Jean J. Puskar/AP
In this Nov. 9, 2017 file photo, people walk along Old Main Street on Penn State’s main campus.
Washington
CNN
—
Two federal judges in Kansas and Missouri have suspended parts of a student loan forgiveness plan launched last year by the Biden administration that reduced borrowers’ monthly payments and offered a quicker path to debt forgiveness.
Two lawsuits filed by Republican-led states allege that the Biden administration overstepped its authority in implementing the Savings on a Valuable Education (SAVE) repayment plan.
Both judges issued partial preliminary injunctions on Monday.
Two parts of the SAVE plan are suspended until the litigation is fully resolved.
The Biden administration cannot forgive any more federal student loans for borrowers enrolled in the SAVE plan, which allows borrowers to be eligible for debt forgiveness after making payments for at least 10 years. To date, $5.5 billion has been forgiven for 414,000 SAVE borrowers.
The Biden administration will also be blocked from implementing further provisions of the SAVE plan. Millions of people expected cuts to their benefits in July, but it’s now unclear whether those cuts will actually happen.
The Department of Education did not immediately respond to a request for comment.
The administration launched Plan SAVE after the Supreme Court struck down President Joe Biden’s signature student loan forgiveness program last summer.
Like existing income-contingent repayment plans, SAVE ties monthly payments to a borrower’s income and family structure, but SAVE plans offer the most generous terms, especially for low-income borrowers.
To date, more than 8 million borrowers have enrolled in SAVE, including 4.6 million borrowers who are $0/month borrowers. payment.
Borrowers who enroll in SAVE may also receive student loan forgiveness in a shorter time frame than with other income-contingent plans. Borrowers who owe $12,000 or less have their debt forgiven under SAVE after 10 years of repayment. For every $1,000 borrowed over that amount, an additional year of monthly payments is added to the time the borrower has to repay. With other repayment plans, borrowers must repay for at least 20 years before their debt is forgiven.
SAVE plans also prevent interest from inflating balances when borrowers make small monthly payments. When enrolled in SAVE, no unpaid interest accrues if the borrower pays in full each month. For example, if $50 in interest accumulates each month and the borrower only needs to pay $30, the remaining $20 is forgiven.
SAVE is separate from the Biden administration’s efforts to forgive student loan debt for public sector workers and borrowers who were defrauded by for-profit colleges.
Borrowers currently enrolled in SAVE can remain enrolled in the plan while their cases are pending trial, and their monthly payments will remain the same.
But there are provisions in the SAVE plan that were due to be phased in next month that could be paused if the litigation continues.
Starting in July, undergraduate loan repayments for people enrolled in SAVE were reduced from 10% to 5% of disposable income, and borrowers with loans for both undergraduate and graduate studies were expected to pay a weighted average of 5% to 10% of their income based on their loan principal balance.
Additionally, currently, borrowers who are enrolled in SAVE will not have any further student loan payments forgiven, even if they have made the required number of monthly payments.
This story has been updated with additional information.
