Proposed Settlement to End SAVE Student Loan Repayment Plan, NPR Reports

Proposed Settlement to End SAVE Student Loan Repayment Plan

The U.S. Department of Education announced a proposed settlement to terminate the Biden-era SAVE (Saving on a Valuable Education) student loan repayment plan. This plan was known as the most flexible and generous income-driven repayment option, offering monthly payments as low as zero for low-income borrowers and promising accelerated loan forgiveness.

Republican state attorneys general, led by Missouri, challenged the program in court, arguing that SAVE was overly generous and constituted federal overreach. The legal battle put approximately 7 million SAVE borrowers in uncertainty for months, during which payment requirements were paused, though interest started accruing again last August.

If approved by the court, the settlement would immediately stop enrollment in SAVE and deny all pending applications. Borrowers currently on SAVE will be moved into alternative repayment plans, which remain unsettled but generally fall into two categories:

1. Fixed payment plans
2. Income-based repayment plans

The Education Department confirmed borrowers will have limited time to select a new, legally compliant plan. A new legislative bill sponsored by Republicans, the One Big Beautiful Bill Act (OBBBA), is set to introduce two new plans in July 2026: a revised standard plan and an income-driven Repayment Assistance Plan. However, the SAVE plan’s termination will accelerate the timeline for borrowers to transition.

Under Secretary of Education Nicholas Kent stated, “The law is clear: if you take out a loan, you must pay it back.” He also welcomed the settlement, emphasizing that taxpayers will no longer be forced to support what he described as illegal and irresponsible student loan policies.

Loan servicers are bracing for operational challenges during the transition. Scott Buchanan from the Student Loan Servicing Alliance noted that borrowers will require significant assistance rejoining repayment after years of deferment under SAVE.

Meanwhile, millions of borrowers already face financial hardship. According to the American Enterprise Institute, over 5.5 million borrowers are in default, 3.7 million are nearly 270 days past due, and an additional 2.7 million are in early delinquency stages. Advocacy groups warn that ending SAVE could further increase costs and risk of default for struggling borrowers.

The settlement marks a significant shift in federal student loan policy, with large-scale impacts on millions of Americans holding federal education debt. The final outcome depends on upcoming court approval and implementation details from the Education Department.