SAVE Plan Borrowers Placed in Forbearance After Federal Court Strikes Down Student Debt Forgiveness
Credit: Image Credit: J. David Ake / Contributor / Getty Images News- President Joe Biden’s new income-driven repayment plan was slated to become official on July 1.
- However, court cases previously blocked parts of the plan from taking effect.
- Now, the Biden administration cannot implement any part of the SAVE plan.
- The SAVE plan promises to be the most affordable repayment option for most low- and middle-income borrowers.
Millions of federal student loan borrowers won’t have to make student loan payments for the foreseeable future thanks to ongoing litigation.
The Department of Education (ED) announced Friday that it placed all student loan borrowers enrolled in the new Saving on a Valuable Education (SAVE) plan into forbearance. This means that not only will they not have to make student loan payments indefinitely, but interest will stop accumulating on that debt while in forbearance.
ED did not provide an exact timeline for how long this forbearance may last.
The move comes after the 8th U.S. Circuit Court of Appeals temporarily blocked implementation of the SAVE plan on Thursday. Over a dozen attorneys general from Republican-led states filed lawsuits against the new income-driven repayment (IDR) plan in April, and two courts previously issued injunctions blocking only part of the plan in late June.
On Friday, the appeals court went a step further and blocked all aspects of the SAVE plan, including the potential for student loan debt forgiveness and lower monthly payments.
Today’s ruling from the 8th Circuit blocking President Biden’s SAVE plan could have devastating consequences for millions of student loan borrowers crushed by unaffordable monthly payments if it remains in effect,
ED Secretary Miguel Cardona said in a statement.
It’s shameful that politically motivated lawsuits waged by Republican elected officials are once again standing in the way of lower payments for millions of borrowers.
ED’s statement did not specify its next legal plans. It said only that President Joe Biden’s administration continues to vigorously defend the SAVE plan in court.
An ED spokesperson did not immediately return a request for comment.
As of February 2024, the White House said approximately 7.5 million borrowers were enrolled in the SAVE plan. While the new IDR plan wasn’t officially slated to go into effect until July 1, 2024, ED instituted many aspects of it early.
The SAVE plan calculates a borrower’s monthly student loan payment based on their disposable income. While IDR plans have existed for decades, the SAVE plan drastically reduced most borrowers’ monthly payments.
Travis Hornsby, founder of Student Loan Planner, wrote on X, formerly Twitter, that time spent in administrative forbearance will not count toward the timeline to forgiveness under IDR or the Public Service Loan Forgiveness (PSLF) program. PSLF awards public servants with complete loan forgiveness after 10 years of repayment.
Some Republican lawmakers, including Education and the Workforce Committee Chairwoman Rep. Virginia Foxx of North Carolina, celebrated the court’s decision to block the SAVE plan.
The chaos and destruction this administration is inflicting on the nation’s student loan system is unprecedented. Is it hubris, ignorance, or indifference that encourages the Biden administration to move forward with an illegal agenda that has dangerous repercussions?
she said in a statement.
Turning a blind eye to fiscal responsibility and the intent of Congress to keep a campaign promise — a promise you had no authority to make — will hurt American education and U.S. economic competitiveness.
ED’s latest forbearance action marks the largest blanket forbearance for federal student loan borrowers since the COVID-19 payment pause instituted in March 2020.