The Department of Education announced Tuesday that it reached a settlement agreement with the state of Missouri to end former President Joe Biden’s student loan forgiveness program.
The Saving on a Valuable Education (SAVE) program bases monthly payments on an individual’s income and family size. The plan protected more borrowers’ incomes, increasing monthly payment exemptions from 150 percent to 225 percent of the federal poverty level—equating to roughly $48,000 per year for a family of two.
In April 2024, Andrew Bailey, Missouri’s then-Attorney General, filed a lawsuit with the attorneys general of Arkansas, Florida, Georgia, North Dakota, Ohio, and Oklahoma to stop the SAVE plan. His argument was that it made student loans function more like grants, as many borrowers were paying as little as $0 per month, and that Biden had overstepped his authority by circumventing congressional approval with an executive action.
In February, a court ruled in favor of the states, and following the passage of the One Big Beautiful Bill Act, the plan was dead in the water with borrowers beginning to accrue interest at rates that for some exceeded 9 percent per year.
The Tuesday settlement, if approved in court, moves this deadline forward, although the Department of Education did not specify a timeline for the changes. The agreement states that the Education Department would no longer enroll new individuals in SAVE, deny all pending applications, and transfer all approximately seven million borrowers into different plans—either fixed payment or payments based on income.
Changing millions of payment plans is complicated. There’s already a backlog of applications on the three other federal income-based plans. All but one of those plans will be gone after July 1, 2028 because of the Big Beautiful Bill.
“For four years, the Biden Administration sought to unlawfully shift student loan debt onto American taxpayers, many of whom either never took out a loan to finance their post-secondary education or never even went to college themselves,” Under Secretary of Education Nicholas Kent said. “The law is clear: if you take out a loan, you must pay it back.”
According to a report from the Congressional Research Service in the Library of Congress, nearly 43 million people—or one in six adults in the country—have federal student loan debt, all of which totals more than $1.6 trillion. This increases the burden of rising living costs: a survey of federal student loan borrowers conducted by Data for Progress in September found that 20 percent of borrowers are currently in delinquency or default and 42 percent said their debt payments made affording essentials like food or housing difficult.
