Trump administration announces deal to end Biden-era student debt repayment plan

By Sunlen Serfaty, Piper Hudspeth Blackburn, CNN

(CNN) — In a move that could send millions of student loan borrowers scrambling, the Trump administration announced an agreement on Tuesday to end the SAVE plan, a Biden-era repayment plan that has faced legal challenges for years.

The Saving on Valuable Education (SAVE) plan is an income-driven repayment plan first introduced in 2023 that helped borrowers struggling to keep up with high interest loans – aiming to reduce monthly payments based on income and family size, prevent interest from ballooning, and accelerate loan forgiveness for some low-income borrowers.

The Trump administration has long called the plan “illegal” and sought to shut it down.

The Department of Education said in a news release that as part of the proposed settlement, it will not enroll any new borrowers into the plan, deny any pending applications, and move all SAVE borrowers into legal repayment plans.

If the agreement is approved by the court, the department said it will mark the end to the SAVE plan. Borrowers will have a “limited time” – the amount not yet outlined – to enroll in a new plan, with the Office of Federal Student Aid (FSA) tasked with supporting borrowers who select one. The settlement resolves a legal challenge against the SAVE plan from Missouri, one of seven GOP-led states that sued the Biden administration over the policy in April 2024.

“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.”

Critics warned that the settlement would raise costs for borrowers, particularly those that may already be struggling with economic uncertainty.

“Ripping the SAVE plan away from student loan borrowers now without access to a clear and affordable alternative is reckless and short-sighted, creating even more needless confusion, uncertainty, and financial stress for millions of Americans already struggling with the rising cost of living,” Abby Shafroth, managing director of advocacy at the National Consumer Law Center, said in a statement Tuesday.

The proposed settlement agreement comes months after the Department of Education announced it would resume applying interest to loans held by borrowers enrolled in the plan, affecting nearly 8 million borrowers. While borrowers were still granted forbearance – meaning a delay on their monthly payments – many saw their balances increase as interest restarted each month.

The student loan landscape has been changing rapidly during President Donald Trump’s second term, and borrowers stand to face even more changes in the coming months.

His landmark tax and spending cuts package – the “One Big Beautiful Bill Act”– passed earlier this year, placed new caps on the amount students can borrow in federal student loans for graduate school and how much parents can borrow to help pay students’ tuition. It also eliminated certain deferments on student loans and created a much more limited set of repayment options.

The SAVE plan has faced legal challenges for years. It was meant to offer the most generous terms for low-income borrowers. Under the plan, some enrolled borrowers saw monthly payments as low as 5% of discretionary income. It also promised to cancel remaining student loan debt after making as little as 10 years of payments.

In 2024, two federal judges in Kansas and Missouri blocked key parts of the program, arguing that the Biden administration overstepped its authority by enacting debt relief without congressional approval. Following the court decision, SAVE borrowers were placed in no-interest forbearance.

CNN’s Tami Luhby contributed to this report.

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