The Trump Education Department has reached a sweeping settlement with Missouri that could remove millions of borrowers from President Biden’s SAVE income-driven repayment plan and push them back into repayment sooner than expected. More than 7.6 million borrowers currently on SAVE after a February court block may soon be required to choose a new repayment plan or face renewed interest charges.
The agreement effectively ends GOP-led lawsuits that challenged the legality of SAVE, trading their dismissal for the elimination of SAVE enrollments and the transition of all borrowers into plans that courts consider compliant.
Higher education analyst Mark Kantrowitz estimates the shift could begin as early as 2026, well ahead of Trump’s previously stated 2028 timeline to sunset SAVE.
Advocates Criticize Move as Borrowers Brace for Higher Bills
Consumer groups sharply condemned the settlement. Persis Yu of Protect Borrowers said it strips borrowers of “the most affordable repayment plan.”
With 42 million Americans owing $1.6 trillion in federal student loan debt, the impact may be significant — especially for low-income borrowers. Interest had already resumed in August for those stuck in SAVE after the court block, and now repayment deadlines are expected to follow.
The settlement mirrors Trump’s campaign promises to scale back Biden-era student loan relief efforts. Missouri, which led the lawsuits against SAVE, argued that the program exceeded executive authority.
The agreement blocks all new SAVE enrollments and denies pending applications.
Education Department Outlines Next Steps for Borrowers
According to the Education Department, borrowers will be migrated into “legal repayment plans,” including:
- Income-Based Repayment (IBR)
- Pay As You Earn (PAYE)
- Revised Pay As You Earn (REPAYE)
- Income-Contingent Repayment (ICR)
Unlike SAVE, these plans do not offer accelerated forgiveness for small balances and typically result in higher monthly payments.
Kantrowitz warned that the rapid transition could increase default rates: rushing millions into new plans without guidance may leave vulnerable borrowers at risk of falling behind.
Republican officials praised the end of what they called “illegal” relief, while Democrats criticized the decision as financially harmful for struggling borrowers.
Notices are expected to be sent to affected borrowers soon.
ED’s December 9 Policy Update Confirms SAVE Dismantling
The U.S. Department of Education formally announced on December 9 that it will begin dismantling the SAVE Plan.
What Changed?
- 7.7 million borrowers will be shifted to alternative repayment plans.
- No new borrowers will be accepted into SAVE.
- Pending SAVE applications will be denied.
- Existing participants will be transitioned to IBR, PAYE, or ICR.
The department noted that interest had already restarted on SAVE accounts in August 2025, following a court order that partially invalidated SAVE.
What This Means for Borrowers
Millions may face higher monthly payments and reduced protections when transitioned out of SAVE.
A survey from Data for Progress found that 42% of borrowers already struggle to afford basic needs while paying off loans. Under alternative plans, many will lose the reduced-payment structure SAVE provided.
Additional data shows growing financial strain:
- TransUnion (2025): 31% of federal borrowers with active payments were 90+ days delinquent.
- The Guardian: One-third of borrowers — especially new graduates and low-income workers — face heightened default risks after payment resumption.
- Forbes: Borrowers could see payment increases of hundreds of dollars per month.
TD Economics warned the federal student loan system is approaching a “default cliff” as delinquency rises.
The ED urges borrowers to use the federal Loan Simulator to estimate new payments before automatic transitions begin.
Why the Shift Happened
The student loan system has undergone major changes since the COVID-19 payment pause began in 2020. By 2023, the SAVE Plan replaced older IDR programs and offered more affordable terms for millions.
However, SAVE became the target of multiple lawsuits alleging administrative overreach. As courts blocked parts of the plan through 2024, the Department placed millions into administrative forbearance, pausing payments and freezing interest.
When court-ordered modifications arrived in August 2025, interest restarted — setting the stage for the settlement that now threatens to end SAVE entirely.
