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Student loan benefits for eight million borrowers established by the SAVE Plan have been largely stopped by a federal court, but not completely. The Biden Administration has announced that SAVE Plan loan payments will be suspended for those enrolled in the program.
The suspensions will last at least until the current round of court appeals is completed.
“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 Education Secretary Miguel Cardona in mid-July. “The Department will be providing regular updates to borrowers affected by these rulings in the coming days.”
And so we’re off on another round of student debt ping-pong. Once again, the Administration proposes student debt relief, and then relief opponents take the matter to court.
The Administration loses, and that loss sets in motion a bonus round of appeals. Meanwhile, student borrowers should watch to see if they are among the lucky ones who receive monthly cost reductions, lower interest rates, or debt cancellation before the court decision applies.
Will you benefit from student debt relief? Almost five million people have seen loan reductions or outright cancellations already, and despite several court decisions there is likely to be more relief. Here’s where you might find help.
How The Student Debt Relief Debate Got Started
Congress unanimously passed the Higher Education Relief Opportunities For Students (HEROES) Act in 2002. The bipartisan legislation said the Department of Education could forgive student debt for individuals “who suffered direct economic hardship as a result of a war, military operation, or national emergency.”
This authority was never used in a big way until 2022 when the Biden Administration announced $430 billion in student debt relief under provisions of the HEROES Act. One part of the plan would have reduced student debt by $10,000 for those earning less than $125,000.
For many borrowers, $10,000 was enough to pay off their remaining student debt entirely.
Paying down student debt does not help borrowers alone. It also has a so-called “multiplier” effect. Without student debt to pay, that money will largely be used for consumer spending, something good for local economies and job creation.
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Department of Education v. Brown
Several student borrowers argued that they had the right to stop the entire forgiveness program under the HEROES Act because they had not had a chance to oppose it under federal rulemaking requirements. A federal judge in Texas agreed with them.
The dispute wound up in the Supreme Court. It voted 6-3 in June 2023 that the complaining borrowers had no standing because they had not suffered any harm. If they did not want reduced debt, they could simply keep making payments.
Biden V. Nebraska
The Supreme Court ruled against the plan, 6-3, saying in June 2023 that while the Administration had some right to cancel student debt, the $430 billion figure was so large it required congressional approval.
Meanwhile, before the Nebraska ruling, the Biden Administration was able to cancel or forgive student debt worth $45 billion. Some of this money went to 660,000 government workers, almost half a million individuals with total and permanent disabilities, and more than a million borrowers who did not receive promised training.
The SAVE Plan
The Administration quickly responded to the Nebraska ruling by introducing the Saving on a Valuable Education (SAVE) Plan.
According to the Student Borrower Protection Center, “The SAVE plan is one of several options for repaying federal student loans. It sets borrowers’ monthly payments based on their income, resulting in low or even $0 payments for low-income borrowers.
Most borrowers’ monthly payments will be halved under SAVE. Of the more than 8 million borrowers who have enrolled, 4.6 million have a $0 monthly payment.
Additionally, after 20 or 25 years, borrowers enrolled in SAVE can have their remaining balance canceled. For borrowers who initially borrowed up to $12,000, their remaining balance will be canceled after 10 years.” (For details, see the government’s SAVE Plan page.)
The Missouri Stay
In July 2024, in response to objections from 18 state attorneys general, a Missouri court stayed the SAVE Plan. What happens next? The Missouri ruling will likely wind its way through the legal system and ultimately be settled in the Supreme Court, with a ruling next summer.
If it loses, expect the Biden Administration to come up with still another debt forgiveness program with a different legal basis.
What Is The Status of Your Student Loan?
Look for notices from the Department of Education regarding your loan and check your loan account to see where you stand with required payments, remaining balances, etc.
As of mid-July, the Administration reported that it had “approved an unprecedented $169 billion in relief for nearly 4.8 million Americans, including teachers, veterans, and other public servants, students who were cheated by their colleges, borrowers with disabilities, and more.”
That’s a big chunk of the $1.6 trillion in outstanding student debt owed by more than 40 million borrowers — and it’s not the end of the story.