US Education Department Officially Ends SAVE Plan for Student Loans

The US Department of Education has officially confirmed that the Saving on a Valuable Education (SAVE) plan for student loans has been cancelled, marking a major shift in federal student loan policy in 2025. The decision follows a settlement agreement under the Trump administration and will significantly affect millions of borrowers enrolled in income-driven repayment plans.

The announcement, included in a court filing to resolve the long-running SAVE plan lawsuit, brings an abrupt end to what was once described as the most affordable student loan repayment plan in the USA. Borrowers currently enrolled in SAVE will soon be required to transition to alternative student loan repayment options, many of which come with higher monthly payments.

What Was the SAVE Plan?

Introduced in 2023 under the Biden–Harris administration, the SAVE plan was designed to make student loan repayment more affordable and accessible. It replaced the REPAYE plan and was promoted as the most borrower-friendly income-driven repayment (IDR) option ever created.

Key features of the SAVE plan included:

• Lower monthly payments based on discretionary income
• A generous interest subsidy, preventing balances from ballooning
• Faster pathways to student loan forgiveness for borrowers with smaller original balances
• Automatic enrolment for many borrowers previously on REPAYE

At its peak, more than eight million borrowers relied on SAVE. However, the Biden student loan SAVE plan soon became the subject of political and legal opposition.

SAVE Plan Lawsuit and Settlement Explained

A coalition of Republican-led states, led by Missouri, challenged the legality of the SAVE plan, arguing that the Education Department exceeded its authority. The SAVE plan lawsuit settlement follows a federal appeals court ruling that blocked the programme and strongly indicated it would eventually be struck down.

Although Congress had passed legislation to phase out SAVE by July 2028, the Education Department settlement accelerates that timeline dramatically. Under the agreement, the SAVE Plan Final Rule will be vacated, officially ending the programme years earlier than expected.

Trump Administration Settlement Ends SAVE Early

That uncertainty has now ended. On Tuesday, the Education Department announced it had reached a settlement agreement with the GOP-led states, effectively killing the SAVE plan outright, years earlier than the 2028 sunset date envisioned by Congress.

Under the settlement:

• The SAVE Plan Final Rule will be formally vacated
• No new borrowers can enrol in SAVE
• All pending SAVE applications will be denied
• Existing SAVE borrowers will be moved into alternative repayment plans

The department stated that this approach best reflects the legal reasoning of both the district court and the Eighth Circuit Court of Appeals, and avoids further litigation.

Student Loan Forbearance Under the SAVE Plan

After the court injunction, borrowers enrolled in SAVE were placed into student loan forbearance. This temporary relief:

• Paused monthly payments
• Initially froze interest
• Did not count towards student loan forgiveness after SAVE, including Public Service Loan Forgiveness (PSLF)

In August 2025, interest accrual resumed, increasing balances for many borrowers. The prolonged SAVE plan forbearance left millions uncertain about future repayment obligations.

What It Means for Borrowers

With the Education Department officially ending the SAVE plan, borrowers will be forced to move into other student loan repayment plans in the coming months.

According to updated Education Department guidance:

• No new borrowers can enrol in SAVE
• Pending SAVE applications will be denied
• All existing SAVE borrowers must transition to alternative plans

Available options include:

• Income-Based Repayment (IBR)
• Income-Contingent Repayment (ICR)
• Pay As You Earn (PAYE) (where eligible)

However, these income-driven repayment plans are almost universally more expensive than SAVE, increasing monthly repayment obligations for most borrowers.

What Replaces the SAVE Plan?

The Education Department has announced plans to introduce a Repayment Assistance Plan next summer. While this new programme will offer income-linked payments, it will:

• Be more expensive than SAVE for most borrowers
• Require up to 30 years of repayment before qualifying for forgiveness

For many, this represents a significant downgrade compared to the benefits previously offered under the SAVE plan.

Political Context and Student Loan Policy Changes

Announcing the settlement, Education officials framed the decision as a correction of federal overreach. The Trump administration’s student loan policy argues that the SAVE plan unfairly shifted costs onto taxpayers.

Critics counter that ending the SAVE plan will disproportionately impact low- and middle-income borrowers, raising concerns about affordability, delinquency, and long-term debt sustainability.

The case highlights how student loan policy changes in the USA remain vulnerable to legal challenges and political transitions, creating instability for borrowers planning long-term repayment or forgiveness.

What Borrowers Should Do Now

Borrowers affected by the SAVE plan cancellation should take proactive steps:

• Monitor official updates from the Education Department
• Use the Loan Simulator to compare repayment plans
• Prepare for higher monthly payments
• Reassess eligibility for student loan forgiveness programmes

While the settlement brings clarity after months of uncertainty, it also signals a more expensive repayment future for millions of Americans managing federal student loans.