In a major shift that could upend repayment plans for millions of Americans, the Trump administration on Tuesday announced a settlement agreement that would officially shut down the SAVE plan — the Biden-era student loan repayment program that’s been tied up in lawsuits for years.
The Saving on Valuable Education (SAVE) plan, rolled out in 2023, was designed to give struggling borrowers some breathing room. It lowered monthly payments based on income and family size, stopped interest from piling up, and even fast-tracked forgiveness for some low-income borrowers.
But the Trump administration has repeatedly called SAVE “illegal” and pushed to dismantle it.
According to a Department of Education news release, the proposed settlement means:
- No new borrowers can enroll in SAVE
- All pending applications will be denied
- Current SAVE borrowers will be moved into legally compliant repayment plans
If the court signs off on the agreement, the SAVE plan will officially end. Borrowers will have a “limited time” — details still unclear — to switch into a new repayment plan. The Office of Federal Student Aid (FSA) will help guide borrowers through the transition.
This settlement resolves a lawsuit led by Missouri, one of seven GOP-led states that sued the Biden administration in 2024, arguing that SAVE was an unlawful expansion of federal loan relief.
Administration Defends Move as Correcting a “Wrong”
Under Secretary of Education Nicholas Kent said the Biden administration tried to “unlawfully shift” student loan costs onto taxpayers who never borrowed.
He added:
“The Trump Administration is righting this wrong and bringing an end to this deceptive scheme.”
The comments highlight the sharp political divide over student loan relief — an issue that has only grown more intense during President Donald Trump’s second term.
Borrower Advocates Warn of Higher Costs and Confusion
Consumer advocates say ending SAVE without a clear, affordable alternative will leave borrowers — especially low-income families — financially exposed.
“Ripping the SAVE plan away…is reckless and short-sighted, creating more confusion and financial stress for millions already dealing with rising living costs,” said Abby Shafroth, managing director of advocacy at the National Consumer Law Center.
Their concerns aren’t new: earlier this year, the Education Department restarted interest accrual for nearly 8 million SAVE borrowers, even though their monthly payments were still paused through forbearance. Balances climbed each month anyway.
More Big Changes to Student Loans Under Trump
The student loan system has been shifting rapidly in Trump’s second term — and more changes are coming.
Trump’s massive tax-and-spending package, the “One Big Beautiful Bill Act,” passed earlier this year, brought sweeping changes to federal student aid. It:
- Imposed new borrowing caps for graduate students
- Limited how much parents can borrow for their children
- Eliminated several deferment options
- Narrowed the number of repayment plans available
Advocates warn these changes could substantially raise out-of-pocket costs for future students and families.
Legal Battles Have Shadowed SAVE Since the Beginning
The SAVE plan was meant to be one of the most generous income-driven repayment options ever offered. Payments could drop to as low as 5% of a borrower’s discretionary income, and some debt could be wiped out after just 10 years of payments.
But the program faced immediate pushback.
In 2024, two federal judges — one in Kansas and one in Missouri — blocked key parts of SAVE, ruling that the Biden administration had overreached by enacting debt relief without Congress. After those rulings, SAVE borrowers were placed in no-interest forbearance, putting the program in limbo.
