The U.S. Department of Education announced a proposed agreement with Republican-led states to permanently eliminate the Biden-era SAVE plan. (Catherine Lane/Getty Images)
WASHINGTON — The U.S. Department of Education announced Tuesday a proposed agreement that would permanently end the income-driven student loan repayment plan in which more than 7 million student loan borrowers are enrolled.
Under the connector application for the seven Republican-led states that challenged the program, the department would not enroll any fresh borrowers in the Savings for Valuable Education, or SAVE, plan, would not deny any pending applications, and would not place borrowers currently covered by the plan in lawful repayment plans.
The program, introduced in 2023 under then-President Joe Biden, faced legal challenges from several GOP-led states, including Missouri, and was blocked by the courts. The initiative aimed to provide lower monthly loan installments for borrowers and write off the remaining debt after a specified period.
If a Missouri federal court approves the deal, the department said borrowers currently enrolled in the SAVE plan “will have a limited time to select a new, legal repayment plan and begin repaying their student loans.”
The contract results from legal challenge to the plan contributed by Missouri, Arkansas, Florida, Georgia, North Dakota, Ohio and Oklahoma in 2024.
“A Deceptive Plan”
In a statement accompanying the announcement, Education Undersecretary Nicholas Kent said President Donald Trump’s administration is “righting this wrong and putting an end to this fraudulent scheme.”
“The law is clear: if you take out a loan, you have to repay it,” Kent added. “Thanks to Missouri and other states fighting this egregious abuse of federal funds, American taxpayers can now rest assured that they will no longer be forced to serve as collateral for illegal and irresponsible student loan policies.”
Republicans argued that a liberal repayment plan would free borrowers at the expense of federal taxpayers.
Missouri Attorney General Catherine Hanaway said in a statement Tuesday that her office “fought for the hard-working Americans who were preyed upon by Biden administration bureaucrats, and we won in court every time.”
“We appreciate President Trump’s real, long-term solutions instead of illegal student loan programs,” Hanaway added.
But student advocates say the agreement will place an additional burden on student borrowers who are already struggling with rising costs of living.
Persis Yu, deputy executive director and managing counsel at the advocacy group Protect Borrowers, in a statement Tuesday criticized the settlement as a “pure capitulation.”
“While millions of student loan borrowers struggle with a deepening affordability crisis… billionaire Education Secretary Linda McMahon has chosen to cut a backroom deal with a right-wing attorney general and deprive borrowers of the most affordable repayment plan that would help millions keep their loan payments on time while keeping a roof over their heads,” Yu said.
Accumulation of interest
In February, a federal appeals court upheld a lower court’s order that blocked the SAVE plan from going into effect. Borrowers under the plan were placed in interest-free forbearance last year in an atmosphere of legal suspension.
However, SAVE borrowers’ loans began accruing interest on August 1 – which was a move department announced in July to comply with court orders.
The SAVE plan was already scheduled to be phased out by July 2028 under an initiative by Republicans in Congress Tax Reductions and Spending Act that Trump signed into law this year.
