8 million borrowers no longer have to make payments

Biden’s Student Loan Payoff

On Thursday, the 8th Circuit Court of Appeals blocked the SAVE student loan repayment plan fully. This ruling means that key provisions of the plan, such as lower monthly payments and a shorter timeline for debt forgiveness, cannot be implemented.

As a result, Students with a student loan on SAVE do not have to make payments while the legal process continues. This development is likely to cause confusion among borrowers who have already received bills with lower payments.

Millions of borrowers will once again be exempt from student debt.

It’s the latest twist in an ongoing legal saga for borrowers. Earlier this year, two separate groups of GOP attorneys general filed lawsuits to block SAVE. In late June, two federal courts blocked parts of the plan. But just days later, the 10th Circuit allowed parts of the plan to move forward, only for the The 8th Circuit’s ruling to halt the plan in its entirety.

This back and forth in the courts has left many borrowers in limbo, wondering what will happen to their student loans. As the legal battle continues, it is crucial that borrowers stay informed of the latest developments.

Minister of Education Miguel Cardona announced on Thursday evening that all borrowers who have registered for the SAVE Plan will benefit from an interest-free deferral scheme as the government continues to vigorously defend the plan in court.

Interest-free deferral for SAVE plan borrowers

Cardona stressed that the Department of Education will provide borrowers with regular updates on the court rulings and their impact in the coming days.

Important information for borrowers

On Friday, the Department of Education confirmed that this grace period will not contribute to borrowers’ progress toward debt forgiveness under the Public Sector Student Loan Forgiveness (PSLF) or income-based repayment plans.

• Borrowers who have enrolled in the SAVE Plan and who have received a bill for August will be granted an interest-free payment deferral.
• During this grace period you do not have to make any payments.
• Those who have not yet received an invoice for August will also be put on a payment deferral and will therefore not receive an invoice.

This proactive measure is intended to provide relief and clarity to borrowers while the legal process unfolds. The Department of Education is committed to ensuring that all affected borrowers are well informed and supported during this period.

The 8th Circuit’s recent ruling involved a lawsuit filed by the Attorney General of Missouri. Meanwhile, another lawsuit seeking to block the SAVE plan, filed by Kansas, is currently before the Supreme Court. In a brief to SCOTUS, Attorney General Elizabeth Prelogar warned that blocking the plan could lead to “intense confusion“for borrowers. According to the Department of Education, 8 million borrowers are enrolled in the SAVE plan, 4.5 million of whom qualify for zero-dollar monthly payments because of their income.

Impact on borrowers

The Department of Education has already ordered servicers to continue processing borrowers’ reduced payments under the SAVE plan. However, if the court issues a final ruling preventing SAVE from being implemented, the Department will have to recalculate borrowers’ payments. This could force many to reconfigure their budgetswhich could lead to potential financial problems.

Political reactions

Some Republican lawmakers have praised the ruling. Notably, Sen. Bill Cassidy, the ranking Republican on the Senate Education Committee, said the ruling was “another rejection of President Biden’s illegal student loan schemes.”

As the situation develops, both borrowers and policymakers will be watching closely to see how these legal battles unfold and what implications they have for the future of the SAVE plan and student loan repayment.

“This is a pre-election abuse of power in an attempt to buy votes at the expense of the American taxpayer,” Cassidy said.

Biden’s commitment to student loan forgiveness

Despite the criticism, the Biden administration remains steadfast in its commitment to helping borrowers. In addition to the SAVE plan, the Department of Education will finalize a broader plan student debt forgiveness initiative in October, which is expected to benefit more than 30 million borrowers.

Challenges and opposition

“Today’s ruling from the 8th Circuit blocking President Biden’s SAVE plan could have devastating consequences for millions student loan borrowers “We will be crushed by unaffordable monthly payments if it remains in effect,” Cardona said. “It is outrageous that politically motivated lawsuits brought by Republican elected officials are once again standing in the way of lower payments for millions of borrowers.”