The SAVE Plan has emerged as a significant point of contention, capturing the interest of borrowers, legal experts, and policymakers alike. On Wednesday, the U.S. Supreme Court declined to lift the block on the SAVE Plan, leaving millions of borrowers in a state of uncertainty.
The U.S. Supreme Court’s Decision
The SAVE Plan, introduced by the Biden administration, was designed as an income-driven repayment option, featuring the most affordable monthly payments, and offering generous federal student loan forgiveness opportunities for borrowers. However, the plan has faced several legal challenges from attorneys general in Republican-led states, including Kansas and Missouri. Rulings by the lower courts have halted portions of the plan, and the Eighth Circuit Court halted the plan in its entirety.
In response, the Biden administration filed an emergency appeal to the U.S. Supreme Court, seeking to allow the plan to take effect. However, this past Wednesday, the Supreme Court declined to lift the suspension, allowing the legal challenges to proceed in the lower courts—two orders of the court were issued, one for the case Alaska, et al. v. Dept. of Education, et al., and one for the case Biden, President of U.S., et al., v. Missouri, et al. Notably, there were no dissents recorded among the justices.
While the Supreme Court did not lift the suspension of the SAVE Plan, it indicated that they expect a resolution from the lower courts. This pushes the cases significance, which holds national importance for millions of borrowers.
A Brief Overview of the SAVE Plan
The SAVE Plan, launched by the Biden administration in July 2023, aims to provide significant relief for federal student loan borrowers. This income-driven repayment (IDR) plan reduces monthly payments from 10% to just 5% of a borrower’s discretionary income, and it offers the most generous federal student loan forgiveness opportunity.
While this plan has been celebrated by some borrowers, it has been fraught with legal challenges. And those enrolled in the plan are caught in the middle.
Implications for Federal Student Loan Borrowers
Borrowers enrolled in the SAVE Plan currently find themselves in a state of uncertainty. They are subject to a 0% interest administrative forbearance, which means no payments are required while legal disputes unfold. However, this forbearance is only temporary, and it is unclear how long the plan will remain suspended.
The ongoing legal challenges create significant financial ambiguity for borrowers. Many had hoped for reduced monthly payments and enhanced forgiveness opportunities promised by the SAVE Plan. In this period of suspension, it is crucial for borrowers to remain vigilant and well-informed about the status of their loans and any potential changes that may arise.
Legal Precedents and Future Policies
The SAVE Plan represents the latest student loan policy introduced by the Biden administration facing legal challenges. Last year, the administration's broad student loan forgiveness initiative was contested and ultimately overturned by the U.S. Supreme Court. As plans for future student loan forgiveness, such as Biden’s Plan B, are being finalized, they are also likely to encounter legal challenges.
With a presidential election just months away, the management of student loan forgiveness or relief under a new administration remains uncertain. The platforms of former President Trump and Vice President Harris on higher education differ significantly. Current polls indicate a tight race between candidates, leaving it difficult to predict the outcome of the election. This unpredictability raises questions for federal student loan borrowers regarding their repayment future.
The Role of the Supreme Court Going Forward
Although the Supreme Court has chosen not to intervene at this stage, the justices' order indicates an expectation for the lower courts to act promptly. The outcomes of these lower court decisions may lead to appeals in the U.S. Supreme Court.
The Fight Continues
The fight for the SAVE Plan is far from over, with its eventual outcome poised to significantly affect millions of student borrowers. Ongoing legal disputes highlight the complexities of enacting comprehensive debt relief measures.
Borrowers currently repaying their student loans, particularly those participating in the SAVE Plan, should closely monitor decisions made at the national level. Such decisions could influence their repayment strategies, including the terms of their repayment plans and potential avenues for forgiveness.