A new settlement between the Education Department and seven Republican-led states would permanently shut down the SAVE repayment program, forcing millions of borrowers to shift into other plans.
By yourNEWS Media Newsroom
The U.S. Department of Education has reached a settlement to end the Biden administration’s SAVE student loan repayment plan, marking the final dismantling of large-scale federal debt relief initiatives introduced under President Biden.
The department announced on Dec. 9 that it reached an agreement with Missouri and six other Republican-led states—Arkansas, Florida, Georgia, North Dakota, Ohio, and Oklahoma—to terminate the SAVE program. The proposal now awaits approval from the U.S. District Court for the Eastern District of Missouri’s Eastern Division.
The seven states argued that SAVE, introduced in 2023, unlawfully expanded executive power by offering debt forgiveness and income-based payment reductions without congressional authorization. Their complaint described the program as “a pretext to evade a Supreme Court decision” that struck down Biden’s earlier mass-debt-cancellation plan, according to the lawsuit.
The SAVE plan—billed by the Biden administration as the “most affordable repayment plan ever”—allowed borrowers with $12,000 or less in federal loans to have their balances erased after ten years of qualifying payments. Monthly payments were capped at a small fraction of income, reducing some bills to zero.
Before it was halted, the plan canceled roughly $1.2 billion in student debt for more than 150,000 borrowers. A federal district court stopped further discharges in spring 2024, and the Eighth Circuit Court of Appeals later upheld that ruling, blocking the program entirely and placing affected borrowers in an interest-free forbearance.
As of July, the Education Department estimated that 7.6 million borrowers were stuck in SAVE-related forbearance.
Under the new settlement, the department would stop enrolling new applicants, reject all pending SAVE applications, and transfer current participants into existing, legally authorized repayment programs. If approved by the court, about 7 million borrowers will have a limited window to choose an alternative plan and resume repayment.
“The law is clear: If you take out a loan, you must pay it back,” Under Secretary of Education Nicholas Kent said, calling the agreement a “definitive end” to what he described as Biden-era “illegal and irresponsible student loan policies.” He added that the settlement ensures taxpayers “will no longer be forced to serve as collateral” for others’ debt.
The case mirrors Missouri’s earlier role in the Supreme Court decision that struck down Biden’s first student loan forgiveness plan. In that case, Missouri successfully argued that forgiveness would reduce revenue for the Higher Education Loan Authority of the State of Missouri (MOHELA), harming the state itself since MOHELA is a state-created entity managing more than 7.7 million accounts.
The Missouri-led lawsuit against SAVE was filed less than a month after a separate coalition of 11 Republican states brought similar legal action, contending that neither the president nor the Education Department can convert loan repayment programs into de facto grant systems.
Some states also argued that SAVE would have reduced state tax revenue by canceling taxable debt.
If approved by the Missouri court, the settlement would officially end the last remaining piece of Biden’s student debt relief agenda, bringing the administration’s education finance overhaul to a close.
Original article
Comments