WASHINGTON, D.C. — The U.S. Department of Education announced a proposed agreement Tuesday that would permanently axe an income-driven student loan repayment plan in which more than 7 million student loan borrowers are enrolled.
Under a joint proposal with seven Republican-led states that challenged the program, the department would not enroll any new borrowers in the Saving on a Valuable Education, or SAVE, plan, deny any pending applications and place borrowers currently in the plan into legally compliant repayment plans.
The program, introduced in 2023 under then-President Joe Biden’s administration, was hit with legal challenges from several GOP-led states, including Missouri, and has been blocked by the courts. The initiative sought to provide lower monthly loan payments for borrowers and forgive remaining debt after a certain period of time.
If a Missouri federal court approves the agreement, the department said borrowers currently enrolled in the SAVE plan “will have a limited time to select a new, legal repayment plan and begin repaying their student loans.”
The agreement stems from a legal challenge to the plan brought by Missouri, Arkansas, Florida, Georgia, North Dakota, Ohio and Oklahoma in 2024.
A ‘deceptive scheme’
In a statement alongside the announcement, Under Secretary of Education Nicholas Kent said President Donald Trump’s administration “is righting this wrong and bringing an end to this deceptive scheme.”
“The law is clear: if you take out a loan, you must pay it back,” Kent added. “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.”
Republicans argued the permissive repayment plan let borrowers off the hook at the expense of federal taxpayers.
Missouri Attorney General Catherine Hanaway said in a statement Tuesday her office “fought for hardworking Americans who were being preyed upon by Biden Administration bureaucrats, and we won in court every time.”
“We appreciate President Trump’s real, long-term solutions instead of illegal student loan schemes,” Hanaway added.
Student advocates, though, said the agreement would place an additional burden on student borrowers already struggling with a rising cost of living.
Persis Yu, deputy executive director and managing counsel at the advocacy group Protect Borrowers, blasted the settlement agreement as “pure capitulation” in a Tuesday statement.
“While millions of student loan borrowers struggle amidst the worsening affordability crisis … billionaire Education Secretary, Linda McMahon chose to strike a back-room deal with a right-wing state Attorney General and strip borrowers of the most affordable repayment plan that would help millions to stay on track with their loans while keeping a roof over their head,” Yu said.
Interest accumulating
In February, a federal appeals court upheld a lower court injunction that blocked the SAVE plan from going into effect. Borrowers under the plan were placed in an interest-free forbearance last year amid legal limbo.
But borrowers’ loans in the SAVE forbearance began to accrue interest Aug. 1 — a move the department announced in July to comply with court orders.
The SAVE plan was already set to be phased out by July 2028 under congressional Republicans’ tax and spending cut bill that Trump signed into law this year.
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