The SAVE Plan Was Officially Ruled Illegal. What That Means For Student Loan Repayment and Forgiveness

KEY TAKEAWAYS

• A district judge has ruled the Saving for a Valuable Education plan repayment plan illegal.
• This effectively ends the Biden-era repayment plan, and the Department of Education is moving to transfer all borrowers still enrolled in the SAVE plan to another repayment option.
• The district judge did clarify that certain deferments and forbearances still count toward loan forgiveness.

The Saving for a Valuable Education plan was ruled illegal late Tuesday, effectively ending the Biden-era repayment plan.

For nearly two years, borrowers enrolled in the SAVE plan have been in limbo. Recently, more than 7 million SAVE borrowershave faced a rapid series of legal rulings with implications for their repayment plans.

A district judge revived the SAVE plan at the end of February, only for that decision to be reversed by the court of appeals on Monday. The appeals court sent the case back to the samedistrict judge who, on Tuesday, approved a proposal the Department of Education first put forward in December that would effectively eliminate the SAVE plan.

Tuesday, the Department of Education said that over the coming weeks, it would begin moving borrowers still enrolled in the SAVE plan into another “legal repayment plan.” Previously, the Department of Education encouraged all SAVE borrowers to transfer to the Income-Based Repayment plan, the only available income-driven repayment plan that will not be eliminated in July 2028.

Why This Matters

Millions of borrowers have spent over a year and a half in a payment pause, unable to make progress toward loan forgiveness. While this decision gives SAVE borrowers more certainty and the opportunity to move closer to forgiveness, many are expected to struggle when they are moved to a new repayment plan.

What That Means For Loan Forgiveness

Compared with most other repayment plans, the SAVE plan offered lower monthly payments. It also made the path to forgiveness easier and the qualifying repayment period shorter for some borrowers.

Borrowers on the Income-Based Repayment plan can get the remainder of their debt forgiven after making 20 or 25 years of payments. On the newly created Repayment Assistance Plan, which opens in July, borrowers will get forgiveness after 30 years.

However, the district judge confirmed on Tuesday that a Biden-era rule that allowed months in certain types of forbearance and deferment to count toward time-based forgiveness was not included in the lawsuit that was ruled on this week. That means borrowers are still able to progress toward forgiveness while on these types of payment pauses:

• Cancer treatment deferment
• Rehabilitation training program deferment
• Unemployment deferment
• Economic hardship deferment
• Military service deferment
• Post active-duty student deferment
• National service forbearance
• National Guard duty forbearance
• Department of Defense Student Loan Repayment forbearance
• Some types of administrative forbearance granted on or after July 1, 2024
• A bankruptcy forbearance on or after July 1, 2024, if the borrower made the required payments on a confirmed bankruptcy plan.

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