Proposed Settlement Terminates Hopes of Loan Forgiveness for Millions and Will Lead to Higher Bills for 7M+ Borrowers
WASHINGTON – Today, the U.S. Department of Education announced a proposed settlement that would end the Saving on a Valuable Education (SAVE) Plan, which offered millions of federal student loan borrowers lower monthly payments and a pathway to becoming debt free. The proposed settlement would force borrowers to switch to repayment plans that require higher monthly payments much sooner than the July 2028 end date for SAVE mandated by Congress.
“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,” said Abby Shafroth, managing director of advocacy at the National Consumer Law Center. “The SAVE plan had created a meaningful pathway for low- and middle-income people to move toward paying off their student loans while making affordable monthly payments. Now, in the midst of a national affordability crisis, their way forward is murky and complicated.”
Today’s announcement, part of a proposed joint settlement agreement with the State of Missouri and several other states, proposes to end the SAVE plan and would require the 7 million-plus people already in it to switch to a different plan within a “limited time.” However, the Department of Education has not yet implemented changes required by Congress to make all borrowers currently in SAVE eligible for the alternative, Income-Based Repayment (IBR), and is still sitting on a significant backlog of unprocessed applications for repayment plans. ED has also not yet finalized or made available the new Repayment Assistance Plan (RAP) that Congress authorized this summer.
The Department of Education has not said what will happen to borrowers in SAVE who do not apply to switch repayment plans. The proposed settlement also eliminates the potential for loan forgiveness that the SAVE plan had offered qualifying borrowers, vacates other repayment rule reforms made in 2023 alongside the SAVE rule that made repayment more fair and efficient, and requires the federal government to notify the state of Missouri before providing required loan forgiveness to borrowers in some circumstances for the next 10 years, giving the state unusual control over the federal student loan program.
The Department of Education will conduct a negotiated rulemaking to effectuate the settlement. That will likely include repealing the SAVE Plan Final Rule. No timing on a negotiated rulemaking was provided.
Related Resources
- Student Loan Borrower Assistance News: What’s Happening With the SAVE Plan?
- SLBA News: Update on Lawsuits Challenging the SAVE Plan and Options for Borrowers
- SLBA News: SAVE: A New Payment Plan That Will Reduce Monthly Payments
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