Biden's SAVE Plan for Student Loan Forgiveness Faces Legal Hurdles and Uncertain Future

The Biden administration's Saving on a Valuable Education (SAVE) plan, aimed at providing relief to millions of student loan borrowers, is currently on hold due to a series of legal challenges. The plan, which has enrolled 8 million participants, was designed to address long-standing issues with earlier income-driven repayment plans and lower monthly loan payments, even to as low as $0 for some low-income borrowers.

Legal Challenges and Current Status

The SAVE plan is frozen following a sweeping injunction issued by the U.S. Court of Appeals for the 8th Circuit. This ruling came after judges in Kansas and Missouri sided with several Republican-led states that argued the plan exceeded the Biden administration's authority and could cause financial harm to lenders and loan servicers. The Supreme Court's decision to leave the appeals court ruling in place means that the SAVE plan remains on hold.

As a result, the 8 million enrollees in the SAVE plan are currently in forbearance, meaning they do not have to make monthly payments and will not accrue interest on their loans during this time. However, the time spent in forbearance will not count toward Public Service Loan Forgiveness (PSLF) or other income-driven repayment (IDR) loan forgiveness programs.

Impact on Borrowers and Future Outlook

The Biden administration has already approved $1.2 billion in loan forgiveness for nearly 153,000 borrowers under the SAVE plan, with eligibility criteria including borrowers who have made at least 10 years of payments and originally took out $12,000 or less for college. Despite this, the broader implementation of the SAVE plan remains uncertain due to ongoing legal battles.

The outcome of the 2024 presidential election could significantly influence the fate of the SAVE plan. If Democratic candidate Kamala Harris wins, the Education Department is likely to continue litigating to protect the SAVE program. Conversely, if Republican candidate Donald Trump wins, his administration might drop the legal battle, potentially ending the SAVE plan and forcing its 8 million enrollees out of forbearance.

Future Initiatives and Regulatory Changes

The Biden administration is preparing to release a final rule regarding student loan relief in October, which could expedite the implementation of new student loan forgiveness programs. However, this initiative is also expected to face legal challenges, particularly given the recent Supreme Court ruling that weakened federal agencies' regulatory authority.

The Department of Education is refining its forgiveness plan to make it more resilient to legal challenges and is conducting negotiated rulemaking to discuss proposals for loan forgiveness for borrowers experiencing hardship. These efforts reflect the administration's ongoing commitment to finding alternative paths to student debt relief.