The U.S. Department of Education under the Trump administration announced a proposed joint settlement agreement with the state of Missouri on Tuesday (Dec. 9) that would end the controversial “Saving on a Valuable Education” (SAVE) student loan repayment plan.
The deal, which requires court approval, concludes a lengthy legal battle waged by Missouri and other states that have repeatedly challenged the legality of the Biden Administration’s massive efforts to forgive student loans, including the SAVE plan.
Key terms of the proposed settlement
If the settlement is approved by the court, it will immediately end the SAVE plan, affecting more than 7 million currently enrolled borrowers who will have to switch to a legal repayment option.
-The department will not enroll any new borrowers in the SAVE plan.
-All pending applications will be rejected.
-All current SAVE borrowers will be moved into statutory repayment plans.
The department agreed to a negotiated rulemaking meeting to remove the SAVE plan from federal regulations, although the forbearance and deferral provisions will continue to count toward income-driven repayment (IDR) forgiveness.
Assistant Secretary of Education Nicholas Kent praised the action, calling the SAVE plan an “illegal and irresponsible student loan policy” that sought to illegally shift debt onto American taxpayers without congressional approval.
“The Trump administration is righting this wrong and ending this fraudulent scheme,” Kent said. “The law is clear: if you take out a loan, you must repay it.”
Missouri Attorney General Catherine Hanaway, whose office led the legal challenge, said: “Unilaterally burdening taxpayers with someone else’s Ivy League debt ignored the authority of Congress and was patently illegal. We appreciate President Trump’s real, long-term solutions instead of illegal student loan schemes.”
Timeline and next steps for borrowers
The SAVE plan, which offered as little as $0 in payments and short-term forgiveness for some, was estimated by the Department of Education to cost more than $342 billion over ten years. Its implementation has been repeatedly blocked by district and appellate courts since the original lawsuit was filed in April 2024.
Current SAVE borrowers will face a limited time to choose a new, legal repayment plan once the contract is approved. The Federal Student Aid Office (FSA) will initiate direct contact to provide transition instructions.
Borrower Action: Borrowers are strongly encouraged to use the FSA Loan Simulator to explore available legal repayment plans.
New IDR Plan: The Department is working to implement a new Repayment Assistance Plan (RAP), created by the One Big Beautiful Bill Act, that will be available to borrowers starting July 1, 2026. The plan is part of a broader effort to simplify student loan repayment options, which will eventually leave only the Revised Standard Plan, the existing Income-Based Repayment Plan, and the new RAP (IBR).
Borrowers can find the most up-to-date information regarding the settlement and its impact at StudentAid.gov/courtactions.
