SAVE plan exit may fuel higher defaults and tighter budgets for millions of Americans
Millions of US student loan borrowers are about to lose what many advocates consider their most affordable repayment option, just as defaults rise and budgets tighten, according to CNN.
The Trump administration has reached a proposed settlement to end the Saving on a Valuable Education (SAVE) plan, a Biden-era income-driven repayment option that cut payments for low- and middle-income borrowers and accelerated forgiveness for some.
Under the deal, the US Department of Education will stop enrolling new borrowers, deny pending applications and move all existing SAVE participants into “legal repayment plans.”
Borrowers currently in SAVE-related forbearance will have a limited, yet-to-be-defined window to choose a new plan, with the Office of Federal Student Aid expected to support that transition.
More than 7.6 million borrowers were in the SAVE forbearance as of July, according to CNBC.
Higher education expert Mark Kantrowitz said borrowers will likely have to exit forbearance early next year, even though US President Donald Trump’s “big beautiful bill” had set SAVE’s expiry on 1 July 2028.
The settlement would resolve a lawsuit brought by Missouri, one of seven Republican-led states that sued over SAVE, arguing that former president Joe Biden used the plan as a backdoor form of debt cancellation after the Supreme Court struck down his broader forgiveness plan in June 2023.
The 8th US Circuit Court of Appeals has already blocked the entire SAVE plan, and two federal judges in Kansas and Missouri previously ruled that the administration overstepped its authority by enacting debt relief without Congress, according to CNN.
The Trump administration has consistently labelled SAVE “illegal.”
Under Secretary of Education Nicholas Kent said the Biden administration had “sought to unlawfully shift student loan debt onto American taxpayers” and that “The Trump Administration is righting this wrong and bringing an end to this deceptive scheme.”
Borrower and consumer advocates warn the shift will raise costs and confusion.
Persis Yu of Protect Borrowers said the deal would “strip borrowers of the most affordable repayment plan,” according to CNBC.
Abby Shafroth at the National Consumer Law Center called ending SAVE without a clear, affordable alternative “reckless and short-sighted,” saying it will add “confusion, uncertainty, and financial stress for millions of Americans already struggling with the rising cost of living,” as reported by CNN.
The change lands as many borrowers already show signs of financial strain.
A survey by The Institute for College Access & Success and Data for Progress cited by CNBC found that 42 percent of federal student loan borrowers say their payments make it harder to cover basics such as food and housing.
Another 37 percent report more difficulty meeting health-care expenses, and 52 percent say it is harder to save for retirement.
More than 5 million borrowers are currently in default and that total could reach about 10 million, the Trump administration said earlier this year.
Carolina Rodriguez of the Education Debt Consumer Assistance Program in New York said “highly educated individuals are budgeting in ways they never imagined just to survive,” often cutting food spending with limited room to adjust further.
At the same time, the average federal student loan balance has climbed to about US$39,000, up from roughly US$29,000 in 2015 and US$18,000 in 2007, based on analysis by Mark Kantrowitz reported by CNBC.
Wage gains for new graduates have stalled.
The median salary for new college graduates was US$60,000 in 2024, slightly below 2020 levels, and more than 40 percent of recent graduates are “underemployed,” working in jobs that do not require a bachelor’s degree, according to Federal Reserve Bank of New York data cited by CNBC.
Trump’s broader “One Big Beautiful Bill Act,” a tax and spending package passed earlier this year, has also tightened student lending by capping federal loan amounts for graduate students and parents, eliminating certain deferments and narrowing repayment options, CNN reported.
Experts cited by CNBC expect these changes, combined with the end of SAVE, to push more borrowers into higher payments and increase default risk as living costs rise and protections phase out.
