Last year, the Biden administration introduced the SAVE plan to make student loan payments more manageable. The plan aims to assist millions of borrowers in the federal student loan program by reducing their monthly debt payments and offering debt forgiveness.
However, the attorneys general of South Carolina, Texas, and Alaska are urging the court to review and reject the SAVE Plan.
This has created uncertainty amongst student loan borrowers.
The student loan repayment program
The Biden administration launched the Saving on a Valuable Education (SAVE) plan in August 2023 to ease student loan payments.
SAVE plan replaces the Revised Pay As You Earn plan and includes three main changes; capping undergraduate loan repayment at 5% of a borrower’s discretionary income, redefining discretionary income, and providing a cancellation period from 20 – 25 years to as low as 10 years for individuals with original loan balances at or below $12,000. For those with higher debts, relief will be granted after an additional year of payments for every extra $1,000 borrowed.
Biden described it as “the most affordable student loan plan ever”.
Three GOP-led states press Supreme Court to stop Biden’s student loan repayment program
Three Republican-led states – South Carolina, Alaska, and Texas – have requested the Supreme Court to stop a Biden administration initiative that aims to reduce monthly payments for millions of student loan borrowers. After initial legal challenges, the Department of Education announced that some borrowers would be placed in forbearance, during which payments would not be required and interest would not accrue while the matter was being resolved.
The attorneys general of South Carolina, Texas, and Alaska are urging the court to review and reject the SAVE Plan proposed by the Biden Administration. They emphasized the urgency of this review, as the administration is planning to implement a rule to waive student debt, potentially involving hundreds of billions of dollars. They believe that legal certainty is crucial in such cases and that the court’s intervention is necessary to uphold federal law and prevent the unilateral allocation of significant amounts of money.
The Supreme Court is expected to schedule a briefing and could decide whether to block the program within a few weeks.
How does it affect borrowers?
About 8 million people are enrolled in SAVE, and approximately 3 million were expecting lower payments as of July 1.
However, the states have asked the Supreme Court to review the case before the lower court finalizes its judgments, creating uncertainty for student loan borrowers. However, the U.S. Education Department has given directives.
Student loan borrowers who have already received a bill with reduced payment from their loan servicer should pay it in July.
Those whose loan servicers are still calculating their new lower or their bills are paused and they’ve been placed on forbearance should make their first payment in August, the bill for August should be lower.
Borrowers that have a $0 monthly bill under SAVE don’t need to pay anything and they’ll be considered up to date on their payments.
