• The Biden-era SAVE student loan repayment plan will likely come to an end soon.
• Over 7 million borrowers may need to switch to other repayment options.
• The settlement agreement requires court approval before implementation.
• New plans will roll out by 2026, targeting a range of repayment terms.
• The legal and operational shift is expected to create confusion for affected borrowers.

The U.S. Department of Education announced a proposed settlement on Tuesday to terminate the Saving on a Valuable Education (SAVE) plan, an initiative launched under President Biden that provided flexible repayment options for student loans. The plan allowed monthly payments as low as $0 while offering expedited loan forgiveness for low-income borrowers. It faced significant legal challenges from seven Republican-led states, including Missouri, with allegations that it exceeded the department's authority, leading to months of uncertainty for millions of borrowers, according to The Hill and NPR.

Under the terms of the agreement, "no new borrowers would be enrolled in the SAVE plan," which effectively stops its operation. The Education Department plans to move current enrollees into other options that are still being finalized. Furthermore, pending SAVE applications will be denied, and borrowers will have a limited time to choose a new repayment plan once the settlement receives court approval, according to The Hill and Vox.

The proposed settlement has prompted various reactions, with proponents of the SAVE plan arguing that its end will create additional financial burdens for borrowers already struggling with repayments resumed after a long pause due to the pandemic and legal uncertainties. With over 12 million borrowers reportedly behind on their loans, the situation is dire as many fear defaulting, as highlighted by education advocates like Persis Yu from Protect Borrowers, according to NPR and The Hill.

The timeline for the transition to new repayment options remains unclear. However, the Education Department's forthcoming plans include the Repayment Assistance Plan (RAP) and revised standard options set to debut by July 2026. These changes reflect a broader shift in policy aimed to align repayment plans with the economic realities faced by borrowers, albeit with the expectation that many may find these alternatives less favorable than those provided by the now-defunct SAVE program, according to Vox and NPR.