Despite two federal injunctions handed down last week, millions of student loan borrowers will not have to make a payment on their debt in July. This temporary relief is part of what was intended to be a new phase of benefits for borrowers enrolled in the Saving on a Valuable Education (SAVE) plan.
What is the SAVE Plan?
The SAVE plan, launched last summer, is designed to provide significant benefits to student loan borrowers. This includes early forgiveness, recalculating payments to make them more manageable, and other cost-saving measures. In July, many SAVE borrowers were set to benefit from early forgiveness and reduced payments. As part of this process, impacted borrowers were to be placed in “a brief processing forbearance” through July. This means they would not have to make a monthly payment, and their interest rates would temporarily drop to 0%.
The Impact of Federal Injunctions
However, two federal judges issued rulings that put parts of the SAVE plan on hold:
- Kansas Ruling: A judge determined that the Education Department cannot enact the full scope of the SAVE Plan because it did not receive authority from Congress. This ruling prevents the department from implementing all the planned benefits of the SAVE program.
- Missouri Ruling: Another judge ruled that the department cannot forgive any loans under the SAVE Plan because it illegally deprives state loan operators of revenue. However, this ruling did allow for monthly payments to be lowered.
These rulings do not impact the roughly 400,000 borrowers who have already seen over $5.5 billion in debt forgiveness under the plan. But for now, the Biden administration cannot forgive any more debt for borrowers on the SAVE Plan and cannot cut payments for borrowers as planned in July.
Forbearance Still in Effect
Despite the injunctions, about 3 million enrolled borrowers with non-zero dollar payments will still be placed in forbearance for July. Borrowers set to benefit from this forbearance will be notified by the Education Department in the coming days if they haven’t already. It is unclear how many borrowers were originally on track to be placed into forbearance. A spokesperson for the Education Department previously told The New York Times that the 4.6 million borrowers on the SAVE plan who have $0 monthly payments would not be placed into forbearance.
Next Steps for Borrowers
Following the injunctions, the Education Department is taking several steps to comply with the court orders and ensure accurate information is provided to borrowers. For now, the department is not accepting any online applications to enroll in income-driven repayment programs or loan consolidation while it updates its systems. This process is expected to take between four and six weeks. However, paper applications are still being accepted for income-driven repayment programs and loan consolidation. While these applications are reviewed, borrowers will be placed into forbearance if they have non-zero payments.
According to the Education Department, many of the cost-saving provisions of the SAVE Plan remain in effect. Borrowers should continue to stay informed about their options and any updates from the department.
Future of the SAVE Plan
The orders issued by the judges are preliminary, meaning the injunctions will remain in effect through a trial of the separate lawsuits. To issue a temporary order, each judge had to conclude that the states were likely to prevail in a trial. This means it is too soon to say what longer-term impact the injunctions will have on the SAVE Plan.
The White House has stated that it strongly disagrees with the judges’ rulings and will continue to defend the program. The administration is committed to using every available tool to provide relief to students and borrowers. In a statement shared with Nexstar, an Education Department spokesperson echoed these sentiments, emphasizing that President Biden, Vice President Harris, and Secretary Cardona remain committed to fixing a broken student loan system and making college more affordable for more Americans.
The Administration’s Commitment
The Biden administration views the SAVE Plan as the most affordable repayment plan in history and is determined to defend it against any legal challenges. More than 8 million borrowers have enrolled in the SAVE Plan since it launched, reflecting its widespread appeal and the critical relief it offers to millions of Americans burdened by student loan debt.
In their statement, the Education Department spokesperson highlighted the political opposition to the SAVE Plan, stating: “Republican elected officials continue to fight to block their own constituents from saving money, having their monthly payments cut in half, and receiving relief. President Biden, Vice President Harris, and Secretary Cardona remain committed to fixing a broken student loan system and making college more affordable for more Americans. They will not stop vigorously defending the SAVE Plan, the most affordable repayment plan in history, and will continue to fight for this long-overdue relief, no matter how many times Republican elected officials and their allies try to stop them.”
As the legal battles continue, borrowers enrolled in the SAVE Plan should stay informed about the latest developments and any changes that may affect their repayment status. The administration’s commitment to providing relief and making college more affordable remains steadfast, despite the challenges posed by the recent court rulings.