The door is closing on one of the most significant federal student-loan repayment plans.
On Tuesday, the Department of Education announced a proposed settlement with the State of Missouri that, if approved by the court, would permanently shut down the SAVE student-loan repayment plan created under former President Joe Biden.
Launched in July 2023, SAVE was designed to give borrowers more affordable monthly payments and a faster path to loan forgiveness. In April 2024, Missouri and several other GOP-led states filed a lawsuit challenging the program. While those legal battles played out, borrowers enrolled in SAVE were placed into forbearance starting last summer.
According to a department press release, if the settlement moves forward, the government will stop enrolling new borrowers in SAVE, reject any pending applications, and transfer everyone currently in the plan to other existing repayment options.
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“The law is clear: if you take out a loan, you must pay it back,” Under Secretary of Education Nicholas Kent said in a statement. “Thanks to the State of Missouri and other states fighting against this egregious federal overreach, American taxpayers can now rest assured they will no longer be forced to serve as collateral for illegal and irresponsible student loan policies.”
If the court signs off on the settlement, borrowers currently in SAVE will have a limited window to choose a new repayment plan and restart payments. The Education Department and federal servicers are expected to contact these borrowers in the coming months with more detailed guidance.
The Trump administration has signaled for months that it planned to dismantle SAVE, originally outlining a phase-out by 2028. This proposed settlement speeds up that timeline. On August 1, the department resumed charging interest on SAVE borrowers’ accounts, and Education Secretary Linda McMahon urged borrowers to move to “a legally compliant repayment plan,” such as an income-based option.
At the same time, the department is working on changes to broaden access to income-based repayment, including eliminating the requirement that borrowers show partial financial hardship. Those updates are expected to be completed by December 2025. The “big beautiful” spending bill Trump signed into law also calls for ending SAVE and replacing it with two new repayment choices starting in July 2026.
Exactly when all of these changes will be fully in place remains uncertain. What is clear, though, is that many borrowers who exit SAVE may see their monthly payments go up under other repayment plans.
