The proposed settlement, which requires court approval, would terminate the Biden-era income-driven repayment program that has been mired in legal challenges since its 2023 launch. Under the agreement, the Department of Education would cease enrolling new borrowers, deny pending applications, and transition all current SAVE participants into other repayment plans.
The SAVE plan was designed to reduce monthly payments based on income and family size, prevent interest capitalization, and accelerate loan forgiveness for low-income borrowers. Some participants saw monthly payments reduced to 5% of discretionary income, with the promise of debt cancellation after as little as 10 years of payments.
Nearly 8 million borrowers are currently enrolled in the program.
"For four years, the Biden Administration sought to unlawfully shift student loan debt onto American taxpayers, many of whom either never took out a loan to finance their postsecondary education or never even went to college themselves, simply for a political win to prop up a failing Administration," Under Secretary of Education Nicholas Kent said in a statement. "The Trump Administration is righting this wrong and bringing an end to this deceptive scheme."
The settlement resolves litigation brought by Missouri and six other Republican-led states that challenged the plan's legality in April 2024. Two federal judges in Kansas and Missouri subsequently blocked key provisions of the program, arguing the Biden administration exceeded its authority by implementing debt relief without congressional authorization.
Following those court decisions, SAVE borrowers were placed in forbearance with payments suspended but interest continuing to accrue—a situation that has already increased balances for many participants.
Consumer advocacy groups condemned the settlement as harmful to struggling borrowers.
The Department of Education said borrowers would have a "limited time"—not yet specified—to select a new repayment plan, with the Office of Federal Student Aid tasked with providing transition support.
The announcement comes amid broader changes to federal student loan policy under the Trump administration. The "One Big Beautiful Bill Act," passed earlier this year, imposed new borrowing caps for graduate students and parent borrowers, eliminated certain loan deferments, and reduced available repayment options.
The rapid policy shifts have created uncertainty for borrowers navigating an increasingly complex student loan landscape, with additional changes expected in coming months.
