Education Department Officially Kills SAVE Plan For Student Loans

The Trump administration announced an agreement on Tuesday to officially kill the SAVE plan for federal student loans. The announcement, included in an Education Department filing to settle an ongoing legal challenge, will result in millions of borrowers being forced into more expensive repayment plans in the coming months.

“For four years, the Biden Administration sought to unlawfully shift student loan debt onto American taxpayers, many of whom either never took out a loan to finance their postsecondary education or never even went to college themselves, simply for a political win to prop up a failing Administration,” said Under Secretary of Education Nicholas Kent in a statement on Tuesday. “The Trump Administration is righting this wrong and bringing an end to this deceptive scheme. The law is clear: if you take out a loan, you must pay it back. Thanks to the State of Missouri and other states fighting against this egregious federal overreach, American taxpayers can now rest assured they will no longer be forced to serve as collateral for illegal and irresponsible student loan policies.”

The SAVE plan, enacted under the Biden-Harris administration in 2023, offered millions of borrowers affordable monthly payments and a route to eventual student loan forgiveness. The plan was touted as the most affordable repayment plan ever, and more than eight million borrowers signed up for the program or were automatically transitioned from SAVE’s predecessor plan, REPAYE. The SAVE plan also featured a generous interest subsidy and “fast-tracked” student loan forgiveness for borrowers with smaller initial balances.

But months after the program was launched, a group of Republican-led states filed a legal challenge against the Biden-Harris administration, arguing that the SAVE plan was illegal. The lawsuit culminated in a federal appeals court issuing an order blocking the program last year while the lawsuit continued, with the court strongly suggesting the program would ultimately get struck down. Subsequently, Congress passed legislation to phase out the SAVE plan, but not until July 2028.

Now, the Education Department under the Trump administration has announced a settlement with the GOP-led states to resolve the lawsuit over the SAVE plan. And that resolution simply kills the SAVE plan, far earlier than 2028. This will have huge implications for millions of borrowers with student loans enrolled in the SAVE program. These borrowers will likely be forced to switch to a different program to maintain access to affordable payments and eventual student loan forgiveness. But alternative repayment plans will likely result in higher monthly payments. Here’s a breakdown.

SAVE Plan Lawsuit Put Millions Of Student Loans In Forbearance

After the federal appeals court issued its ruling last year blocking the SAVE plan, millions of borrowers with federal student loans were forced into an administrative forbearance. That forbearance stopped all monthly payments and froze interest, but the period also hasn’t counted toward student loan forgiveness for income-driven plans (which typically leads to a discharge after 20 or 25 years in repayment), or Public Service Loan Forgiveness (referred to as PSLF). The Trump administration restarted interest accrual for student loans in the SAVE plan in August.

“You are in a general forbearance, unless you obtained a different status (for example, deferment), because your loan servicer is not currently able to bill you at an amount required by the court injunction,” says Education Department guidance. “You will be in this forbearance until servicers are able to accurately calculate monthly payment amounts or the court reaches a decision on the availability of the SAVE Plan. Borrowers will be informed of any further change to this litigation-related forbearance. Under this general forbearance, you don’t have to make your monthly payments on your student loans; interest does accrue, starting Aug. 1, 2025; and time spent doesn’t provide credit toward Public Service Loan Forgiveness (PSLF) or IDR.”

There has been no official end-point for the SAVE plan forbearance, since it has been dependent in part on the outcome of the ongoing legal challenge. So, millions of borrowers with student loans enrolled in SAVE have been stuck in limbo for more than a year.

Education Department Announces Settlement To Push Student Loans Out Of SAVE Plan

On Tuesday, the Education Department announced a settlement to resolve the SAVE plan litigation. The settlement effectively kills the SAVE plan, and will force borrowers into other, more expensive repayment plans.

“Since the Eighth Circuit’s opinion affirming this Court’s preliminary-injunction order, the parties have conferred about appropriate next steps in this case that will best serve the interests of judicial economy,” said the Education Department in the settlement filing. “Based on those discussions, and in light of the reasoning and legal conclusions reached by this Court and by the Eighth Circuit, the parties agree that the most efficient course of action in this case is for the Court to enter a final judgment that is consistent with this Court’s and the Eighth Circuit’s orders, and with the parties’ negotiated Settlement Agreement.”

“The SAVE Plan Final Rule (i.e., the Final Rule published on July 10, 2023 at 88 Fed. Reg. 43,820), will be vacated,” reads the agreement, with one exception that allows certain deferment and forbearance periods to count toward student loan forgiveness under income-driven repayment plans.

What SAVE Plan Settlement Means For Student Loans

Under the terms of the settlement agreement, which is pending court approval, borrowers with student loans in the SAVE plan will not be able to remain in a forbearance until the program is sunsetted in 2028 under legislation passed by Congress last summer. Instead, borrowers will be forced to move into other repayment plans in the coming months.

“On Dec. 9, 2025, the U.S. Department of Education (ED) announced a proposed settlement agreement with the state of Missouri that would end the Saving on a Valuable Education (SAVE) Plan,” says Education Department guidance updated on Tuesday. “As part of the proposed settlement agreement, which is pending court approval, ED would not enroll any new borrowers in the SAVE Plan, deny any pending SAVE applications, and move all SAVE borrowers into available repayment plans. While the settlement agreement is still pending court approval, we encourage borrowers to use the Loan Simulator to explore other available repayment plans.”

Currently, borrowers can apply for the IBR plan, as well as ICR and PAYE, depending on eligibility. ICR and PAYE will be phased out by July 2028. But all three plans are almost universally more expensive than the SAVE plan. The Education Department will be launching another plan, the Repayment Assistance Plan, next summer. But that plan also will be more expensive than SAVE for most borrowers, and will keep borrowers in repayment for 30 years before they can qualify for student loan forgiveness.

The Education Department has not provided a firm timeline on when borrowers with student loans in the SAVE plan forbearance will have to switch to a different plan. But one thing is clear: borrowers who were pursuing affordable payments and eventual student loan forgiveness under SAVE will need to start planning now for big changes in the coming weeks and months.