On Tuesday, the Trump administration announced that it reached a settlement with several Republican states to end Joe Biden’s student loan repayment program (SAVE). The settlement still has to be approved by the U.S. district court for the Eastern district of Missouri in order to end the program. Here’s what you need to know.
What is the SAVE program?
SAVE is an income-driven repayment program that was launched under the Biden administration. It helps borrowers repay their student loans by lowering some borrowers’ monthly payments to as little as $0, cutting required payment on undergraduate loans by half and offering early forgiveness for those with low balances, according to The Guardian.
The SAVE program is considered to be one of the most advantageous student loan repayment programs in U.S. history. There are currently over 7 million borrowers enrolled in the SAVE program.
Why does the Trump administration want to end the SAVE program?
The Trump administration has called the plan “illegal.”
“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 press release. “The Trump administration is righting this wrong and bringing an end to this deceptive scheme. The law is clear: if you take out a loan, you must pay it back.”
Officials in Republican states have aligned with Trump’s view on the SAVE plan. In March, Missouri, Arkansas, Florida, Georgia, North Dakota, Ohio and Oklahoma sued the Biden administration, claiming the SAVE program was illegal.
“Our office fought for hardworking Americans who were being preyed upon by Biden administration bureaucrats, and we won in court every time,” Missouri’s Republican attorney general Catherine Hanaway said. “Unilaterally saddling taxpayers with someone else’s Ivy League debt ignored congressional authority and was clearly unlawful. We appreciate president Trump’s real, long-term solutions instead of illegal student loan schemes.”
The news comes as the Trump administration previously resumed interest to loans held by borrowers enrolled in the plan. The decision affected nearly 8 million borrowers, many of which saw their balances increase, according to CNN. It also comes as Trump’s “One Big Beautiful Bill Act” put new caps on the amount that students may borrow in federal student loans.
What happens now with the SAVE program?
The SAVE program will be shut down if the settlement is approved by the U.S. district court for the eastern district of Missouri. If it goes through, borrowers will be given a short window to choose a new option before the Department of Education automatically removes them from the program. The department will also stop new enrollment in SAVE and deny pending applications.
The Guardian reported that over 43 million Americans, or about one in six adults, currently have student loan debt. About 12 million borrowers are late on payments, per the American Enterprise Institute.
Natalie Abrams, the president of the Student Debt Crisis Center, said the announcement will put even more financial strain on millions of borrowers.
“Today’s decision from the department of education is devastating for the nearly 8 million student loan borrowers who depended on the Save plan to keep their payments affordable. Borrowers have endured years of uncertainty, and this only exacerbates the confusion and financial strain they are already facing,” she said in a press release. “Borrowers need real relief and stability, not a return to unaffordable, costly student loan payments that push them closer to financial crisis.”