In two separate decisions, judges in Kansas and Missouri have blocked different aspects of President Biden’s new SAVE student loan repayment plan from taking effect.
The Saving on a Valuable Education (SAVE) student loan repayment plan first opened for borrowers in August 2023, with some of the major key aspects not taking effect until July 1, 2024. The plan aimed to reduce borrowers’ monthly student loan payment to just 5% of their discretionary income. The plan also allowed certain borrowers to receive loan forgiveness based on certain timelines.
A Kansas judge blocked the upcoming payment change that would reduce borrowers’ payments from 10% to 5% of their income. The Missouri judge blocked the Department of Education from forgiving any student loan debt under this plan.
The SAVE Student Loan Repayment Plan
The SAVE student loan repayment plan has been touted by the Biden Administration as providing relief to over 8 million student loan borrowers. SAVE is one of multiple income-driven repayment plans that are available to student loan borrowers today.
The plan has several key features, and is based on the older REPAYE student loan repayment plan.
The plan allows borrowers to pay just 10% of their discretionary income as their monthly student loan payment. If their income is below 225% of the poverty line, their monthly student loan payment would be $0 per month.
However, the plan also provided that starting July 1, 2024, the monthly payment for undergraduate borrowers would be capped at just 5% of discretionary income – effectively cutting payments in half for many borrowers.
The repayment plan also includes a loan forgiveness component. Like other income-driven repayment plans, the SAVE plan would provide loan forgiveness for any remaining balance left after 20 years for undergraduates, and 25 years for graduate borrowers.
However, as an additional benefit, the SAVE repayment plan would cancel the debt for borrowers who enter repayment with less than $12,000 after just 10 years.
It’s the 5% payment income level and the $12,000 in loan forgiveness that were specifically challenged in these lawsuits.
What This Ruling Means For Student Loan Borrowers
It’s important to note that this ruling prevents two things: the upcoming change in repayment plan discretionary income level and future loan forgiveness. This ruling does not remove any borrower already enrolled from the SAVE plan, and doesn’t change any borrower’s existing payment – which is currently set at 10% of discretionary income.
Education Secretary Miguel Cardona released a statement on Twitter/X saying, “While we continue to review these rulings, the SAVE plan still means lower monthly payments for millions of borrowers – including more than 4 million borrowers who owe no payments at all…”
It’s expected that the Biden Administration will appeal these rulings in the coming days.
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