Proposed settlement would end SAVE student loan repayment plan : NPR
The U.S. Department of Education announced Tuesday that it has reached a proposed settlement agreement to end a popular but controversial Biden-era student loan repayment plan.
The Valued Education Savings Plan, better known as SAVE, was the most flexible and generous of all income-driven repayment plans, promising accelerated loan forgiveness and monthly payments as low as $0 for low-income borrowers. Republican state attorneys general, led by Missouri, sued the Biden administration, arguing in court that SAVE was too generous.
The legal challenges left all SAVE borrowers in limbo for months, during which they were not required to make their loan payments – even after many had already spent years in a pandemic-related payment pause. Interest began accruing again on SAVE loans in August.
“The law is clear: If you take out a loan, you must repay it,” Undersecretary of Education Nicholas Kent said in a statement announcing the proposed agreement. “Thanks to the state of Missouri and other states fighting this massive federal overreach, American taxpayers can now rest assured that they will no longer be forced to serve as collateral for illegal and irresponsible student loan policies.”
Tuesday’s agreement, pending court approval, would end the long legal battle over SAVE by ending SAVE itself. The Department of Education would commit to not enrolling more borrowers in SAVE, denying all pending SAVE applications, and moving the approximately 7 million borrowers still enrolled in SAVE to other repayment plans — although some of those plans are also in flux.
The department also said student borrowers would have “a limited time to select a new legal repayment plan.” Borrowers will have to choose between two types of plans: 1.) fixed payment plans or 2.) plans with payments based on the borrower’s income.
The two new plans created by the Republicans’ One Big Beautiful Bill Act (OBBBA) will be rolled out in July 2026, and will include a revised standard plan and a new income-driven plan called the Repayment Assistance Plan. However, SAVE borrowers will need to change their plans before then.
The days of the SAVE plan were already numbered. Under OBBBA, borrowers would have had to change their plans by July 1, 2028. Tuesday’s news would push back that deadline, although the administration did not provide a timeline for the changes.
If the proposal is approved by the court, transitioning millions of borrowers to other plans will be a herculean feat for the loan servicing companies that handle day-to-day lending operations.
“It’s going to be bumpy,” says Scott Buchanan, head of the Student Loan Servicing Alliance. “Remember, SAVE borrowers haven’t been repaying for years. They’re going to have a ton of questions and will need a lot of support to start repaying again.”
The settlement comes as millions of borrowers struggle to keep up with their payments.
“We are on the precipice where millions of borrowers are defaulting on their loans,” says Persis Yu of Protect Borrowers. “And instead of choosing to defend a plan that would have been affordable for these borrowers, this Department of Education has capitulated to the AGs and is going to make life much more expensive.”
The American Enterprise Institute, AEI, recently released an analysis of the latest federal student loan data: in addition to the 5.5 million borrowers currently in default, an additional 3.7 million are more than 270 days behind on their payments and at the edge of the defect. An additional 2.7 million borrowers are in the early stages of delinquency. In total, some 12 million borrowers are worryingly behind.
