Recent Setback for President Biden’s Student Loan Repayment Plan

President Biden’s new student loan repayment plan faced a setback recently as two federal judges issued preliminary injunctions in Kansas and Missouri, temporarily blocking certain benefits of the program. These rulings have put on hold parts of the plan known as SAVE, pending the resolution of lawsuits filed by Republican-led states challenging the plan’s legality. As a result, millions of borrowers are left in uncertainty until the legal issues are resolved.

Implications of the Injunctions

The injunctions prevent the Biden administration from implementing key aspects of the SAVE program. Borrowers will not see the anticipated reduction of their monthly loan payments by up to half, which was scheduled to start on July 1. Additionally, debt forgiveness for SAVE enrollees has been halted. The administration had already forgiven $5.5 billion in debt for over 414,000 borrowers through the program since its launch in August.

What Borrowers Need to Know

If you are one of the eight million borrowers enrolled in the SAVE program, you likely have questions about how the recent developments will affect you. While the Education Department is yet to release official guidance, here is what we currently know about the situation.

Understanding the SAVE Program

The Saving on a Valuable Education (SAVE) plan operates similarly to previous income-driven repayment plans, linking borrowers’ monthly payments to their income and household size. After a specified number of years of payments, typically 20 or 25 years, any remaining debt is forgiven. However, the SAVE program, which replaced the Revised Pay as You Earn (REPAYE) plan, offers more generous terms compared to its predecessors.