Two recent court rulings will temporarily prevent the Biden administration from implementing further parts of the president’s student loan repayment plan, which has already lowered or eliminated monthly payments for millions of federal student loan borrowers. These decisions put the SAVE Plan, introduced by President Joe Biden, into uncertainty, causing borrowers to once again face unclear payment obligations.
What is the SAVE Plan?
The SAVE Plan was established by executive order in 2023 after the administration’s attempt to forgive up to $20,000 of federal student loan debt per borrower failed. This plan offers some borrowers lower income-driven repayments, while others have their loans forgiven entirely.
The White House explained that under the SAVE Plan, borrowers who have made payments for at least 10 years and initially borrowed up to $12,000 are eligible for automatic loan forgiveness. Additionally, for every $1,000 borrowed over $12,000, borrowers can receive forgiveness after
an additional year of payments. For example, someone with an original debt of up to $21,000 would have their loans forgiven after 20 years of payments under the SAVE Plan.
For many borrowers not qualifying for immediate forgiveness, the plan reduced their monthly payments. Initially, borrowers with only undergraduate loans started repaying at 10% of their discretionary income, which was redefined from 150% to 225% of the federal poverty level under Biden’s order. On July 1, this amount was set to decrease to 5% of their discretionary income, further lowering payments.
In one ruling on Monday, a federal judge in Missouri sided with Republican attorneys general who argued that the administration lacked the authority to implement the SAVE Plan. While the case continues, the ruling prevents the Biden administration from proceeding with additional forgiveness under the SAVE Plan.
In another case from Kansas, a judge temporarily blocked the administration from reducing student loan payments from 10% to 5% of a borrower’s discretionary income, which was scheduled to take effect on July 1.
Republicans argue that student loan forgiveness unfairly burdens those who did not attend college. Kansas Attorney General Kris Kobach stated, “Once again, the Biden administration has decided to steal from the poor and give to the rich. He is forcing people who did not go to college, or who worked their way through college, to pay for the loans of those who ran up exorbitant student debt. This coalition of Republican attorneys general will stand in the gap and stop Biden.”
The White House responded late Monday, asserting its commitment to defending the SAVE Plan. White House press secretary Karine Jean-Pierre stated, “Since day one, the President and his Administration have fought to fix a broken student loan system and make sure borrowers aren’t saddled with unmanageable student loan debt. Part of that effort includes creating the most affordable student loan repayment plan ever – the SAVE Plan – which for months has allowed 8 million Americans access to lower monthly payments and has already helped hundreds of thousands of borrowers get their remaining debt canceled more quickly.”
By: Big Sky Headlines staff