Part of SAVE Repayment Plan Can Resume After Injunction, Appeals Court Rules
By Maria Carrasco, NASFAA Staff Reporter
A federal appeals court on Monday ruled that a provision of the Saving on a Valuable Education (SAVE) repayment plan — which was recently halted by an injunction from a Kansas judge — can continue as planned while the appeals process moves its way through court.
Earlier last week, a pair of federal judges in Missouri and Kansas issued separate injunctions that blocked the Department of Education (ED) from fully implementing the SAVE repayment plan. Specifically, a Kansas judge halted a provision of the SAVE plan which calculated monthly payments by using half the current percentage of discretionary income for undergraduate borrowers, lowering the rate from 10% to 5%.
And on Sunday, the 10th Circuit Court of Appeals halted that judge’s injunction, meaning that specific provision of the SAVE plan can move forward as planned, for now. However, the federal appeals court’s decision does not apply to the injunction ruled by a Missouri judge last week, which blocked a provision that would forgive some borrowers' loans after 10 years of repayments, instead of the 20 or 25 years currently required in other income-driven repayment (IDR) plans.
As a result of last week’s injunctions from the judges in Missouri and Kansas, ED on Friday told several news outlets that 3 million borrowers enrolled in the SAVE plan will be put in a temporary forbearance where payments will not be required and interest will not accrue. The New York Times reported that while these borrowers are put in forbearance, the months in forbearance will not count as qualifying payments toward loan cancellation through SAVE or the Public Service Loan Forgiveness (PSLF) program.
The decision to put these borrowers in forbearance was made so ED could recalculate borrowers’ payments to comply with the recent court rulings.
It’s unclear if these borrowers will remain in forbearance after Monday’s decision from the federal appeals court. NASFAA has reached out to ED for more details on the temporary forbearance. Additionally, ED has not yet released a public comment or press release on the issue.
However, over the weekend, ED did update the Federal Student Aid (FSA) website with more information about how last week’s legal challenges could impact borrowers. ED wrote on the website that as a result of last week’s injunctions, the online applications to enroll in and manage an IDR plan, including the SAVE plan, and to consolidate loans are temporarily paused.
Borrowers can still enroll in the SAVE plan, or another IDR plan, and request a direct consolidation loan by submitting a PDF application to their servicer. Instructions for borrowers are available on the FSA website. As on Monday afternoon, the application for an IDR repayment plan was not available.
Stay tuned to Today’s News for more updates on the legal challenges of the SAVE repayment plan.
Publication Date: 7/2/2024
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