What The End Of The Biden-Era SAVE Plan Means For Student Loan Borrowers - Explainer

(MENAFN- Live Mint) The US Department of Education, under the Trump Administration, announced on Tuesday (December 9) a proposed joint settlement agreement with the State of Missouri that would end the controversial "Saving on a Valuable Education" (SAVE) student loan repayment plan.

The agreement, which requires court approval, concludes a lengthy legal battle led by Missouri and other states that repeatedly challenged the legality of the Biden Administration's mass student loan forgiveness efforts, including the SAVE Plan.

Key terms of the proposed settlement

If approved by the court, the settlement will immediately cease the SAVE Plan, impacting more than 7 million currently enrolled borrowers who will need to transition to a legal repayment option.

-The Department will not enroll any new borrowers in the SAVE Plan.

-All pending applications will be denied.

-All current SAVE borrowers will be moved into legal repayment plans.

The Department has agreed to a negotiated rulemaking session to remove the SAVE Plan from federal regulations, though forbearance and deferment provisions will continue to count toward Income-Driven Repayment (IDR) forgiveness.

Under Secretary of Education Nicholas Kent praised the action, calling the SAVE Plan an "illegal and irresponsible student loan policy" that sought to unlawfully shift debt onto American taxpayers without congressional authorization.

"The Trump Administration is righting this wrong and bringing an end to this deceptive scheme," said Kent. "The law is clear: if you take out a loan, you must pay it back."

Missouri Attorney General Catherine Hanaway, whose office led the legal challenge, stated, "Unilaterally saddling taxpayers with someone else's Ivy League debt ignored Congressional authority and was clearly unlawful. We appreciate President Trump's real, long-term solutions instead of illegal student loan schemes."

Timeline and next steps for borrowers

The SAVE Plan, which offered payments as low as $0 and short-term forgiveness for some, was estimated by the Department of Education to cost over $342 billion over ten years. Its implementation had been repeatedly blocked by district and appeals courts since the initial lawsuit was filed in April 2024.

Current SAVE borrowers will face a limited time to select a new, legal repayment plan once the agreement is approved. The Office of Federal Student Aid (FSA) will begin direct outreach to provide guidance on the transition.

Borrower action: Borrowers are strongly encouraged to use FSA's Loan Simulator tool to explore available legal repayment plans.

New IDR plan: The Department is working to implement the new Repayment Assistance Plan (RAP), created by the One Big Beautiful Bill Act, which will be available to borrowers by July 1, 2026. This plan is part of a broader effort to simplify student loan repayment options, which will ultimately leave only a revised Standard Plan, the existing Income-Based Repayment (IBR) Plan, and the new RAP.

Borrowers can find the most up-to-date information regarding the settlement and its impact at StudentAid/courtactions.

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