Key Highlights
- The Education Department officially killed the SAVE plan for federal student loans under a settlement agreement with GOP-led states.
- This move will affect millions of borrowers and result in higher monthly payments on their loans.
- The SAVE plan, which offered affordable repayment options and eventual loan forgiveness, was launched by the Biden-Harris administration in 2023.
- A legal challenge against the program led to a federal appeals court blocking it last year, with Congress passing legislation to phase out the program by July 2028.
Background on the SAVE Plan
The Student Loan Borrower Assistance (SAVE) plan was introduced in 2023 as part of the Biden-Harris administration’s efforts to make student loan repayment more manageable for millions of borrowers. The program promised affordable monthly payments and a clear path toward eventual forgiveness, which made it one of the most popular options among those with federal student loans.
However, the plan faced opposition from Republican-led states almost immediately after its launch. They argued that the program was illegal and sought to challenge its implementation in court. This legal battle dragged on for months, leaving millions of borrowers in limbo as their loan payments were frozen during a period of forbearance.
The Legal Challenge and Settlement
On December 9, 2025, the Education Department announced a settlement agreement with Republican-led states to resolve the ongoing legal challenge against the SAVE plan. According to Under Secretary of Education Nicholas Kent, “The Trump Administration is righting this wrong and bringing an end to this deceptive scheme.” The agreement vacates the SAVE Plan Final Rule, effectively ending the program far earlier than its scheduled sunset in July 2028.
The settlement does allow certain deferment and forbearance periods to count toward student loan forgiveness under income-driven repayment plans. However, this is a limited exception, and most borrowers will be forced into other, more expensive repayment options.
Impact on Borrowers
Borrowers enrolled in the SAVE plan will need to switch to alternative repayment plans as soon as possible. The current options include Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE). These programs are almost universally more expensive than the SAVE plan, with higher monthly payments that could stretch for longer periods before forgiveness.
Education Department guidance notes that borrowers should use the Loan Simulator to explore other available repayment plans.
However, the switch will require careful planning and consideration of financial implications. Many experts recommend that borrowers begin preparing now to ensure they can manage their payments effectively under new terms.
Conclusion
The death of the SAVE plan marks a significant shift in federal student loan policy. While it may provide temporary relief for some, the move highlights ongoing tensions between different administrations and states over financial aid programs. As millions of borrowers face potential increases in their monthly payments, the focus will now turn to how alternative plans can be structured to offer similar support and flexibility.