Parts of Biden's income-based repayment plan SAVE stalls on legal snag

President Joe Biden's income-driven repayment plan hit a legal snag this week after two federal judges blocked parts of it that were set to take effect next week. 

The Biden Administration introduced the Saving on a Valuable Education (SAVE) plan after the Supreme Court struck down Biden's student loan forgiveness plan. The White House said that the SAVE plan could lower borrowers' monthly payments to zero dollars, reduce monthly costs in half and save those who make payments at least $1,000 yearly. Additionally, borrowers with an original balance of $12,000 or less will receive forgiveness of any remaining balance after making 10 years of payments. The plan now has more than 8 million enrollees.

Some of the provisions under SAVE– mainly cutting the payments on the loans to 5% of discretionary income from 10% that was set to take effect on July 1st and any new debt cancellations through the program – are now stalled as a result of the court-ordered block.  

In Kansas, Judge Michael Crabtree ruled that the Department of Education can only enact the full scope of the SAVE program if Congress explicitly authorizes that portion of the program, according to a report by The Hill. In Missouri, Judge John Ross ruled that the Department of Education cannot forgive any loans under SAVE, finding that forgiving federal loans illegally deprives state loan operators of revenue.

Missouri Attorney General Andrew Bailey, representing one of the seven states that brought the lawsuit, said in a statement that the plan saddled "working Missourians with Ivy League debt."

"Only Congress has the power of the purse, not the President," Bailey said in a statement. "Today's ruling was a huge win for the rule of law, and for every American who Joe Biden was about to force to pay off someone else's debt."

Private student loan borrowers can't benefit from federal loan relief. But you could lower your monthly payments by refinancing to a lower interest rate. Visit Credible to speak with an expert and get your questions answered. 

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The White House said in a statement that the Department of Education will continue to enroll more Americans in SAVE. Students and borrowers can still access the plan's remaining benefits, including $0 payments for anyone making $16 an hour or less, lower monthly payments for millions more borrowers, and protection from runaway interest if they are making their monthly payments. 

The SAVE plan has allowed 8 million Americans access to lower monthly payments – including more than 4 million borrowers who owe no payments; and has already helped hundreds of thousands of borrowers get their remaining debt canceled more quickly, U.S. Secretary of Education Miguel Cardona said in a statement.

"The Biden-Harris Administration's SAVE Plan is the most affordable repayment plan in history," Cardona said. "We designed SAVE to cut undergraduate loan payments in half, avoid interest growth for borrowers making zero-dollar or low payments, and allow at-risk borrowers to reach forgiveness faster. Under SAVE, nearly 8 million Americans—one out of five borrowers—have breathing room from bills that, too often, compete with basic needs." 

"But Republican elected officials and special interests sued to block their own constituents from being able to benefit from this plan – even though the Department has relied on the authority under the Higher Education Act three times over the last 30 years to implement income-driven repayment plans," Cardona continued.

If you're having trouble making payments on your private student loans, you won't benefit from federal relief. However, you could consider refinancing your loans for a lower interest rate to lower your monthly payments. Visit Credible to get your personalized rate in minutes.

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Only 33% of student loan holders have been making regular payments since they started up again in October – and about half are looking to use an income-driven repayment plan or are seeking outright forgiveness, according to a Civic Science survey.

Roughly 58% of student loan holders said that they are at least "somewhat" or "very" concerned about paying their student loans, and more than 60% of borrowers said their student loan debt is impacting their ability to save for retirement. This concern pushes many borrowers to seek ways to suspend loan repayment, even if it means that interest will continue to build on the debt.

"New data reveal a plurality of loan holders have deferred their loans, but 14% report they have one or more loans currently in forbearance, meaning having received a temporary pause on repayment for up to 12 months, while 14% say it's likely they will apply for forbearance," the survey said. "Perhaps more concerning, 9% of borrowers have defaulted on their loans, and 6% expect they will go into default. If repayments continue as they have been, the majority of student loan holders will experience forbearance, deferment, or default at some point." 

If you hold private student loans, you could lower your monthly payments by refinancing to a lower interest rate. Visit Credible to speak with an expert and get your questions answered.

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