SAVE borrowers have not been in repayment for years and will need extensive help.
Advocates and analysts warn of serious financial consequences. Persis Yu of Protect Borrowers said the agreement risks pushing millions toward default by replacing an affordable plan. A recent American Enterprise Institute analysis found about 5.5 million borrowers are in default, 3.7 million are more than 270 days late and another 2.7 million are in earlier stages of delinquency — roughly 12 million borrowers are significantly behind on payments.
