On July 18, in a one-sentence order, the 8th Circuit Court of Appeals in Missouri put the final nail in the coffin on President Biden’s marquee student loan repayment plan, the Saving on a Valuable Education (SAVE) plan. The order halts the full implementation of the SAVE plan for the foreseeable future and allows the fate of student loan forgiveness and affordable repayment to hang in the balance for millions of borrowers. [The Associated Press]
What is the SAVE plan? SAVE is an income-driven repayment (IDR) plan. The benefits—which include lower payments (as low as $0 per month), reduced risk of runaway interest accrual, and the possibility for early forgiveness for low-balance borrowers (<$12,000 remaining)—are an upgrade from the Revised Pay-As-You-Earn (REPAYE) plan created in 2015.
Catch up quick: The ruling is the latest development in a string of legal challenges to the SAVE plan since the Education Department released it last fall. Lawsuits from eleven states—Alabama, Alaska, Idaho, Kansas, Louisiana, Missouri, Montana, South Carolina, Texas, Utah, and Nebraska—contend that the Biden administration is overreaching its authority with SAVE and is placing an undue burden on American taxpayers who don’t have student loans.
Read more from Inside Higher Ed, The Washington Post, and Forbes.
To be continued: Alaska, South Carolina, and Texas filed an emergency appeal to a federal appeals court ruling in Denver, asking SCOTUS to weigh in. The Supreme Court is expected to set a briefing schedule and may make a decision on the future of the IDR program in the next few weeks. [CNN Politics]
What’s next? Secretary of Education Miguel Cardona announced that borrowers enrolled in the SAVE plan would be placed into forbearance—or, temporary postponement of student loan payments—while legal challenges persist.
Unlike general forbearance (during which interest continues to accumulate, and borrowers are responsible for making payments on accrued interest), this mass forbearance will be interest-free, eliminating what may be a sudden financial burden for borrowers. [CNBC]
