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KEY TAKEAWAYS
- The Department of Education announced an agreement with the states suing for the elimination of the Saving for a Valuable Education repayment plan.
- More than 7.7 million borrowers still in forbearance under the SAVE plan will soon need to transition to another repayment plan, and the Income-Based Repayment plan may be the most certain option for them.
The Department of Education announced early Tuesday that it has moved one step closer to shutting down the Saving for a Valuable Education repayment plan.
On Tuesday morning, the Department of Education announced a joint agreement with the State of Missouri and several other states that had filed a lawsuit to block the SAVE plan last year. Pending court approval, the agreement will end the SAVE plan.
The SAVE plan, an income-driven repayment plan created by former President Joe Biden’s administration, has been embroiled in several lawsuits for more than a year. Since July 2024, the plan’s millions of borrowers have been in an administrative forbearance, where payments are not due, but they are unable to make progress toward forgiveness.
Why This Matters
For the millions of borrowers in SAVE who have been in limbo for over a year, they will likely soon see the end of their repayment plan, which provided $0 monthly payments to a large number of borrowers. These borrowers will need to transition to a different repayment plan which likely has less favorable terms.
What Does This Mean For Borrowers?
The Department of Education announced that it will no longer allow borrowers to move to the SAVE plan and will deny any pending transfer applications. It also said it will transition the more than 7.7 million borrowers still in the SAVE plan to one of the existing repayment plans.
“The Department, through its Office of Federal Student Aid (FSA), will provide support to borrowers currently enrolled in the illegal SAVE Plan in selecting a new, legal repayment plan,” the Department said in a press release. “The Department will begin direct outreach to impacted borrowers to provide guidance about how to repay their student loans in the coming weeks.”
Borrowers can get a head start and begin applying to transfer to a standard repayment plan or any three of the remaining income-driven repayment plans: the Income-Based Repayment, Income-Contingent Repayment, or Pay as You Earn. The Federal Student Aid’s Loan Simulator tool provides borrowers with an estimate of monthly payments, allowing them to compare repayment plans.
The Department of Education has encouraged all SAVE borrowers to transition into the IBR plan earlier this year. The IBR plan will also soon allow more types of borrowers in, including those with a consolidated Parent PLUS loan and those who do not meet the partial financial hardship requirement.
