Today (July 18, 2024), the SAVE repayment plan was blocked by the 8th Circuit Court of Appeals. The SAVE repayment plan was partially blocked several weeks back, but that ruling was overturned. Today’s ruling pushed that partial blockage into a full blockage of the repayment plan.
The partial blockage stated that the 5% of discretionary income for undergraduate borrowers and forgiveness for those who had less than $12,000 in loans, who had been making payments for more than 10 years, was not going to be allowed. It was then overturned a few days later allowing the Department of Education to forgive those balances and begin preparing to implement the 5% for undergraduate borrowers, and an amount between 5% and 10% for those who had a mix of undergraduate and graduate loans, starting in August of 2024.
With today’s news, that is gone (at least for now).
There are lots of questions and not very many answers, but here are some things that I believe could happen (but have no real confirmation, just my opinion):
1. Anyone currently in the SAVE repayment plan will go into an administrative forbearance while this is being figured out. Again, I don’t know this 100%, but I have to imagine that will happen.
Update 7/22: It is not an administrative forbearance but rather a forbearance and as of this time will NOT be counting for PSLF or IDR credits. Continue to stay tuned and I will update as I know more.
2. While on an administrative forbearance, payments should be $0 and counting for PSLF. That’s a positive in a negative situation.
3. I have to imagine that if SAVE is completely repealed, the Department of Education will bring back REPAYE, PAYE, and ICR (all of which have been phased out in the last few months).
Right now, over 8 million people have either moved into SAVE from REPAYE or have switched to SAVE from another repayment plan. If SAVE is completely blocked, I imagine that borrowers would automatically be pushed into the REPAYE plan.
The issue with doing this is that on the SAVE repayment plan, the payment amount can be based on a single income if the borrower filed their taxes as married filing separately as I talk about here:
This is different than REPAYE, which requires both partners’ incomes to be counted in the calculation regardless of filing status.
There are many other ramifications that will come if all of this holds up, but for right now, it is important to remember that nothing is set in stone. With the number of people that will be affected by this move, I would be shocked if this doesn’t end up being heard at the Supreme Court.
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