This story was first published at Chalkbeat Colorado.
DENVER | Last week, the U.S. Department of Education reached a proposed settlement in a lawsuit brought by Republican state attorneys general to end the Saving on a Valuable Education student loan repayment plan.
The plan, better known as SAVE, offered a flexible, income-driven repayment plan and quicker loan forgiveness. Some of the about 7.6 million borrowers enrolled paid as little as $0 a month.
Republican state attorneys general argued that the plan would saddle taxpayers with borrowers’ obligations. The federal government backs student loans with the expectation that it will recoup a portion of the money plus interest from borrowers. The Trump administration has also repeatedly questioned the SAVE plan’s legality.
As part of the settlement, the Trump administration said it will stop enrolling new borrowers in the plan, deny any pending applications, and move all SAVE borrowers into different repayment plans.
For those borrowers, this means the Education Department will begin sending notifications in the coming weeks. Officials also said borrowers will have a limited time to choose a new repayment plan.
Those options include fixed repayment plans that calculate how much a borrower owes, their interest rate, and repayment timeline, as well as income-based repayment plans that calculate how much borrowers earn and can afford to pay each month.
The settlement is just one of several steps the Trump administration and Congress have taken to reshape federal student loan programs. Before the settlement, lawmakers planned to phase out the SAVE plan.
Other changes include the creation of the new Repayment Assistance Plan, or RAP, which would extend the timeline to get student loan forgiveness up to 30 years. National advocacy groups have panned the plan as potentially more expensive for some borrowers.
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“The plan, better known as SAVE, offered a flexible, income-driven repayment plan”
What this did was cause student loan balances to actually rise, because the payers weren’t covering the interest, much less any of the principal. That’s why you had people posting videos complaining that they’d been paying their loans for 10 years, only to see the balance go up by $15-20k or more above what they borrowed–not to mention the fact that a lot of student loan borrowers took the COVID pause as a debt jubilee and didn’t pay down a single penny, which caused any non-subsidized loan balances they were carrying to increase exponentially. The smart ones either invested those payment amounts to make a chunk payment later, kept paying even though they didn’t have to, or a combination of both, and either paid the loan off or very close to it when the pause ended.
Paying back student loans is very simple–pay the minimum monthly payment listed on the promissory note, and you’ll get it paid off over the term of the loan. Or, pay more than the minimum and pay them off early. “Income-based repayment” is nothing more than a scam to make you a debt slave.