Will Trump Repeal the SAVE Plan?

Will President Trump seek to repeal the Saving on a Valuable Education (SAVE) repayment plan? Right now, it seems more likely than not that he would, and his administration has multiple paths to get there. 

We’ll discuss how a SAVE plan repeal could happen in a second Trump administration with his 2024 election victory and what options borrowers might have for their student loan debt as a result.

Why President Trump would oppose SAVE

At first glance, President Trump’s first term saw almost no movement on student loan policy besides pausing federal student loan payments and interest at the beginning of the pandemic. Given that he expressed very little interest in student loan policy, why would it be a foregone conclusion that Trump would oppose the SAVE plan in a second term?

The best evidence is the strong Republican opposition to SAVE at the state level.

Multiple Attorneys General from Republican-led states have filed lawsuits against President Joe Biden’s SAVE plan. In total, 18 states have joined some version of these lawsuits.

Clearly, stopping the SAVE plan is an animating policy issue among Republican officials. 

While President Trump was unmotivated to launch a new income-driven repayment (IDR) plan during his term, stopping an existing IDR plan would be easier to accomplish.

How Trump could repeal the SAVE plan

Ending the SAVE plan could likely occur from two different paths:

1. A negotiated rulemaking session

The President Biden Administration used negotiated rulemaking to implement the SAVE plan in the first place.

Negotiating rulemaking is a fancy word for a formal committee representing key stakeholders affected by a policy change. If the committee approves the proposed regulatory changes Department of Education suggests, the regulations go into effect. If the committee can’t come to a consensus, the Department of Education can do whatever it wants.

The most obvious path to repealing the SAVE plan would be to replace it with the IDR plan specified in the College Cost Reduction Act. The IBR plan, though, would be untouched as it's defined in statute.

2. Allowing a Conservative Lower Court Ruling to Stand Without Appeal

Perhaps an even easier path to repealing the SAVE plan would be to let the Eighth Circuit Court make a ruling that says student loan forgiveness through the 1993 ICR statute is illegal.

There is currently a lawsuit against the SAVE plan that is being evaluated by that court.

Even conservative-leaning higher education policy experts state that they believe Congress clearly intended student loan forgiveness through the ICR statute. However, forgiveness is not explicitly stated clearly like it is in the other big statute on income driven repayment (the IBR statute).

So, one path to repealing SAVE is allowing the lower Eighth Circuit court to do it and then simply choose not to appeal or drop the appeal of the case, where it would've gone to the Supreme Court.

This path is fraught with major hazards for borrowers, as borrowers on the PAYE program could theoretically be impacted as well since PAYE is derived from the same statute as the SAVE plan. So, if the statute that created the SAVE plan is found to be illegally used, it could have wide-ranging impacts on borrowers beyond the focus of the lawsuit, which is simply to bring down that one repayment plan.

What would replace SAVE?

There is such a thing as the “Republican IDR plan,” even though it's not called that specifically.

In the College Cost Reduction Act, House Republicans say what they would do with income driven repayment plans. They would create a single new option that's quite similar to the prior Revised Pay As You Earn (REPAYE) plan, except with the Republican IDR plan, there’s a component that matches a borrower’s monthly payments made on interest to the principal.

This Republican plan is significantly less generous for low-income earners, but it’s more generous than the REPAYE plan for higher earners.

It’s possible that a Trump-led Department of Education would simply reintroduce the REPAYE plan instead, but attempting to replace SAVE with something designed by Republicans seems more likely.

However, this option would be completely off the table if the Eighth Circuit Court rules the ICR statute is illegal. In that case, the only option for forgiveness would be the IBR repayment plan. That's 15% of your income if you had a loan before July 2014 and 10% of your income if you borrowed your first loan after July 2014.

Why repealing SAVE would be very easy

Ultimately, the White House can convene a negotiated rulemaking session for any reason, and that committee has extremely wide latitude over regulations on IDR, particularly under the Income Contingent Repayment (ICR) statute.

President Obama used that ICR statute to create the Pay As You Earn (PAYE) and REPAYE programs.

So, when asking the question, “Would President Trump repeal SAVE?” you might simply consider how easy or difficult that policy action would be.

Since it merely requires a regulatory committee convening, it’s very likely that SAVE would be repealed.

How fast could SAVE be repealed?

The negotiated rulemaking committee can’t meet until Donald Trump is sworn in, which won't happen until early 2025.

For new rules to take effect in July 2026, they’d need to be published by November 2025. However, rulemaking committees require public notice and comment, so it’s possible that the committee could convene at least until 2026. That would mean SAVE couldn’t be repealed until July 2027.

That's why the legal path to repeal might be implemented much faster. Simply allowing a court to say SAVE is illegal, and then the Trump administration not doing anything about the ruling (such as appealing it) would settle the matter.

What can borrowers do to prepare for SAVE getting repealed

Generally speaking, a student loan borrower who needs to go for forgiveness on SAVE would still need to go for a student loan forgiveness plan on whatever version of IDR a future President creates, even if the only remaining plan left is IBR.

It’s important to know what’s written into law and cannot be reversed without 60 votes in the Senate.

Specifically, the Income-Based Repayment (IBR) statute defines “Old IBR” as 15% of a borrower’s income for 25 years of payments and New IBR as 10% of income for 20 years. “New IBR” is only available to borrowers who took out a loan for the first time after July 2014.

So, it might be helpful to understand your worst-case scenario as a borrower. If that scenario still involves going for debt forgiveness, then you’re in good shape.

If you want to chat about a customized plan in case the SAVE plan is repealed, you can book a time with our team of experts.