Finally, the time has come: the end of the unlawful so-called SAVE era, an era marked by the Biden administration’s attempts to force American taxpayers to pay for college loan debts.

On Tuesday, the Department of Education announced a proposed joint settlement with the State of Missouri and six other states to end the Biden administration’s Saving on A Valuable Education (SAVE) plan, an income-driven loan repayment plan that courts ruled illegal, and were clearly costly and poor policy. If the department receives judicial approval, officials will be able to eliminate the SAVE plan altogether.

While the name sounds appealing, the SAVE plan delivered the opposite of what it promised. It did not “save” anything, merely transferred unpaid debts from individuals who took out loans for college to taxpayers. Had the program continued, it would have shifted billions in student debt to hard working Americans.

SAVE fundamentally reimagined the Department of Education’s income-based repayment plans for the worse. The plan halved borrowers’ monthly payment from 10% to 5% of discretionary income and raised the income threshold of borrowers who are exempt from repayment from 150% to 225% of the poverty line.

Borrowers could also qualify for loan cancellation in as little as 10 years instead of 20 or more, depending on their loan amounts. On top of all that, the plan also waived accrued unpaid interest.

What did these overgenerous provisions mean for American taxpayers? The University of Pennsylvania Wharton School’s budget models estimated that it would cost almost half a trillion dollars over 10 years, and only 22% of undergraduate borrowers enrolled in SAVE were expected to repay their loans.

The proposal would have set a dangerous precedent: Borrowers could assume that Uncle Sam would wipe away whatever debt they incurred, and colleges could continue raising tuition with little accountability, confident that taxpayers would shoulder the cost.

Thankfully, in the spring of 2024, the attorney general of Missouri, on behalf of the state, filed a lawsuit along with six other states to challenge the unlawful SAVE plan. A few months later, two federal court judges issued nationwide injunctions stopping the Biden administration from administering the SAVE plan. The following year, the U.S. Court of Appeals for the Eighth Circuit issued an injunction enjoining implementation of the entire plan and sent the case back to the district court.

Now, the Department of Education and the State of Missouri have reached a settlement agreement to dismiss the litigation in exchange for taking steps to end the plan.

If the courts authorize this settlement, taxpayers will not have to pay for college loans held by someone else, and the Education Department will deny any future or pending applications and begin encouraging borrowers to voluntarily transition to other legal repayment plans.

The department will also undertake rulemaking over the next year to remove the SAVE plan from the federal books (“with the exception of the forbearance and deferment provisions that were included in the final SAVE Plan rule that will continue to count for Income-Driven Repayment (IDR) forgiveness purposes”), but this will not prevent it from carrying out the actions above.  

In the coming weeks, the department will conduct direct outreach to affected borrowers to help them select an alternative repayment plan and get back on track with repayment.

Over the past few years, roughly seven million student borrowers enrolled in SAVE have been stuck in an unnecessary limbo, uncertain about their obligations. Had the prior administration not pursued the SAVE plan unlawfully, students would not have been placed in this position, and they would have continued making payments on the loans they personally agreed to repay.

Moving forward, American taxpayers should not be left to shoulder the debts of borrowers, and colleges and universities must be held to higher standards for the return on investment they deliver.

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