On Thursday, the 8th Circuit Court of Appeals blocked the SAVE student-loan repayment plan in full. This ruling means that key provisions of the plan, such as lower monthly payments and a shorter timeline to debt cancellation, cannot be implemented.
As a result, student-loan borrowers on SAVE won’t have to make payments as the legal process continues. This development will likely spark confusion for borrowers who have already received bills with lower payments.
Another student-loan payment pause is here for millions of borrowers.
It’s the latest twist in the ongoing legal saga for borrowers. Earlier this year, two separate groups of GOP state attorneys general filed lawsuits to block SAVE. At the end of June, two federal courts blocked parts of the plan. However, just days later, the 10th Circuit allowed parts of the plan to move forward, only for the 8th Circuit’s ruling to halt the plan once again in its entirety.
This back-and-forth in the courts leaves many borrowers in a state of uncertainty, wondering what will happen next with their student loans. As the legal battles continue, it’s crucial for borrowers to stay informed about the latest developments.
Education Secretary Miguel Cardona announced Thursday night that all borrowers enrolled in the SAVE Plan will benefit from an interest-free forbearance as the administration continues to vigorously defend the plan in court.
Interest-Free Forbearance for SAVE Plan Borrowers
Cardona emphasized that the Department of Education will keep borrowers informed with regular updates in the coming days regarding the court rulings and their impact.
Important Information for Borrowers
On Friday, the Education Department confirmed that this forbearance period will not contribute to borrowers’ progress toward forgiveness under the Public Service Loan Forgiveness (PSLF) or income-driven repayment plans.
- Borrowers enrolled in the SAVE Plan who have received a bill for August will be placed in an interest-free forbearance.
- Payments are not required during this forbearance period.
- Those who have not yet received an August bill will also be put in forbearance and thus will not receive a bill.
This proactive measure aims to provide relief and clarity to borrowers as the legal proceedings unfold. The Education Department is committed to ensuring that all affected borrowers are well-informed and supported during this period.
The 8th Circuit’s recent ruling addressed a lawsuit spearheaded by Missouri’s Attorney General. Meanwhile, another lawsuit to block the SAVE plan, initiated by Kansas, is currently before the Supreme Court. In a briefing to SCOTUS, Solicitor General Elizabeth Prelogar warned that blocking the plan could create “intense confusion” for borrowers. According to the Education Department, 8 million borrowers are enrolled in the SAVE plan, with 4.5 million of them qualifying for zero-dollar monthly payments due to their incomes.
Impact on Borrowers
The Education Department has already instructed servicers to proceed with processing borrowers’ reduced payments under the SAVE plan. However, if the court issues a final ruling preventing the implementation of SAVE, the department will need to recalculate borrowers’ payments. This could force many to reconfigure their budgets, leading to potential financial strain.
Political Reactions
Some Republican lawmakers have praised the ruling. Notably, Sen. Bill Cassidy, the leading Republican on the Senate education committee, stated that the ruling is “another rebuke to President Biden’s illegal student loan schemes.”
As the situation evolves, borrowers and policymakers alike will be watching closely to see how these legal battles unfold and what impact they will have on the future of the SAVE plan and student loan payments.
“This is an abuse of power before an election in an attempt to buy votes at the expense of American taxpayers,” Cassidy said.
Biden’s Commitment to Student Loan Relief
Despite the criticism, the Biden administration remains steadfast in its commitment to providing relief for borrowers. Alongside the SAVE plan, the Education Department is set to finalize a broader student-loan forgiveness initiative in October, which is anticipated to benefit over 30 million borrowers.
Challenges and Opposition
“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,” Cardona said. “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.”
