President Biden’s SAVE loan plan, known as the most affordable student loan plan ever, is facing a partial suspension. This has raised a lot of questions as students worry about their loan forgiveness.
However, borrowers can still access some benefits despite the suspension including protection against interest accruing if borrowers are making their monthly payments and undergraduate loan payments cut in half. This was made known by the secretary of the Department of Education, Miguel Cardona.
The fate of the SAVE Plan
In a move that many legal experts anticipated, President Biden’s latest plan to ease student borrowers has hit a legal roadblock. The Saving on a Valuable Education (SAVE) plan is partially on hold following the lawsuits filed by Federal Judges from Republican-led states of Kansas and Missouri.
The lawsuits were filed on the same day, stating that President Biden had overstepped His authority. According to these judges, forgiving student loans of over $156 billion isn’t something a president can do without explicit approval from the US Congress.
Benefits that can be accessed
The interest treatment appears to be unaffected by the court’s rulings for now. This means that if a borrower’s monthly payment does not cover all the interest owed that month, the uncovered portion will be waived by the Department of Education to prevent the debt from growing.
In a statement, the Department of Education Secretary, Miguel Cardona said; “While we continue to review these rulings, the SAVE plan still means lower monthly payments for millions of borrowers.” He also added, ” including more than four million borrowers who owe no payments at all, and protections for borrowers facing runaway interest when they are making their monthly payments.”
Another benefit is the lowered payment rate. SAVE already had implemented the lowered payment formula to let borrowers keep more of their earnings to pay for basic needs. This shields them from the repayment formula.
Benefits that are halted
The benefits of the SAVE program that have been halted by the rulings are those yet to be implemented. The SAVE program had phases of components and programs such as a reduction in payment to 5% of discretionary income from 10% has been halted. This phase was to take effect from July 1.
In the lawsuits, the Missouri judge’s order blocks any new debt cancellation that could have been achieved through the SAVE program. Although protested against by borrowers and students, this order has blocked loan forgiveness for now.
Fate of Student Loan Forgiveness
The SAVE plan which has over 8 million borrowers signed up under it has so far given loan forgiveness to about 400,000 students. However, the loan forgiveness plan has been put on pause due to the lawsuits and will remain that way until it has been resolved.
Despite the rulings, Biden’s administration is working on a Plan B for the loan forgiveness which is a more targeted aid package. According to the Education Department, the final rule on this plan will be published in October.
