Some 7 million student loan borrowers would have to enroll in a different program and repay their debt if a court approves the settlement.
The Trump administration is moving to dismantle the federal student loan repayment plan known as SAVE, the last remnant of the Biden-era effort to provide large-scale student debt relief.
The U.S. Department of Education announced on Dec. 9 that it had reached a proposed settlement with Missouri and six other Republican-led states that sued to block the SAVE plan. The plan still needs approval from the U.S. District Court of the Eastern District of Missouri’s Eastern Division.
The states argued that the Biden administration exceeded its authority when it created SAVE in 2023, a program that offered millions of borrowers lower monthly payments and an accelerated path to debt erasure.
SAVE, described by the Biden administration as the “most affordable repayment plan ever,” allowed borrowers who originally took out $12,000 or less to have their debts forgiven after 10 years of qualifying payments. It also calculated monthly bills based on a small percentage of a borrower’s income, reducing payments to as low as zero dollars for millions.
Since its debut, the plan had canceled $1.2 billion in federal student loan debt owed by more than 150,000 borrowers. That relief ended in spring 2024 when a federal district court intervened to halt further debt discharges.
The SAVE program was introduced after the U.S. Supreme Court shot down President Joe Biden’s original mass-debt-cancellation plan, which relied on the post-9/11 HEROES Act that allows the education secretary to modify student loan-related rules during war or national emergencies.
SAVE instead drew its authority from a different statute, but the seven states argued that it was another attempt at broad debt cancellation that the Supreme Court had already forbidden.
The SAVE plan “is not the product of a well-reasoned decision,” their complaint read. “It is a pretext to evade a Supreme Court decision.”
In July 2024, the Eighth Circuit Court of Appeals affirmed the district court’s order and blocked the SAVE plan in its entirety. As a result, borrowers enrolled in SAVE were placed into an interest-free forbearance, where they have remained for a year.
By Bill Pan
