President Donald Trump’s administration has announced a new agreement that would end the pause on student loan payments for millions of borrowers.
The Education Department announced the settlement Tuesday in a lawsuit challenging former President Joe Biden’s Saving on a Valuable Education (SAVE) loan repayment plan. The plan has been at the center of an ongoing legal battle since last year.
The agreement would put an end to the SAVE plan, which means borrowers enrolled in the program will need to find a new, legal plan and start making payments again, according to the Education Department.
The agreement will have to be approved in court before it takes effect, the agency said. Last year, borrowers enrolled in the SAVE plan had their loans placed in forbearance, which means their payments have been on hold.
If you’re one of the 7.6 million borrowers currently enrolled in the SAVE plan, here’s what you need to know about the new agreement:
What does this agreement mean for borrowers?
If the agreement is approved in court, impacted borrowers will have a “limited time” to choose a new repayment plan and begin repaying their loans, the Education Department said.
Borrowers can apply for a new income-driven repayment plan through the Federal Student Aid website. The process can be sped up if borrowers allow the Education Department to obtain their federal tax information from the Internal Revenue Service directly, according to the agency.
“This allows the Department to process borrowers’ IDR applications faster and eliminates the need for borrowers to manually upload their income information,” the agency said in a press release.
There is also a second option of fixed payment plans.
When will these changes take effect?
While the Education Department said borrowers will have a “limited time” to select a new plan once the agreement is approved, the exact timeline remains unclear.
Higher education expert Mark Kantrowitz told CNBC that borrowers will likely need to choose a new plan by early next year.
The Education Department will also be reaching out to impacted borrowers in the coming weeks.
“The Department will begin direct outreach to impacted borrowers to provide guidance about how to repay their student loans in the coming weeks,” the agency said.
What is the SAVE plan, and why was it challenged in court?
The SAVE plan, which went into effect under the Biden administration in 2024, had lower monthly payments than any other available plan.
Several GOP-led states challenged the SAVE plan in court last year, arguing the Biden administration overextended its authority when it implemented the plan.
An appeals court ruled in the states’ favor and blocked the plan in February. Then, in July, the Education Department told borrowers enrolled in the plan that their loans would start to accrue interest again on August 1.
This month’s agreement will “dismiss the litigation in exchange for the Department agreeing not to enroll any new borrowers in the illegal SAVE Plan, to deny any pending applications, and to move all SAVE borrowers into legal repayment plans,” according to the Education Department.
