The Trump administration moved to dismantle President Joe Biden's signature student loan repayment relief on Tuesday, announcing a joint settlement with Missouri that would formally end the payment pause and phase out the Saving on a Valuable Education (SAVE) plan. The decision sets up a significant shift for more than 7.6 million borrowers enrolled in the programme and signals heightened legal and political stakes around federal student loan policy.
The U.S. Department of Education said borrowers in SAVE forbearance will be required to choose a new repayment option once the settlement takes effect. The announcement follows the 8th U.S. Circuit Court of Appeals ruling that sided with Republican-led states, which argued the Biden administration exceeded its authority in granting widespread repayment relief.
Under the proposal, the Department agreed to stop enrolling new borrowers into SAVE, reject pending applications, and transition current participants into established repayment plans. Officials noted that any final settlement must still be approved by a federal judge, and repayment guidance will begin rolling out to affected borrowers in the coming weeks.
Education expert Mark Kantrowitz warned that borrowers could be required to leave the forbearance programme as early as 2026, far earlier than expected. The Trump administration's legislative framework-referred to by supporters as the "big beautiful bill"-had previously set the programme's expiration for July 1, 2028. An accelerated timetable would mean a faster return to monthly payments for millions.
The Education Department positioned the settlement as a correction to what it characterized as an unlawful use of executive authority. Undersecretary of Education Nicholas Kent sharply criticized the Biden administration, stating: "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." Kent added: "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."
Kent praised the states that brought the original challenges, saying taxpayers can be confident "they will no longer be compelled to shoulder the burden" of what he described as irresponsible federal policy.
Republican attorneys general supporting the lawsuit argued that SAVE was the administration's workaround after the Supreme Court struck down Biden's broader debt-cancellation effort in 2023. The SAVE programme had offered the lowest monthly payments of any federal repayment option, enabling many low-balance borrowers to reduce debt faster while interest remained suppressed.
Consumer advocates have responded forcefully to the proposed settlement. Persis Yu of Protect Borrowers said the government is stripping away "the most affordable repayment plan" from millions who relied on SAVE's reduced payment structure. Her comments reflect widespread concern among borrower groups that the transition could destabilize households already struggling with rising costs.
More than 42 million Americans collectively owe over $1.6 trillion in federal student loans, according to the Congressional Research Service. The settlement, if approved, would reshape repayment schedules for a broad share of low-income borrowers and reopen a political battle over whether the federal student loan system should prioritize relief or fiscal restraint.
