The Department of Education has announced a joint settlement with Missouri and six other states that sued the Biden administration over SAVE (Saving on a Valuable Education). The plan still needs court approval.
These states argued that the SAVE plan exceeded the Education Department’s statutory authority and would impose significant costs on taxpayers.
Madison Doan of the Heritage Foundation states what happens next.
“This was an income-driven repayment, loan repayment plan and was very costly, and we think poor policy. So, if the department does receive additional approval, then officials will finally be able to eliminate the SAVEs plan altogether,” she said.
Doan says the Wharton budget model out of the University of Pennsylvania estimated repayment would have cost taxpayers more than $475 billion over 10 years.
If approved, more than 7 million borrowers enrolled in SAVE will no longer benefit from the program. New enrollments would be halted, pending applications denied, and current participants would be transitioned to other repayment plans.
Borrowers will have a limited time to choose alternative plans such as Income-Based Repayment or other federal repayment options.
Doan says it's hoped that these changes will eventually curb tuition costs and put borrowers in a better spot in terms of the amount of loans they're taking out.
“What’s going to happen for the next couple weeks is that the department will reach out to these borrowers. They'll offer to move them into a different, like a standard repayment plan. They’ll hope that they voluntarily move, and then we'll see kind of what happens from that."
