The U.S. Department of Education recently shared a proposal to eliminate the SAVE plan, a program that aimed to make student loan payments more manageable for borrowers. The SAVE plan was popular because it allowed low-income students to potentially pay as little as $0 monthly and offered faster paths to loan forgiveness. However, some Republican attorneys general, led by Missouri, argued that the program was too lenient and took legal action against it.
During the legal battle, borrowers were left uncertain, unable to make payments as interest continued to accrue. Nicholas Kent, the Under Secretary of Education, emphasized the importance of repayment, stating, “If you take out a loan, you must pay it back.” He mentioned that this agreement would protect taxpayers from what he deemed “irresponsible student loan policies.”
Pending court approval, the Department of Education plans to stop enrolling new borrowers in SAVE and transition about 7 million existing participants to other repayment plans. However, these alternatives are still being finalized, creating further confusion.
Borrowers will soon have limited options: fixed payment plans or income-driven repayment plans. Starting in July 2026, new repayment plans will be introduced under the One Big Beautiful Bill Act, which includes a revamped standard plan and a new income-driven plan called the Repayment Assistance Plan.
The urgency surrounding this settlement comes as many borrowers are already struggling with payments. The American Enterprise Institute recently reported that over 12 million borrowers are behind on their loans. This includes 5.5 million in default and another 3.7 million who are at risk of default. Experts warn that many borrowers could soon face financial hardships.
Scott Buchanan, a leader in student loan servicing, indicated that transitioning borrowers to new plans will be challenging. He anticipates a “bumpy” transition, as many have not made payments for years and will require significant support to navigate the shift.
Concerns are rising among advocacy groups, too. Persis Yu from Protect Borrowers expressed worry that the demise of SAVE will only increase financial strain on those who were already struggling.
With many borrowers waiting anxiously for a resolution, this development highlights broader issues in the student loan system. The changes could set a precedent for future policies, affecting countless lives across the country. For more detailed insights into student loan statistics, check out recent findings from AEI.
