Key takeaways
- On Friday, the 8th Circuit Court of Appeals blocked all elements of the SAVE plan that weren’t already on hold.
- The decision contradicts a temporary June ruling by the 10th Circuit Court of Appeals.
- Both appeals decisions are in response to injunctions filed by federal judges earlier in June, which temporarily halted parts of the SAVE repayment and debt relief plan.
- For now, payments for SAVE borrowers will remain on hold while the courts review the White House’s income-driven repayment plan.
The Biden-Harris administration's Saving on a Valuable Education plan was blocked by a federal appeals court Friday, the latest decision in a string of dizzying rulings on the administration’s newest student debt relief plan.
Friday's decision comes weeks after the same court, the 8th Circuit Court of Appeals, temporarily blocked the SAVE plan. It also contradicts an earlier, June 30 decision by the 10th Circuit Court of Appeals to allow parts of SAVE to proceed.
If you're one of the more than 8 million borrowers enrolled in SAVE, your monthly payments remain on hold while the future of this income-driven repayment plan is reviewed by the courts. Though the 8th Circuit Court of Appeals has blocked SAVE, this case could make its way to the Supreme Court for a final verdict, Mark Kantrowitz, financial aid expert and CNET Money Expert Review Board member, told CNET in July.
Following last month's temporary ruling, the Department of Education issued a statement saying borrowers enrolled in SAVE would be placed in an interest-free forbearance until further notice. This means SAVE borrowers won’t have to make monthly payments on their student loans until the courts resolve this matter.
“Borrowers enrolled in the SAVE Plan will be placed in an interest-free forbearance while our Administration continues to vigorously defend the SAVE Plan in court,” said Miguel Cardona, the Secretary of Education. “The Department will be providing regular updates to borrowers affected by these rulings in the coming days.”
News of the latest ruling comes weeks after the Biden-Harris administration published the final draft of its Plan B student loan forgiveness plan, which could offer some form of debt relief to over 30 million borrowers. Like SAVE, this student loan forgiveness plan is expected to face legal hurdles.
What’s next for the SAVE repayment plan?
The White House’s SAVE plan has faced a myriad of hurdles over the past six months. Earlier this spring, Republican-led lawsuits were filed in Kansas and Missouri against the SAVE plan. In June, two federal judges filed injunctions against key components of SAVE. These rulings temporarily prevented the Department of Education from moving forward with the next phase of its SAVE plan, including lowering payments from 10% of a borrower’s discretionary income to 5%. New student loan forgiveness efforts under the income-driven repayment program were also halted.
Then on June 30, the 10th US Circuit Court of Appeals ruled to allow (PDF) the Department of Education to proceed with lowering borrowers’ payments. A July ruling by the 8th Circuit Court of Appeals temporarily paused all components of the SAVE plan not already on hold. On Friday, this temporary hold was made permanent, blocking SAVE until a higher court could determine the future of this repayment plan.
What should borrowers enrolled in SAVE do next?
If you’re enrolled in the SAVE repayment plan, you’re probably confused about what’s next -- and for good reason. With two decisions contradicting one another, it will likely require a higher court, the US Supreme Court, to clear the air.
You can try to plan ahead based on what could happen. If you were expecting debt relief from SAVE, be prepared in case the courts shoot down the plan. Monthly payments are on hold for all borrowers in the SAVE plan right now, and they’ll likely remain paused until a final decision is reached. In the meantime, you can review your existing loan balance and estimated monthly payment so you have an idea of how much you may need to pay when payments resume.
If the courts approve the SAVE plan, you can expect your payments to drop to 5% of your discretionary income -- a move the Department of Education was in the process of implementing. If debt cancellation is also approved, there’s nothing you’ll need to do to apply for forgiveness through SAVE. You’ll be notified by the Department of Education when you meet the forgiveness requirements.
For now, Kantrowitz says you should watch for new guidance from the Department of Education. He also reiterated that the current court rulings are temporary and not final.
