Taxpayers may finally get a fair deal. A recent court ruling has created another path for the U.S. Department of Education to eliminate a costly student-loan repayment plan known as Saving on a Valuable Education, or SAVE. Doing so would relieve taxpayers who have increasingly been asked to shoulder the cost of student debt through expansive debt-cancellation schemes.
Despite the policy’s moniker, SAVE did anything but save money for taxpayers.
SAVE, created under the Biden administration, dramatically expanded income-driven repayment in ways that shifted costs from borrowers to taxpayers. 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, shielding more earnings from repayment calculations.
In addition, despite making lower monthly payments, borrowers could also qualify for loan cancellation in as few as 10 years, rather than 20 or more (the rules of other federal loan repayment options), depending on how much they borrowed. On top of all that, the plan also waives unpaid interest.
The University of Pennsylvania Wharton School’s budget models estimated that SAVE would cost almost half a trillion dollars over 10 years. Just 22% of undergraduate borrowers enrolled in SAVE were expected to repay their loans.
Even analysts supportive of income-driven repayment plans acknowledged the problem. The left-leaning Urban Institute observed that SAVE would have transformed IDR (which are income-driven repayment plans for unpaid federal student loans), “from a safety net … into a substantial subsidy for most undergraduate students who take on debt.”
But last week, the court declined to approve a proposed settlement between the Trump administration and the state of Missouri that would have formally ended SAVE. This sounds like bad news, but there is a silver lining.
The court’s reasoning was procedural but consequential. The lawsuit had originally been filed by a coalition of Republican-led states challenging the Biden administration’s authority to implement SAVE. But after the change in administration, the federal government no longer defended the rule. Without adversity between opposing parties, the court concluded there was no longer a live case and therefore no constitutional basis to issue a final ruling.
In practical terms, that means the judiciary will not resolve the legality of SAVE. However, on Monday, the state of Missouri and several other Republican-led states filed a motion asking the court to pause the dismissal of the case while they seek an appeal. If the judge rejects the request to freeze the case, the matter could be returned to the Department of Education.
The department could then take steps to eliminate SAVE through negotiated rulemaking, also known as “neg-reg.” It is a regulatory process that the agency must follow when rewriting federal student loan regulations. Though this process takes anywhere from several months to over a year to complete, the court’s earlier decision effectively places responsibility for ending SAVE back in the department’s hands.
The even better news is that Congress has already taken steps to phase out the program. The One Big Beautiful Bill Act, which President Donald Trump signed into law last July, requires borrowers currently enrolled in SAVE to switch to other repayment programs by July 1, 2028.
If borrowers fail to elect into a new plan by 2028, the department will move them into the Repayment Assistance Plan, which includes elements of debt cancellation, but is stricter on repayment terms.
The department should consider all its options when it comes to ending SAVE—including undergoing negotiated rulemaking—to prevent potentially billions of dollars in additional taxpayer costs.
Accountability should be the Trump administration’s lasting impact on higher education policy. The agency should focus on the fundamental idea that borrowers are responsible for repaying the loans they willingly took out and end SAVE once and for all.