The U.S. Department of Education on Tuesday proposed a settlement that would terminate the Biden-era Saving on a Valuable Education (SAVE) income-driven repayment plan. SAVE, the most generous income-driven option, let low-income borrowers qualify for expedited forgiveness and set monthly payments as low as $0. Republican state attorneys general, led by Missouri, sued the administration and argued the program was excessively generous.
The legal battle left SAVE participants uncertain for months. Many borrowers were not required to make payments during the pandemic pause; interest on SAVE loans began accruing again in August. Under Secretary of Education Nicholas Kent said the law requires loan repayment and praised the states for stopping what he called an “egregious federal overreach.”
Under the proposed agreement, pending court approval, the Education Department would stop enrolling new borrowers in SAVE, deny all pending SAVE applications and shift roughly 7 million borrowers currently in SAVE into other repayment plans. Affected borrowers would have a limited window to choose a new, legally authorized plan, selecting between fixed-payment schedules or other income-driven options. Some of those alternative plans remain subject to legal uncertainty.
Congress’s Republican-backed One Big Beautiful Bill Act (OBBBA) created two replacement plans scheduled to begin in July 2026: a revised standard repayment plan and a new income-driven option called the Repayment Assistance Plan. The settlement would require SAVE enrollees to move off the program sooner than previously planned; under OBBBA the deadline for switching had been July 1, 2028, but the settlement accelerates that timeline and the administration has not released a detailed transition schedule.
Moving millions of borrowers into different repayment tracks will be operationally complex. Scott Buchanan, head of the Student Loan Servicing Alliance, warned, “It’s gonna be bumpy,” noting many SAVE borrowers have not been in repayment for years and will need significant assistance navigating new plans and restarting payments.
Consumer advocates and policy analysts cautioned about the financial risks of dismantling SAVE. Persis Yu of Protect Borrowers said the deal could push many people toward default by replacing an affordable option with costlier plans. A recent American Enterprise Institute analysis highlighted the scale of repayment distress: about 5.5 million borrowers are in default, 3.7 million are more than 270 days delinquent, and another 2.7 million are in earlier stages of delinquency — roughly 12 million borrowers are significantly behind on payments.
If approved by the court, the settlement would mark a significant shift in federal student loan policy and create a challenging transition for servicers and millions of borrowers who may face higher monthly bills or increased risk of delinquency and default.