Federal student loan payments will remain paused for more than 8 million borrowers well into next year as the court battle over the Biden administration’s SAVE repayment plan continues.
The income-driven plan lowers borrowers’ monthly bills to as low as zero and offers a quicker pathway to the discharge of all remaining balances.
Before federal judges intervened, the Education Department enrolled more than 8 million borrowers, erasing more than $5 billion for 414,000 enrollees who initially owed $12,000 or less and had made 10 years of payments.
“The 8 million borrowers in SAVE and anyone who has applied for SAVE should expect to remain in interest-free general forbearance for six more months or longer as the Department re-programs its systems, pending further developments from the Eighth Circuit Court of Appeals,” a spokesperson for the Education Department told The Epoch Times on Oct. 22.
In June 2023, the U.S. Supreme Court struck down the original Biden plan to forgive student loans. The administration then announced other plans to forgive student loans.
In March, several Republican-led states sued the Biden administration to block SAVE, followed by another suit filed in April by other Republican states. The Supreme Court in August put a hold on the plan’s implementation.
Missouri, which operates a quasi-state agency that manages student loans and scholarships, argued it could lose revenue if loans are reduced or erased.
The state highlighted SAVE’s far-reaching economic impact. The Congressional Budget Office estimates that SAVE will cost some $230 billion over the next decade, while the Biden administration places the price tag at $156 billion. A budget model used by the Wharton School of the University of Pennsylvania predicts that SAVE would cancel $475 billion in debt.
Judge John Ross of the U.S. District Court for the Eastern District of Missouri sided with the states to block the department from carrying out any further loan forgiveness under SAVE. Unsatisfied with the partial injunction, the states petitioned the Eighth Circuit to halt the plan in its entirety as litigation moves forward.
In August, the Eighth Circuit agreed and issued a nationwide injunction on all components of the SAVE plan, saying that the states were likely to succeed in their claim that the Biden administration has overstepped its authority in canceling debt on such a large scale.
For those already enrolled in SAVE and anyone who has applied, they won’t owe a payment and their loans won’t accrue interest while the Eighth Circuit weighs the case. However, unlike the previous payment pause during the COVID-19 pandemic, those months of paused payments won’t count toward the eventual debt cancellation.
Borrowers can still apply to enroll in SAVE, although the Education Department has directed loan servicers to halt processing applications to join all income-driven repayment plans in accord with the injunction.
