The U.S. Department of Education proposed an agreement with Republican-led states to permanently scrap the Biden-era SAVE plan. (Catherine Lane/Getty Images)
WASHINGTON – The U.S. Department of Education announced a draft agreement Tuesday that would permanently eliminate an income-driven student loan repayment plan that enrolls more than 7 million student loan borrowers.
Under a joint Suggestion Because seven Republican-led states had challenged the program, the department would not enroll up-to-date borrowers in the Saving on a Valuable Education, or SAVE, plan, reject any pending applications, and place borrowers currently in the plan in compliant repayment plans.
The program, launched in 2023 under then-President Joe Biden’s administration, faced legal challenges from several Republican-led states, including Missouri, and was blocked by the courts. The aim of the initiative was to enable borrowers to make lower monthly loan payments and to forgive remaining debts after a certain period of time.
If a federal court in Missouri approves the agreement, 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 agreement arises from a legal challenge to the plan brought from Missouri, Arkansas, Florida, Georgia, North Dakota, Ohio and Oklahoma in 2024.
A “deception plan”
In a statement alongside the announcement, Acting Education Secretary 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 pay it back,” Kent added. “Thanks to the state of Missouri and other states’ fight against this egregious federal overreach, 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 the permissive repayment plan would provide relief to borrowers at the expense of federal taxpayers.
Missouri Attorney General Catherine Hanaway said in a statement Tuesday that her office has “fought for hard-working Americans who were exploited by Biden administration bureaucrats, and we have 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 said the agreement would place an additional burden on student loan borrowers already struggling with rising living costs.
Persis Yu, deputy executive director and managing counsel at advocacy group Protect Borrowers, called the settlement agreement a “pure capitulation” in a statement Tuesday.
“As millions of student loan borrowers struggle with the deepening financial crisis, billionaire Education Secretary Linda McMahon has chosen to strike a backroom deal with a right-wing attorney general and deprive borrowers of the cheapest repayment plan that would help millions stay current on their loans while keeping a roof over their heads,” Yu said.
Interest piles up
In February, a federal appeals court upheld a lower court injunction that blocked the SAVE plan from taking effect. Borrowers under the plan were placed in a interest-free forbearance last year amid legal limbo.
But since August 1st, interest has been charged on borrowers’ loans in the SAVE forbearance – a step that … department announced in July to comply with court orders.
The SAVE plan was scheduled to expire by July 2028, as approved by Republicans in Congress. Tax and spending cuts bill that Trump signed the law this year.
