SAVE, the most affordable federal student loan repayment program, ends: What borrowers can do
Two court rulings this week could impact millions of student loan borrowers enrolled in the federal SAVE Plan. Credit: AP / Seth Wenig
More than 7 million student borrowers in the federal SAVE plan will need to move into new programs that could require higher loan payments, advocates said after a pair of court rulings this week dealt what the Trump administration said was the final one-two punch to the program.
A federal judge in Missouri, John A. Ross, on Tuesday approved an agreement between the federal government and seven Republican-led states to phase out the Saving on a Valuable Education, or SAVE, plan. The ruling came a day after the 8th Circuit Court of Appeals ordered the lower court to enter a final judgment in the case.
The ruling “brings finality for borrowers and taxpayers by ending the Biden Administration’s unlawful SAVE Plan, which was mass loan forgiveness in disguise,” Under Secretary of Education Nicholas Kent said in a statement. Within weeks, the agency “will issue clear guidance on next steps” for borrowers, he said.
What is the SAVE plan?
Created in 2023 under then-President Joe Biden, SAVE was the Department of Education’s most affordable student loan repayment program. Seven states, including Missouri, sued the Biden administration in 2024, challenging the legality of the program. Those states and the Trump administration reached an agreement in December to end most provisions of the SAVE plan.
The plan included many “borrower-friendly” provisions, such as capping payments at 5% of discretionary income and forgiving certain loans after 10 years, said Megan Walter, a senior policy analyst with the National Association of Student Financial Aid Administrators. By comparison, the Income-Based Repayment student loan program caps payments at 10% or 15% of discretionary income and forgives certain loans after 20 or 25 years.
The SAVE plan “provided a predictable and manageable pathway into student loan repayment,” Nicholas Prewett, executive director of financial aid and scholarship services at Stony Brook University, said in an email. “The current legal uncertainty surrounding the program creates real concern for borrowers who structured their financial plans around its terms.”
What should borrowers do now?
Borrowers whose SAVE plan payments have been paused during the court battle should research their options, student loan experts said Wednesday.
Resources include the federal studentaid.gov website’s loan simulator, as well as the New York Department of Financial Services’ website and the nonprofit Community Service Society of New York’s Education Debt Consumer Assistance Program, said Persis Yu, managing counsel and deputy executive director with the nonprofit Protect Borrowers.
There are benefits to preparing for the changeover before it becomes mandatory, student debt advocates said. The upsides could include getting ahead of a likely crush of applications to get into new programs, as well as preventing debt from ballooning unnecessarily as interest accrues. Eligible borrowers working for government agencies or nonprofits could also get credit for monthly payments toward Public Service Loan Forgiveness, advocates said.
Among those who have already moved from SAVE to other student loan programs, Yu said, “some people’s payments have as much as tripled. There is a real hit to people's pocketbooks.”
The Department of Education has a backlog of more than 700,000 student loan repayment program applications, an agency report shows.
“Adding another seven million applications … for borrowers trying to move into a different repayment plan, I'm not sure what the department's plan is there,” Walter said. “There's a lot of questions that we will need answers to before we're able to give guidance on what borrowers should be doing next.”
Maura McDermott covers education. Since joining Newsday in 2012, she also has worked on the investigations team and covered real estate and the business of health care.
