Key Insights

The Supreme Court’s recent ruling on President Joe Biden’s Saving for a Valuable Education (SAVE) Plan has left borrowers in the same situation.

In mid-July, the Department of Education placed borrowers enrolled in the SAVE plan into forbearance, allowing them to pause payments until the ongoing legal cases are resolved.

As the case moves to an appellate court, borrowers face uncertainty.

Despite the Supreme Court’s latest ruling, little has changed for those involved in the SAVE plan.

On Wednesday, the Supreme Court denied the Department of Education’s request to lift the block on the income-driven repayment plan. This block will remain in place until the court decides on the program’s legality.

The ruling leaves borrowers, who have been uncertain since July, still in forbearance without any requirement to make payments until the legal disputes are settled.

“We are disappointed by this ruling, especially since lifting the injunction could have provided lower payments and other benefits to borrowers across the nation,” a Department of Education spokesperson stated on Friday. “The Department will continue to strive to reduce the impact and disruption on borrowers while we await the final decision.”

Advocates for student loan borrowers have criticized the ongoing legal battle as unfair.

“This is absurd. Millions of individuals were making progress on their student loans, and now they are left in uncertainty,” said Mike Pierce, executive director of the Student Borrower Protection Center, in a statement.

What Is the SAVE Plan?

Launched in July 2023, the SAVE plan was introduced as a replacement for the REPAYE plan, with the aim of providing a more manageable repayment structure for borrowers.

Like its predecessor, SAVE is an income-driven repayment plan where borrowers pay 10% of their discretionary income monthly and are eligible for loan forgiveness on any remaining balance after 20 years (25 years for graduate loans).

The critical difference between the plans is how discretionary income is calculated, which results in lower mortgage payments. Additionally, under SAVE, borrowers’ loan balances would not grow due to accruing interest, offering a potential path to financial freedom.

How Did We Get Here?

The SAVE plan has faced legal challenges since its introduction in early July.

The revised calculation of discretionary income allowed nearly 4.5 million borrowers to make progress toward loan forgiveness without making monthly payments.

In mid-July, the Eighth Circuit Court of Appeals ruled in favor of a group of Republican-led states that sued to block the plan. The lawsuit argued that the Department of Education needed more legal authority to implement the plan with congressional approval, citing the high cost of forgiveness to the federal government.

The court battles have primarily focused on whether the plan can continue while the legal arguments are ongoing. To prevent further confusion for borrowers, the Department of Education placed all borrowers enrolled in the plan into forbearance.

Earlier this month, the Biden Administration filed an emergency appeal to the Supreme Court, requesting that the temporary ban on the plan be lifted while the case was decided. The court did not grant the appeal, and the case will proceed to the appeals court with the block remaining in place.