The SAVE Plan Is Dead — 4 Takeaways for Student Loan Borrowers

The SAVE Plan, a Biden-era income-driven repayment (IDR) plan for federal student loans that offered borrowers low monthly payments and fast-tracked student loan forgiveness, is officially dead. And now, millions of borrowers will likely see disruptions and significant changes to repayment in the coming weeks and months.

The outcome follows two weeks of legal drama. The Department of Education and the state of Missouri, which had led one of two key legal challenges to try to block or end the SAVE Plan, reached a settlement agreement in December that, once approved by the district court overseeing the 18-month-long litigation, would end the SAVE Plan and force borrowers to switch to other repayment plans. But in late February, the district court declined to approve the settlement and dismissed the lawsuit, arguing that the court had no role in the matter now that the parties were in agreement about the outcome. Missouri appealed to the Eighth Circuit Court of Appeals, which, in a terse decision on Monday, overruled the district court and ordered the lower court to enter judgment and effectively approve the settlement. The court did so the following day, officially ending the SAVE program.

Here’s what the latest developments mean for student loan borrowers, and what those who have been in the SAVE Plan forbearance need to know.

The SAVE Plan is actually, really dead for student loan borrowers

While there had been some uncertainty about the status of the SAVE Plan in recent weeks, the latest actions by the federal appeals court and the district court in Missouri leave no room for doubt: the SAVE Plan is over, as the underlying regulations governing the program and allowing borrowers to access its benefits, such as lower payments and student loan forgiveness, are now officially vacated.

“The Eighth Circuit Court of Appeals went beyond right-wing Attorney Generals’ (AGs) motion to stay the lower court’s dismissal of Missouri v. Trump and instead directed the lower court to vacate the Saving on a Valuable Education (SAVE) repayment plan,” explained Protect Borrowers in a statement earlier this week. “The ruling grants the request of both the Missouri AG and the Trump Administration’s Department of Justice, who had jointly asked the court to kill the program, without determining its legal validity. This ruling comes as energy prices skyrocket and the American people are hit with yet another lever in a punishing affordability crisis.”

There will be no appeal of the rulings, because the only parties who could appeal — the Education Department and the state of Missouri (along with several other states who originally filed the legal challenge) — are aligned in their intent to end the program. That means the SAVE Plan is really, truly dead for federal student loan borrowers.

Student loan borrowers will be kicked off the SAVE Plan

With the SAVE Plan now over, the more than seven million student loan borrowers who have been in an administrative forbearance since the summer of 2024 due to the legal challenges will soon be forced to switch to other IDR plans.

“Defendants will not enroll any new borrowers in the SAVE Plan, will deny any pending enrollment applications for the SAVE Plan, and will continue working to move all current borrowers out of the SAVE Plan,” reads the text of the settlement agreement between the Education Department and the state of Missouri that is now officially in force. “Defendants will likewise not enforce the original REPAYE rule or otherwise enroll any borrowers, including SAVE borrowers, into the original REPAYE Plan.”

“Under the settlement, the Department agrees to work to move all of the borrowers currently in the SAVE plan out and into a different repayment plan,” explained the National Consumer Law Center (NCLC) in a blog post in December summarizing the settlement agreement. “Borrowers should expect that when they select a new repayment plan — or are switched into a new repayment plan if they do not select one themselves — they will begin receiving monthly student loan bills again and will be expected to make payments. Since summer 2024, borrowers enrolled in the SAVE plan have been in a forbearance, meaning they have not been billed or required to make payments. That forbearance will likely come to an end soon.”

Unclear timing and process for transitioning student loan borrowers to other repayment plans

The Education Department has not yet provided clear guidance on when student loan borrowers in the SAVE Plan will need to switch or what exactly the process will look like. But borrowers may not have much time.

“The settlement does not say how soon borrowers will have to move out of the SAVE plan,” said NCLC in its blog post. “In its press release, the Department of Education said that borrowers in SAVE will have ‘a limited time’ to select a new repayment plan.  The Department has not said what repayment plan the Department will move borrowers into if they do not select a new repayment plan.”

“ED has not commented on this development beyond the following statement from Undersecretary of Education Nicholas Kent published by CNBC: ‘In the coming weeks, the Department will issue clear guidance on next steps for borrowers enrolled in the illegal SAVE Plan, including details regarding how borrowers can move into a legal repayment plan,’” said The Institute for College Access and Success (TICAS) in a blog post that was updated this week.

SAVE Plan borrowers should expect higher student loan payments

Because other IDR plans have less generous repayment formulas than the SAVE Plan, and because many borrowers have seen their income increase since they first enrolled in the program (even while household expenses and costs of living have increased, too), many borrowers will see higher student loan payments under other plans. In some cases, the payment increases may be very significant.

“The consequence of eliminating the SAVE plan for individual borrowers would be enormous,” said NCLC in a statement last week. “For example, an unmarried student loan borrower with annual income of $45,000 enrolled in the SAVE plan could see their monthly payments more than quadruple from $38 to $175. Payments could jump even higher for borrowers with older loans. The financial shock to borrowers would be abrupt and dramatic: borrowers in the SAVE plan have not been billed in one-and-a-half years as a result of legal challenges, and would face a sudden resumption of bills if abruptly forced out of SAVE and into another plan.”

The Education Department encourages student loan borrowers in the SAVE Plan to start evaluating their other repayment options now, and to start budgeting for potentially higher monthly payments. A new IDR option called the Repayment Assistance Plan (RAP) is expected to launch later this year, but it is unclear at this juncture whether borrowers will be able to switch directly from SAVE to RAP. Borrowers should also know that RAP has a 30-year repayment term before a borrower can qualify for student loan forgiveness, much longer than the 20- and 25-year terms for other IDR plans.