Trump Strikes Deal to End Biden’s Student Debt Repayment Plan
In a significant shift for student loan borrowers, the Trump administration announced a new agreement to terminate the Biden-era SAVE plan. This development has raised concerns for millions currently managing their debt.
Details of the Trump Agreement
The agreement, revealed on Tuesday, eliminates the Saving on Valuable Education (SAVE) plan, which was established in 2023. This income-driven repayment plan was designed to aid borrowers managing high-interest loans. By calculating repayment amounts based on income and family size, the plan aimed to make payments more manageable and facilitate loan forgiveness for low-income individuals.
End of the SAVE Plan
The Department of Education indicated that no new borrowers will be admitted into the SAVE plan. Pending applications will be denied, and existing SAVE borrowers will be transitioned to standard repayment plans. This could signal an impending end to the program, depending on court approval of the settlement.
- New borrower enrollment in SAVE halted
- Pending applications denied
- Transition to standard repayment plans for existing borrowers
Legal Background
The legal challenges to the SAVE plan have been ongoing, stemming mainly from a lawsuit filed by Missouri and six other GOP-led states in April 2024. The administration has labeled the SAVE plan as “illegal.” Nicholas Kent, Under Secretary of Education, criticized the previous administration’s approach, claiming it unfairly shifted the burden of student loan debt onto taxpayers.
Impact on Borrowers
Critics, including Abby Shafroth from the National Consumer Law Center, have expressed serious concerns about this decision. They warn that discontinuing the SAVE plan may exacerbate the financial struggles of borrowers, especially during times of economic uncertainty.
Prior to this announcement, the Department of Education had resumed applying interest on loans for borrowers enrolled in the SAVE plan, impacting nearly 8 million individuals. Although borrowers had been granted temporary forbearance, many saw their balances increase due to accruing interest.
Changes to Student Loan Policy
Under President Trump’s second term, the landscape for student loans is rapidly evolving. His recent significant tax and spending cuts package introduced new borrowing limits for federal student loans, specifically for graduate students. These changes have simplified repayment options and removed certain deferment possibilities.
Borrower Experiences Under SAVE
The SAVE plan aimed to provide favorable terms for low-income borrowers. Some participants enjoyed monthly payments as low as 5% of their discretionary income. Additionally, the plan promised that after 10 years of payments, remaining loan balances could be canceled.
Throughout its tenure, the SAVE plan faced numerous legal challenges. In 2024, federal judges in Kansas and Missouri ruled against key components of the program, contesting its legality without congressional authorization.
As the student loan landscape continues to shift, borrowers face an uncertain future with their repayment options. The implications of these changes will undoubtedly impact millions of Americans for years to come.
