A recent lawsuit filed by a group of Republican state leaders challenges the Biden administration’s SAVE plan, a new income-driven repayment option for student loans that President Joe Biden has touted as the most generous plan in history. The challengers argue that the administration is overreaching with mass student loan forgiveness, contrary to Congressional intent. The Biden administration has not yet filed a formal response to the lawsuit, but it could have significant implications for millions of borrowers if the court rules against the SAVE plan.
The impact of this legal challenge on student loan forgiveness remains uncertain. If the court rules in favor of the challengers, borrowers enrolled in the SAVE plan could see their benefits revoked. However, it is unclear whether the court would have the power to reverse loan forgiveness approvals that have already been granted to thousands of borrowers. Additionally, future borrowers could be blocked from accessing the early debt cancellation feature of the SAVE plan, potentially leading to higher monthly payments under an older repayment plan.
The lawsuit targets the regulations governing the SAVE plan specifically and does not impact other popular student loan forgiveness programs like Public Service Loan Forgiveness or Total and Permanent Disability Discharge. In addition, the challenge does not address the IDR Account Adjustment, which is a separate initiative by the Biden administration aimed at providing retroactive credit toward loan forgiveness. While the lawsuit poses a threat to the SAVE plan, other debt relief programs remain unaffected for now.
Despite the legal challenges, the Biden administration continues to push forward with new student loan forgiveness initiatives. In addition to the SAVE plan, the administration is working on a new forgiveness program targeted at borrowers who have been in repayment for many years and those experiencing financial hardships. The final regulations for this program are expected to be released in May, with a potential rollout as early as this summer or fall. However, experts anticipate more legal challenges as the administration seeks to provide relief to struggling student loan borrowers.
