U.S. Department of Education Announces Next Steps for Borrowers Enrolled in the Unlawful SAVE Plan

Today, the U.S. Department of Education (the Department) began issuing guidance to all borrowers enrolled in the unlawful 'Saving on a Valuable Education' (SAVE) Plan, directing them to exit the plan and enter a legal federal student loan repayment plan. The guidance will be sent to the 7.5 million borrowers who enrolled in the illegal SAVE Plan based on the false promise of "student loan forgiveness" and artificially low monthly payments.

The SAVE Plan was the Biden Administration's third and final attempt at mass student loan forgiveness and was blocked repeatedly by federal, district, and appellate courts. Estimates suggest the illegal SAVE Plan would have cost taxpayers more than $342 billion over 10 years. Earlier this month, a court ended the illegal SAVE Plan by approving a settlement between the Department and the State of Missouri, which was announced in December. As part of the joint settlement, the Department will not enroll any new borrowers in the illegal SAVE Plan, deny any pending applications, and move all SAVE Plan borrowers into legal repayment plans.

"Today's guidance, which every borrower enrolled in the defunct SAVE Plan will receive over the next week, puts the Biden Administration's illegal student loan bailout agenda to rest once and for all," said Under Secretary of Education Nicholas Kent. "For years, borrowers have been caught in a confusing cycle of uncertainty, but the Trump Administration's policy is simple: if you take out a loan, you must pay it back. Borrowers currently enrolled in the illegal SAVE Plan will be given at least 90 days to enter a legal repayment plan of their choice, including the new Repayment Assistance Plan, which will launch on July 1."

In the guidance, the Department provides information on how borrowers can enroll in a new, legal federal student loan repayment plan and previews upcoming changes to student loan repayment options.

Starting on July 1, federal loan servicers will begin issuing notices to borrowers, instructing them to exit the illegal SAVE Plan and enroll in a legal repayment plan within 90 days. Borrowers who do not transition plans within the 90-day period communicated by their servicer will be automatically enrolled into either the Standard Repayment Plan, or the new Tiered Standard Plan that will be available beginning July 1. Servicers will notify borrowers of their specific 90-day deadline.

The 90-day period provides borrowers with ample time to explore repayment options that best suit their needs and plan accordingly. A borrower who wishes to transition before their loan servicer communicates a specific 90-day deadline may contact their servicer at any time to enroll in a lawful repayment plan.

Next Steps

The Department, through its Office of Federal Student Aid (FSA), will provide support to the more than 7.5 million borrowers currently enrolled in the defunct SAVE Plan. Starting today, FSA will email borrowers to inform them that the SAVE Plan has ended and help them select a new, legal repayment plan to put them on a path to a sustainable financial future while safeguarding the interests of American taxpayers. Borrowers will have ample time to select a new, legal repayment plan and resume repaying their federal student loans.

Additional information about the approved settlement is available at StudentAid.gov/courtactions.

Applying for a Legal Income-Driven Repayment Plan

All borrowers enrolled in the defunct SAVE Plan will need to apply for a legal repayment plan. Applying for a legal income-driven repayment (IDR) plan is quick and easy if borrowers provide consent for the Department to obtain their federal tax information directly from the Internal Revenue Service. By providing consent, the Department can process a borrower's IDR application faster and eliminate the need for a borrower to manually upload their income information.

Upcoming Changes to Student Loan Repayment

The Department is working on implementing the student loan repayment provisions included in the Working Families Tax Cuts Act. This once-in-a-generation law created a new IDR plan, the Repayment Assistance Plan (RAP), and a new Tiered Standard Plan that will be available to borrowers on July 1, 2026.

Under RAP, a borrower's monthly payment is based on that borrower's income and number of dependents. This provides borrowers with more affordable monthly payments while maintaining their repayment obligations. Unlike existing IDR plans, RAP ensures that borrowers who make full, on-time monthly payments will be shielded from runaway interest and are able to make progress toward reducing the principal balance on their loan.

The new Tiered Standard Plan will offer fixed terms - 10, 15, 20, or 25 years - based on a borrower's total outstanding loan balance, giving borrowers with higher debt lower monthly payments and more time to repay.

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