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Student loan borrowers on a key Biden Administration repayment plan won’t see their monthly payments cut in half in July after all.

Federal judges in Kansas and Missouri have issued preliminary injunctions blocking components of the Saving on a Valuable Education, or SAVE, program. The orders will put parts of SAVE on hold while two lawsuits filed by more than a dozen states make their way through the courts. Those suits claim that President Joe Biden overstepped his authority in implementing the plan and that the program’s cost will hurt states economically.

The income-driven repayment plan is being rolled out in phases and was scheduled to take full effect on July 1. As of that date, monthly payments were to be capped at 5% of a borrower’s discretionary income, which is the amount that’s left after taxes and necessary expenses like food and shelter. (Payments are currently set at 10% of a borrower’s discretionary income.)

Now that won’t happen, at least for the time being. And no further loan forgiveness will be granted under SAVE until the suits are resolved, even in cases where the necessary number of payments has been made.

However, the parts of SAVE that have already been implemented will remain in effect, and the more than 8 million Americans who are currently on the plan should not see any changes to their monthly payment amount. In addition, borrowers whose loans have already been forgiven will not be affected.

The White House announced the SAVE program last summer after the Supreme Court knocked down Biden’s one-time initiative to forgive more than $400 billion in student loan debt. The administration has so far canceled $5.5 billion in student loan debt for 414,000 borrowers under SAVE.

What Are the SAVE Lawsuits About?

In March, 11 states, led by Kansas, filed a lawsuit aimed at closing down the SAVE program and the administration’s other debt forgiveness initiatives. Missouri filed a separate suit in April that involved six other states.

The Kansas lawsuit, in part, accuses the administration of unlawfully lowering repayment amounts to a level not authorized by Congress.

The Missouri suit also contends that the Department of Education overstepped its authority. In addition, it claims that the Missouri Higher Education Loan Authority, or MOHELA—a student loan servicer founded by Missouri state lawmakers in 1981— would lose revenue from servicing fees if loans were to be forgiven early.

In Kansas, U.S. District Judge Daniel Crabtree has given the Biden Administration 14 days to appeal.

The White House says the administration plans to do just that.

“The Department of Justice will be appealing both decisions to block key provisions of our SAVE Plan. We will never stop fighting to lower monthly payments and help borrowers get out from under the burden of student debt,” Press Secretary Karine Jean-Pierre said in a social media post.

What Should Current SAVE Plan Borrowers Do?

If you are currently enrolled in the SAVE plan, you don’t need to take any action. Your monthly payments will remain the same until the lawsuits are resolved.

But bear in mind that undergraduate loan payments will not drop from 10% of your discretionary income to 5% in July as previously scheduled. There will also be no student debt cancellation while the injunctions are in place.

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Last Update: June 26, 2024