Education Department Tells 7.5 Million Student Loan Borrowers in "Illegal" SAVE Plan to Prepare for Repayment More than 7 million student loan borrowers enrolled in the SAVE repayment plan will receive notices starting Friday, instructing them to transition to a new repayment plan, the Education Department announced. The SAVE plan, which was invalidated by a federal court earlier this month, has been in forbearance since July 2024 as legal challenges unfolded. Starting July 1, loan servicers will begin sending borrowers notices giving them 90 days to select an alternative repayment plan. The available options will likely result in higher monthly payments for most borrowers. The Education Department described the SAVE plan as "illegal," stating it was based on "the false promise of student loan forgiveness and artificially low monthly payments." Under Secretary of Education Nicholas Kent emphasized in a statement that the Biden administration’s approach to student debt relief was being "put to rest," asserting that borrowers must "pay back loans they took out." The department’s guidance, which will be sent to all borrowers enrolled in the defunct plan, aims to end what Kent called the "illegal student loan bailout agenda." Borrowers enrolled in the SAVE plan have faced uncertainty as legal battles progressed. While the plan was in effect, they were not required to make payments, but interest on their loans began accruing after a court blocked its implementation last summer. This has led to increased debt balances for some students. Alexis Arredondo, a first-generation college graduate with $40,000 in student debt, described the situation as a "very difficult" choice between higher monthly payments or a longer repayment period that would result in more interest.#save_plan #nicholas_kent #education_department #repayment_assistance_plan #student_borrower_protection_center
Federal Appeals Court Ends SAVE Plan for Student Loan Borrowers A federal appeals court has ruled to end the Saving on a Valuable Education, or SAVE, plan, a repayment program introduced by the Biden administration in 2023. The decision, issued by the U.S. Court of Appeals for the 8th Circuit, overturned a previous ruling that had dismissed a legal challenge led by Republicans. The court’s reversal means the SAVE plan, which aimed to reduce monthly payments for millions of borrowers, will no longer be available. The SAVE plan, which allowed borrowers to pay as little as 5% of their discretionary income each month, was designed to ease the burden of student debt. However, Republican-led lawsuits argued the program violated federal regulations, leading to its suspension. The 8th Circuit’s ruling to end the plan has left borrowers in a state of uncertainty, with many now facing the prospect of higher payments or prolonged debt. The Department of Education had previously placed borrowers in forbearance during the legal challenges, meaning they were not required to make monthly payments. However, their loans have continued to accrue interest since August 2024. Undersecretary of Education Nicholas Kent stated that the department will soon provide guidance on transitioning borrowers to legal repayment plans. Experts advise affected borrowers to immediately apply for an Income-Driven Repayment Plan Request form, with the Income-Based Repayment plan (IBR) currently considered the most viable option. For those pursuing Public Service Loan Forgiveness, borrowers are urged to file a PSLF Buyback application to account for the stalled progress under SAVE. The U.S. Department of Education has not yet commented on the court’s decision.#federal_appeals_court #us_court_of_appeals_8th_circuit #save_plan #nicholas_kent #one_big_beautiful_bill
