A U.S. appeals court has delivered another blow to the SAVE plan—an income-driven student loan replacement program implemented by the Biden administration. That’s more bad news for Americans seeking relief from crushing levels of student debt.
About 8 million federal student loan borrowers enrolled in the SAVE plan, which has been frozen for months as it faced court challenges. Seven Republican-led states—Missouri, Arkansas, Florida, Georgia, North Dakota, Ohio, and Oklahoma—sued the U.S. Department of Education claiming that the department and former President Joe Biden lacked the authority to forgive millions of dollars in student loans.
In a ruling out today, the 8th Circuit Court of Appeals affirmed the request by the seven states for a preliminary injunction, leaving payments frozen and sending the case back to the district court for further proceedings.
“The Secretary has gone well beyond this authority by designing a plan where loans are largely forgiven rather than repaid,” the court wrote in its decision.
According to court filings, the plan would make “substantial” changes to the student loan repayment system. The average borrower with $10,000 in debt would pay close to $4,800 less back to the federal government.
The SAVE plan also sought to increase the income exemptions from 150% of the poverty line to 225%, meaning those making less than $32,800 per year would have no monthly payment. The court filing says that would account for 4.3 million SAVE borrowers. After 20 years, undergraduate loans would be forgiven altogether. For graduate students, 25 years.
For individuals under the SAVE plan, Yolanda Watson Spiva, president of Complete College America, says it is advisable to set aside money now so that borrowers are ready when payments resume—potentially at higher levels.
"Borrowers should be prepared for a tough repayment landscape. Many students and graduates simply don’t have the discretionary income to keep up with payments, especially when the average monthly repayment is around $200. Without relief, we’re likely to see rising default rates, which is concerning for both individual borrowers and the broader economy," she says.
While she expects additional legal challenges, there could be overall adverse consequences for the educational and professional outcomes of young people with college enrollment and degree completion rate declines.
The news comes as Republicans in the U.S. House of Representatives have floated eliminating two tax credits that provide thousands of dollars in relief to students. Debt from student loans in the U.S. is over $2 trillion, according to estimates.
More on education:
- $2 trillion in student loan debt is in limbo under Trump
- Trump wants to abolish the Department of Education: What that could mean for student loan borrowers
- Trump’s win ends hopes of student loan forgiveness for many borrowers: ‘The dream is gone. It’s shot’
This story has been updated to add additional commentary from Watson Spiva.
