The U.S. Department of Education announced on Mar. 27 that it has begun sending guidance to all borrowers enrolled in the 'Saving on a Valuable Education' (SAVE) Plan, instructing them to leave the plan and select a legal federal student loan repayment option. The move affects approximately 7.5 million borrowers who joined the SAVE Plan, which courts have ruled unlawful.
The Department's action follows multiple court decisions blocking the SAVE Plan, which was part of the Biden Administration’s efforts at broad student loan forgiveness. According to estimates cited by the Department, maintaining the plan would have cost taxpayers more than $342 billion over ten years. Earlier this month, a court approved a settlement between the Department and the State of Missouri that formally ended enrollment in the SAVE Plan.
Under Secretary of Education Nicholas Kent said, “Today’s guidance, which every borrower enrolled in the defunct SAVE Plan will receive over the next week, puts the Biden Administration’s illegal student loan bailout agenda to rest once and for all.” Kent added that borrowers currently enrolled will be given at least 90 days to choose from legal repayment plans such as a new Repayment Assistance Plan launching July 1.
Starting July 1, federal loan servicers will notify affected borrowers about their requirement to exit from SAVE within a specific 90-day window. Those who do not make a selection during this period will be automatically placed into either a Standard Repayment Plan or a new Tiered Standard Plan also set for launch on July 1. The Department emphasized that this transition period is intended to give borrowers enough time to review their options and make informed choices.
Borrowers are encouraged by Federal Student Aid (FSA) officials to contact their servicers if they wish to switch plans before receiving formal notification about their deadline. The FSA is providing support through direct emails explaining next steps and how applicants can expedite processing by consenting for tax information sharing with Internal Revenue Service systems.
Looking ahead, changes stemming from recent legislation—the Working Families Tax Cuts Act—will introduce both an income-driven Repayment Assistance Plan (RAP) and Tiered Standard Plans beginning July 1, 2026. RAP payments are based on income and dependents while protecting against excessive interest accrual; Tiered Standard Plans offer longer terms with lower monthly payments depending on total debt amount.
