In recent legal decisions, judges in Kansas and Missouri have put a halt to certain aspects of President Biden’s new SAVE student loan repayment plan. The plan, which was introduced in August 2023, aimed to reduce borrowers’ monthly student loan payments to just 5% of their discretionary income. However, a Kansas judge blocked the reduction in payments from 10% to 5%, while a Missouri judge blocked the Department of Education from forgiving any student loan debt under the plan.
The SAVE student loan repayment plan, touted by the Biden Administration as providing relief to over 8 million student loan borrowers, is one of multiple income-driven repayment plans available today. Similar to the older REPAYE plan, it allows borrowers to pay 10% of their discretionary income as their monthly student loan payment, with the payment for undergraduate borrowers set to be capped at 5% starting July 1, 2024. Additionally, the plan includes loan forgiveness after 20 years for undergraduates and 25 years for graduate borrowers, with the possibility of debt cancellation for borrowers with less than $12,000 after 10 years.
The recent rulings in Kansas and Missouri do not affect borrowers already enrolled in the SAVE plan, nor do they impact existing payments. Education Secretary Miguel Cardona emphasized that the plan still offers lower monthly payments for millions of borrowers, including over 4 million borrowers who currently owe no payments at all. Despite the setbacks, it is anticipated that the Biden Administration will appeal the rulings in the near future to push forward with the implementation of the SAVE plan as intended.
The legal challenges to the SAVE plan specifically target the reduced payment income level and the provision for $12,000 in loan forgiveness after 10 years. While these components are currently blocked from taking effect, borrowers under the plan can still benefit from the existing terms and conditions. The SAVE plan was designed to alleviate the financial burden of student loan debt for millions of borrowers, and supporters of the plan remain hopeful that the legal obstacles will be overcome to provide the intended relief to those in need.
Overall, the SAVE student loan repayment plan seeks to provide a more manageable repayment structure for borrowers while also offering opportunities for loan forgiveness for those who qualify. The recent legal hurdles have temporarily delayed key aspects of the plan, but the Biden Administration is committed to pursuing legal avenues to ensure that the SAVE plan can deliver on its promises to help borrowers navigate the challenges of student loan repayment. As the legal process unfolds, borrowers are advised to stay informed and monitor updates on the status of the SAVE plan and any potential changes that may impact their student loan repayment.
