The Trump administration announced on Tuesday that it has reached a deal to terminate the SAVE plan. This program was a key part of former President Joe Biden’s efforts to make student loan repayment more affordable. Millions of borrowers who relied on this plan for lower monthly payments will now face significant changes. Officials stated that the plan was never legal, while critics argue that removing it will cause financial chaos for many Americans.
The Department of Education has agreed to a settlement with the state of Missouri. This agreement effectively shuts down the Saving on a Valuable Education program. As a result, the government will stop accepting new applications and will reject any that are currently pending. Borrowers who are already enrolled will be moved to different repayment plans that the current administration considers legal.
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Why the Administration is Canceling the Plan
The Trump administration has consistently argued that the SAVE plan was an illegal overreach of executive power. Under Secretary of Education Nicholas Kent defended the decision to end the program. He stated that the previous administration tried to unfairly shift the burden of student debt onto taxpayers. According to officials, ending this program is a way of correcting a deceptive scheme and restoring fairness to the system.
This decision resolves a lawsuit filed in April 2024 by seven states led by Republicans. They argued that the President did not have the authority to create such a generous repayment plan without approval from Congress. By settling this lawsuit, the Department of Education is signaling a return to stricter interpretation of student loan laws.
Confusion and Stress for Borrowers
Advocates for student borrowers are worried about the immediate impact of this change. Abby Shafroth from the National Consumer Law Center warned that removing the SAVE plan without a clear alternative will harm people who are already struggling financially. She noted that this move creates unnecessary confusion and uncertainty for millions of families.
The situation is complicated by the fact that interest on these loans has recently restarted. For a period, borrowers on the SAVE plan were placed in forbearance where payments were paused. However, interest continued to grow during that time, meaning many people now owe more than they did before. Borrowers will have a limited time to choose a new repayment path, but the specific deadline has not yet been explained.
Stricter Rules Under New Legislation
This move is part of a broader shift in how the government handles higher education debt. President Donald Trump is pushing forward with his One Big Beautiful Bill Act. This new legislation introduces much stricter limits on borrowing. For example, it places caps on how much students can borrow for graduate school and limits the amount parents can borrow for their children’s tuition.
The new bill also removes certain options for deferring loan payments. The goal is to reduce the number of repayment plans available and simplify the system. While the SAVE plan offered payments as low as 5 percent of discretionary income and a path to loan forgiveness in as little as 10 years, the new system focuses on standard repayment and fewer loopholes.
Legal Battles and Court Decisions
The SAVE plan faced legal trouble almost immediately after it was launched in 2023. Federal judges in Kansas and Missouri blocked major parts of the plan in 2024. They ruled that the Biden administration had gone too far by offering debt relief that Congress had not authorized.
Following those court orders, millions of borrowers were stuck in limbo. They were placed in a status called no-interest forbearance. While they did not have to make payments during that time, they also did not make any progress toward loan forgiveness. Now that the plan is officially being dismantled, those borrowers must prepare to resume standard payments under different terms.
Comparing the Policies
The table below highlights the key differences between the outgoing SAVE plan and the new approach under the Trump administration.
| Feature | SAVE Plan (Ending) | Trump Administration Policy |
| Monthly Payment Amount | Based on income (as low as $0) | Standard repayment calculation |
| Interest Rules | Unpaid interest did not grow | Standard interest rules apply |
| Loan Forgiveness | Possible after 10 years for some | Stricter requirements |
| Borrower Eligibility | Broad access for most loans | New limits on grad/parent loans |
| Legal Status | Considered illegal by current admin | Enforced through new legislation |
Key Takeaways for Borrowers
- The SAVE plan is being terminated immediately as part of a legal settlement.
- The Department of Education will no longer accept new applications for this program.
- Current enrollees will be moved to other repayment plans considered legal by the administration.
- The new One Big Beautiful Bill Act will limit how much students and parents can borrow in the future.
- Critics warn that these changes will increase monthly costs and financial stress for millions.
