What relief student loan borrowers can count on amid legal challenges

The Biden administration’s efforts on student loan forgiveness have repeatedly been met with legal challenges. The Supreme Court struck down President Joe Biden’s first attempt at wide-scale forgiveness last summer.

Now, its new income-driven repayment plan (the Saving on a Valuable Education plan known as SAVE) is partially suspended after Republican-led states, including Arkansas, Florida and Missouri, filed lawsuits against it earlier this year. And experts say Biden’s do-over effort at delivering sweeping debt forgiveness is almost certain to face similar opposition.

Amid all the anxiety-provoking news, here’s what relief student loan borrowers can still count on — at least for now.

The Biden administration rolled out the SAVE plan in the summer of 2023, describing it as “the most affordable student loan plan ever.” Indeed, the terms of the new income-driven repayment plan are the most generous to date, making it controversial among critics of debt forgiveness. So far, around 8 million borrowers have signed up for SAVE, according to the White House.

Specifically, SAVE comes with lower monthly payments than any other IDR plan, and leads to quicker debt erasure for those with small balances. Some people can get their debt cleared after just 10 years, whereas the other IDR plans typically only lead to that relief in 20 years or 25 years.

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In late June, two federal judges in Kansas and Missouri temporarily halted significant parts of SAVE, after a number of red states argued that the Education Department overstepped its authority and essentially was trying to find a roundabout way to forgive student debt after the Supreme Court blocked its sweeping plan in June 2023.

Since then, the Biden administration successfully appealed one of the injunctions against SAVE. As a result, most of the program remains in effect for the time being.

Many borrowers enrolled in SAVE should benefit from the reduction of monthly bills to 5% of their discretionary income, compared with the 10% or more requirement under other IDR plans. The government also covers any unpaid interest each month for SAVE enrollees.

“Borrowers enrolled in the SAVE plan can still access its considerable benefits, including undergraduate loan payments cut in half, as well as protection against interest accruing if borrowers are making their monthly payments,” U.S. Department of Education Secretary Miguel Cardona said in a statement.

Because the injunction against SAVE regarding expedited loan forgiveness is still active, borrowers aren’t able to get their loans excused under the plan’s expedited timeline.

The legal whiplash over the SAVE plan has been a major headache for student loan borrowers, and made it hard for them to budget, said Aissa Canchola-Bañez, policy director at the Student Borrower Protection Center.

“Borrowers shouldn’t be expected to live court judgment by court judgement,” Canchola-Bañez said. “[They] deserve relief and this is why it’s critical for the administration to finalize its debt relief rules and enact debt relief for as many borrowers as possible.”

The Biden administration is working as quickly as it can to finalize its so-called Plan B for loan forgiveness, which is a more targeted aid package than its first attempt, but one that could still reach tens of millions of Americans.

The U.S. Department of Education recently disclosed that it will publish its final rule on its plan sometime in October. It’s possible the department will try to start forgiving people’s debts that month.

Those who stand to benefit from the relief include borrowers who have seen their balances grow beyond what they originally borrowed and those who have already been in repayment for decades.

Yet it’s unclear how far the Education Department will get. Lawsuits are expected to follow swiftly, said higher education expert Mark Kantrowitz.

A recent Supreme Court ruling could also make it harder for Biden’s revised plan to survive those legal attacks, Kantrowitz said.

The high court in late June overruled the so-called Chevron doctrine, a 40-year-old precedent that required judges to defer to a federal agency’s interpretation of laws in question. The 6-3 ruling, which split the conservative-majority court along ideological lines, is expected to undermine the federal government’s regulatory power.

But there is some good news for borrowers, Kantrowitz said.

“The SAVE repayment plan, on the other hand, is not at risk,” he said, adding that Congress gave the U.S. Department of Education explicit authority to amend the terms of loan repayment plans for students.

In the meantime, the Education Department’s other income-driven repayment plans and the Public Service Loan Forgiveness program remain unscathed by legal drama. Consumer advocates encourage all borrowers to research what, if any, relief they may be eligible to receive.