The Trump Administration, in a joint settlement with the State of Missouri, ended a student-loan repayment program called the Saving on a Valuable Education (SAVE) plan.
Now, it’s the borrower’s responsibility to figure out the transition to new plans.
Under the Biden-era SAVE program, 7.5 million borrowers were eligible to have monthly payments reduced based on adjusted gross income and family size.
A single borrower with no dependents earning $32,800 per year or less would have had a monthly payment of $0 for up to 10 years before loan payments are forgiven.
In April 2024, then Missouri Attorney General Andrew Bailey filed a lawsuit challenging SAVE and borrowers have not been able to make payments since July 2024. Despite being enrolled in a mandatory forbearance, interest has been applied, increasing loan payment amounts for those borrowers.
According to Abby Shafroth, Managing Director of Advocacy at the National Consumer Law Center, borrowers will have to repay this interest.
“Interest that has been accruing is being added to their total balance, so they will ultimately have to pay that interest unless they qualify for loan forgiveness,” Shafroth said. “The terms of how fast they pay it up is going to depend on repayment plans.”
More than 13% of Missouri residents have student loan debt. According to 2020 data, about half of all University of Missouri students graduate with debt.
“The Trump Administration’s policy is simple: if you take out a loan, you must pay it back,” said Secretary of Education Nicholas Kent in Monday’s press release announcing the end of SAVE. “Borrowers currently enrolled in the illegal SAVE Plan will be given at least 90 days to enter a legal repayment plan of their choice, including the new Repayment Assistance Plan, which will launch on July 1.”
As a part of the settlement, the Department of Education will cease enrolling new borrowers into the SAVE plan, deny pending applications and move current borrowers into other repayment methods.
Borrowers have limited repayment options for closing debt. While Income-Based Repayment and Pay As You Earn Repayment plans still exist, the Education Department is introducing two new plans: a Repayment Assistance Plan and a new Tiered Standard Plan.
Borrowers with direct loans will be eligible for the Repayment Assistance Plan (RAP) plan and monthly payments are based upon 1%-10% of their adjusted gross income and number of dependents. The tiered plan offers fixed repayment terms based on outstanding loan balance.
However, attorney Micheal Doyel believes it’s a recipe for confusion. Those who can not pay will have to file for default.
“The problem with default is they can start garnishing wages and that does not take a lawsuit for that to happen,” Doyel said. “They can intercept income tax returns, if somebody's on Social Security or receiving government benefits, those can be intercepted to pay for this.”
The Education Department has a loan repayment calculator for borrowers to calculate varying costs across differing plans.
But Shafroth worries that eliminating SAVE in the midst of an affordability crisis has significant consequences.
“We know people are already struggling with rising gas costs, rent costs, grocery costs, healthcare, childcare,” Shafroth said. “Increasing another one of their monthly bills is really a problem and it’s going to cause a lot of hardship.”
