Key Points
- The U.S. Court of Appeals for the Eighth Circuit on March 9, 2026 reversed a lower court’s dismissal of the SAVE Plan lawsuit and ordered the district court to enter the December 2025 settlement agreement as final judgment.
- Under the settlement, the Trump administration agreed to halt all SAVE Plan enrollment and loan forgiveness under the plan’s income-contingent repayment authority, and to pursue rulemaking to formally repeal the SAVE Final Rule.
- Borrowers remain in administrative forbearance for now, with more updates coming on how and when borrowers will have to move out of SAVE.
The SAVE student loan repayment plan is dead — and a federal appeals court just made that official.
The U.S. Court of Appeals for the Eighth Circuit ruled on March 9, 2026 (PDF File) that a lower court wrongly dismissed the Republican states’ lawsuit against the plan, directing the district court to enter a December 2025 settlement agreement that permanently bans the Biden-era income-driven repayment program.
The request to force the joint settlement was one of the alternatives presented in the GOP appeal to the 8th Circuit Court.
Editor's Note: The lower court signed off on the final judgement (PDF File) and settlement agreement on March 10, 2026.
Here's what borrowers need to know.
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Background: The Legal Fight Over SAVE
The SAVE Plan (Saving on a Valuable Education) was created by the Biden administration in 2023 as a revision to the existing REPAYE (Revised Pay As You Earn) income-driven repayment plan. Established under Section 455 of the Higher Education Act of 1965 (20 U.S.C. § 1087e), SAVE offered lower monthly payments and accelerated loan forgiveness timelines compared to earlier income-driven repayment options.
Seven Republican-led states (Missouri, Arkansas, Florida, Georgia, North Dakota, Ohio, and Oklahoma) sued to block the plan in the Eastern District of Missouri, arguing the administration had exceeded its statutory authority in creating it.
Federal courts agreed: the 8th Circuit issued an injunction halting SAVE in 2024, placing enrolled borrowers into a payment-free forbearance while the litigation proceeded.
After President Trump took office in January 2025, his administration and the plaintiff states negotiated a settlement, which both sides signed on December 9, 2025.
The settlement would have resolved the litigation by having the federal government agree to permanently wind down SAVE. However, the district court dismissed the case instead. That dismissal triggered the states’ appeal to the Eighth Circuit.
What The Settlement Agreement Requries
The December 2025 settlement is sweeping in scope. Under its terms, the Department of Education must:
- Stop enrolling any new borrowers in SAVE and deny all pending applications.
- Continue moving current SAVE borrowers to other repayment plans.
- Refrain from forgiving loans under SAVE’s income-contingent repayment authority as interpreted by the SAVE Final Rule.
- Not implement any provisions of the SAVE Plan Final Rule, with one narrow exception: a provision about deferment and forbearance counting toward forgiveness eligibility (34 C.F.R. § 685.209(k)(4)(iv)), which took effect July 1, 2024 and was never challenged in the lawsuit.
- Not revive or enroll borrowers in the original REPAYE plan.
- Pursue formal rulemaking to officially repeal the SAVE Final Rule, consistent with the One Big Beautiful Bill Act signed into law on July 4, 2025.
The settlement also creates an ongoing notification requirement: if the Department plans to forgive more than $10 billion in federal student loans in any single month, it must give the Missouri Attorney General’s office at least 30 days’ written notice, identifying the legal authority used. That oversight provision runs for ten years from the date of the agreement.
The settlement creates no third-party beneficiary rights — meaning individual borrowers cannot use it to sue the government.
What This Means For Borrowers
For the roughly seven million borrowers who are in SAVE forbearance, the Eighth Circuit’s ruling cements what has been apparent since the 2024 injunction: SAVE is dead.
Borrowers currently sitting in SAVE forbearance will need to transition to a different federal repayment plan in the future (exact SAVE timeline still TBD). The Department said in the original settlement agreement that additional communication will be coming soon.
Borrowers currently have the options of Income Based Repayment (IBR), Pay As You Earn (PAYE), Income Contingent Repayment (ICR), and the standard repayment plans. It's important to note that that both PAYE and ICR will phase out by June 2028. Depending on timing, borrowers may be able to directly enroll in the new Repayment Assistance Plan (RAP) which launches in July.
Importantly, the settlement does not eliminate all loan forgiveness pathways. Borrowers enrolled in SAVE can still receive forgiveness through:
- Public Service Loan Forgiveness (PSLF)
- Borrower Defense to Repayment discharges
- Total and Permanent Disability Discharges
- Closed School Discharges
- Death discharges
Those programs rely on separate legal authority and are unaffected by the SAVE settlement.
What Comes Next
The Eighth Circuit’s ruling orders the Eastern District of Missouri to enter the settlement as final judgment — immediately. The emergency motion the states had filed to get an injunction is now moot because the settlement will take effect.
For borrowers in SAVE, it's more important than ever to do the math about whether you should change repayment plans now, or wait. For borrowers pursuing forgiveness under PSLF, it's likely better to change ASAP.
For now, all borrowers in the SAVE forbearance will need to wait for further guidance from the Department of Education. Check for updates on the Court Actions page for future communication.
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Editor: Colin Graves
Robert Farrington is the founder of The College Investor and is widely recognized as one of the nation’s leading voices on student loan debt and saving for college. He holds an MBA from UC San Diego Rady School of Management and has spent over 15 years researching, writing, and advising on student loans, 529 plans, financial aid programs, and saving and investing for young professionals.
Robert has been featured in the The New York Times, The Wall Street Journal, The Washington Post, NBC News, and Forbes, where he has been a regular personal finance contributor for over a decade. His work combines both professional expertise and personal experience – he successfully navigated his own student loan repayment journey and has helped thousands of readers do the same.
He is committed to making the intersection of personal finance and education transparent and accessible. You can learn more about Robert on the About Page or on his personal site RobertFarrington.com.