Two federal court judges in Kansas and Missouri have temporarily halted parts of President Biden’s SAVE (Saving on a Valuable Education) student loan repayment plan. The lawsuits argue that the administration exceeded its authority.
SAVE is an income-driven repayment plan with 8 million people enrolled in it. (Source: CNN.) Currently, borrowers pay a monthly payment of 10% of their discretionary income, and those earning below 225% of the poverty line pay $0 per month. Starting July 1, 2024, payments for undergraduate loans were to be capped at 5% of the borrower’s discretionary income, and borrowers with less than $12,000 in loans would have their debt forgiven after 10 years. (Source: U.S. Department of Education.)
The Kansas court temporarily blocked the portion reducing payments from 10% to 5% of discretionary income. The Missouri court temporarily stopped the U.S. Department of Education (ED) from forgiving any student loan debt under this plan.
Despite the injunctions, borrowers currently enrolled in SAVE will remain at 10% of the borrower’s discretionary income. However, new provisions, such as reducing payments for undergraduate loans, are paused. The lawsuits claim that SAVE basically turns loans into grants without congressional approval, potentially costing between $138 billion to $475 billion over 10 years. (Source: CNN.)
The Biden Administration plans to appeal the rulings.
ED emphasized that the SAVE plan still offers lower or $0 payments for millions, and that they have the authority to carry out the program aimed at providing relief for borrowers to help them reach forgiveness faster.
