- The U.S. Department of Education announced a proposed settlement agreement to end the SAVE plan, a flexible and generous income-driven repayment program.
- Republican state attorneys general sued the Biden administration, arguing that the SAVE plan was too generous.
- About 7 million borrowers enrolled in the SAVE plan will be moved into other repayment plans by the Education Department.
- The agreement is pending court approval and would move millions of borrowers to new repayment plans by July 2026.
Background on Biden’s SAVE Plan
Biden’s Saving on a Valuable Education (SAVE) plan was the most flexible and generous income-driven repayment program, promising expedited loan forgiveness and monthly payments as low as $0 for low-income borrowers. This made it stand out among other similar programs and drew significant attention from both supporters and critics.
Legal Challenges and Controversy
The legal challenges to the SAVE plan put all its enrolled borrowers in a state of limbo, during which they were not required to make payments on their loans. Interest resumed accruing on these loans in August 2025. The lawsuit was led by Missouri’s Republican state attorneys general, who argued that the SAVE plan was too generous and violated federal law.
Proposed Settlement Agreement
The U.S. Department of Education announced a proposed settlement agreement to end the controversial SAVE plan. Under this agreement, borrowers enrolled in the program will have “a limited time to select a new, legal repayment plan.” The Education Department would commit not to enroll more borrowers in SAVE and deny all pending SAVE applications.
These changes would also move approximately 7 million existing borrowers into other repayment plans, though some of these alternative plans are currently in flux. The settlement agreement is pending court approval and will likely see significant challenges from both supporters and critics of the original plan.
Implications for Borrowers
The transition to new repayment plans could be challenging for borrowers who have not been making payments for years under the SAVE program. Scott Buchanan, head of the Student Loan Servicing Alliance, commented that it would be a “Herculean feat” for loan servicing companies to handle the transition.
“It’s gonna be bumpy,” said Buchanan. “Remember, SAVE borrowers have not been in repayment for years. They’re gonna have a ton of questions and will need a ton of hand-holding to get back into repayment.”
Critics’ Concerns and Future Implications
The American Enterprise Institute’s recent analysis highlighted the concerning state of student loan defaults, with 5.5 million borrowers already in default, another 3.7 million more than 270 days late on their payments, and an additional 2.7 million in earlier stages of delinquency. This means that approximately 12 million borrowers are struggling to keep up with their payments.
Persis Yu from Protect Borrowers expressed concern over the administration’s decision to abandon the SAVE plan. “We are sitting on the precipice of millions of borrowers defaulting on their loans,” said Yu, adding that the Department of Education’s capitulation to state attorneys general and the move to more expensive repayment plans could exacerbate this issue.
The new repayment plans created by the Republicans’ One Big Beautiful Bill Act (OBBBA) will roll out in July 2026. These plans include a revised standard plan and an income-driven Repayment Assistance Plan, but many are unsure how these changes will affect current borrowers who were enrolled in the SAVE program.
The transition to new repayment plans is expected to be complex and challenging for both borrowers and loan servicing companies, with significant implications for millions of student loan borrowers across the country.
