Department of Education To Move Millions of Borrowers From Biden-Era Student Loan Repayment Plan

KEY TAKEAWAYS

KEY TAKEAWAYS:

• More than 7 million borrowers in the SAVE plan must transfer to a new repayment plan following legal challenges.
• The Department of Education recommends transferring to the Income-Based Repayment plan, as other options will phase out by 2028.
• Borrowers should expect higher monthly payments under alternative plans, which could increase default rates.

More than 7 million borrowers still enrolled in the Saving for a Valuable Education repayment plan will need to transfer soon, the Department of Education said.

The Education Department said in a statement to Investopedia that the latest development in the legal saga will lead to the end of the “unlawful SAVE Plan.”

“In the coming weeks, the Department will issue clear guidance on next steps for borrowers enrolled in the illegal SAVE Plan, including details regarding how borrowers can move into a legal repayment plan,” said Under Secretary Nicholas Kent in a statement. "The Trump Administration will continue to realign the federal student loan portfolio to better serve students and taxpayers.”

At the end of February, borrowers expected the SAVE plan to be revived after a district judge dismissed the lawsuit that had kept the repayment plan in limbo for almost two years. On Monday afternoon, however, a higher court of appeals resumed the case and sent it back to the district judge.

The district judge now has to decide whether to approve the Department of Education’s December agreement to immediately end the SAVE plan.

Why This Matters

The Department of Education is already facing delays due to the constant changes in student loan policy over the past few years. Borrower advocates say that if the SAVE plan ends, these delays will increase further.

The SAVE plan, created under the Biden administration, offered income-driven payments lower than those under most repayment plans and made it easier to achieve forgiveness. The plan was first embroiled in lawsuits in April 2024, when a group of states sued, arguing the president didn’t have the power to implement them.

While then-President Joe Biden and his Department of Education fought for the SAVE plan, its borrowers were placed in administrative forbearance. This more than year-and-a-half payment pause is still active today.

What Should I Do Next?

While the Department of Education says Monday’s decision means the end of SAVE, borrowers still have to wait for the district judge’s final judgment.

In the meantime, borrowers can take action to resume their payments or progress toward loan forgiveness.

There are three income-driven repayment plans currently available to borrowers: the Income-Contingent Repayment, the Pay As You Earn and the Income-Based Repayment plan.

The Department of Education has recommended that SAVE borrowers transfer to the IBR plan, as the other two income-driven repayment plans will be eliminated by July 2028. Additionally, a newly created option, the Repayment Assistance Plan, is expected to be available in July 2026.

RELATED EDUCATION

Managing $120K in Student Loans on an $80K Salary: Should You Pay More Than the Minimum?

How Does Your Student Loan Debt Compare to Others? Find Out Where You Stand

No matter the repayment plan, most borrowers should expect higher monthly payments than they would have under the SAVE plan, if it had resumed. Already, more than 10.5 million borrowers are either delinquent or have defaulted on their federal student loans. Borrower advocates say the end of SAVE could make the default rate even worse.

Do you have a news tip for Investopedia reporters? Please email us at

[email protected]