The US Department of Education has officially ended the controversial ‘Saving on a Valuable Education’ (SAVE) plan, which was repeatedly struck down by courts as illegal. About 7.5 million borrowers who joined the SAVE plan based on promises of “student loan forgiveness” and unusually low monthly payments will now be guided to switch to legitimate federal student loan repayment plans. The move aims to clarify obligations for borrowers, protect taxpayer funds, and eliminate uncertainty surrounding the SAVE plan.The SAVE plan was the Biden administration’s third attempt at large-scale student loan forgiveness, but it faced repeated legal challenges in federal, district and appellate courts. Estimates suggest that the program, if implemented, could cost more than $342 billion over 10 years. Earlier this month, a federal court approved a settlement between the Department of Education and the state of Missouri, officially ending the plan. Under the settlement, the department will stop enrolling new borrowers, deny pending applications, and transition all current SAVE Plan participants to statutory repayment plans.
What Borrowers Should Know
Beginning July 1, 2026, federal lenders will begin notifying borrowers of the termination of the SAVE plan. Borrowers will have 90 days to choose a legal repayment plan. If a borrower doesn’t choose a plan within that period, they will automatically move to the standard payment plan or the new tiered standard plan, which also starts on July 1. Borrowers can contact their loan servicer at any time before their 90-day deadline to switch to a legal repayment plan.The department’s Office of Federal Student Aid (FSA) will provide guidance and support during this transition. Emails will be sent to all SAVE Plan borrowers, explaining how to choose a new payment plan and highlighting options that are both affordable and sustainable. The Department emphasizes that borrowers now have enough time to make informed decisions about their financial future.
New federal payment options
Two major payment plans will be available from July 1:
Payment Assistance Plan (RAP) – This income-based plan calculates monthly payments based on the borrower’s income and number of dependents. Unlike some existing plans, RAP ensures that borrowers who make full, on-time payments can reduce their loan principal while avoiding interest. The plan is designed to make repayments more manageable while keeping borrowers on track to pay off their loans in full.- Tiered Standard Plan – This plan offers fixed repayment terms of 10, 15, 20 or 25 years depending on the total loan amount. Borrowers with large loans will benefit from lower monthly payments and extended repayment timelines, making it easier to manage large student loans.
For borrowers applying for income-based repayment plans, the Department may access federal tax records with the borrower’s consent. This allows for faster processing of applications without the need to manually upload income information.
Moving on.
The department has emphasized that the move is not intended to penalize borrowers. Instead, it ensures that debtors are in legal repayment plans while protecting the interests of taxpayers. The 90-day period gives borrowers enough time to explore repayment options and choose a plan that suits their financial situation.Borrowers are encouraged to act promptly and consider their options carefully. The department aims to make the process simple, transparent and supportive, helping borrowers stay on track with their loans while reducing financial stress.For more details on settlement and new repayment options, borrowers can visit StudentAid.gov/courtactions.
