Key Highlights
- The U.S. Department of Education announced a proposed settlement agreement to end the controversial SAVE student loan repayment plan.
- Borrowers enrolled in the SAVE plan will transition into other federal repayment plans by July 2026.
- The plan was seen as too generous, leading Republican state attorneys general to sue the Biden administration.
- Approximately 7 million borrowers are affected by this settlement agreement.
The End of SAVE: A Major Shift in Federal Student Loan Policy
In a significant move that could reshape federal student loan policies, the U.S. Department of Education announced a proposed settlement on December 9, 2025, to end the Biden-era Saving on a Valuable Education (SAVE) plan. This plan had been one of the most flexible and generous income-driven repayment options, offering expedited loan forgiveness and monthly payments as low as $0 for eligible low-income borrowers.
The decision comes after months of legal challenges led by Republican state attorneys general, particularly Missouri’s, who argued that the SAVE plan was too lenient.
This lawsuit put millions of borrowers in limbo, as they were not required to make payments even during a pandemic payment pause. Interest on their loans resumed accruing in August 2025.
What Borrowers Need to Know
Nicholas Kent, Under Secretary of Education, stated, “The law is clear: if you take out a loan, you must pay it back.” He continued, emphasizing that the agreement would ensure American taxpayers are no longer forced to serve as collateral for allegedly irresponsible student loan policies.
Transitioning to New Plans
The settlement would end the SAVE plan by moving approximately 7 million borrowers into alternative repayment plans. However, these new plans are also under scrutiny and may change in the future. Borrowers will have a limited time to select from two types of plans: fixed payment plans or income-based plans.
Implications for Millions of Borrowers
The changes could significantly impact millions of borrowers who are already struggling with their payments. Persis Yu, executive director of Protect Borrowers, expressed concern, stating, “We are sitting on the precipice of millions of borrowers defaulting on their loans.” She further added that instead of defending a plan deemed affordable for these borrowers, the Education Department has caved to legal pressure and will likely make life more expensive.
According to the American Enterprise Institute’s recent analysis, as of December 9, 2025, some 12 million borrowers are behind on their student loan payments. This includes 5.5 million in default and another 3.7 million more than 270 days late. The remaining 2.7 million are in earlier stages of delinquency.
The Road Ahead
If the proposed agreement is approved by the courts, it will mark a substantial shift in federal student loan policy. Loan servicing companies face the Herculean task of transitioning millions of borrowers to new plans, which Scott Buchanan from the Student Loan Servicing Alliance described as “bumpy.” He added, “SAVE borrowers have not been in repayment for years. They’re gonna have a ton of questions and will need a ton of hand-holding to get back into repayment.”
The announcement comes at a critical time when millions of borrowers are already struggling to keep up with their payments. While the settlement aims to resolve legal disputes, it may also exacerbate financial stress for many student loan holders.