Student Loan Borrowers Could See Higher Payments After Judge’s Ruling

A federal appeals court has blocked the Biden administration’s student loan repayment program known as the Saving on a Valuable Education (SAVE) plan, leaving millions of borrowers uncertain about their repayment options. The ruling from the 8th U.S. Circuit Court of Appeals, siding with Republican-led states, has halted the program, which was designed to offer lower monthly payments and faster debt forgiveness for some borrowers.

Why It Matters

The court’s decision means that borrowers currently enrolled in the SAVE plan may soon need to transition to a different repayment option, potentially increasing their monthly payments. The ruling could also extend the uncertainty surrounding student loan forgiveness, as the SAVE plan was expected to be one of the most affordable repayment plans available.

The decision comes amid broader political and legal debates about the authority of the executive branch to enact widespread student loan relief.

What To Know

The implementation of the court ruling is expected to take several months, as the lower court must first enforce the decision before the Department of Education can issue guidance to borrowers. During this period, borrowers should prepare for potential changes in their repayment plans and consider alternative options.

Mark Kantrowitz, a student loan and higher education expert, told Newsweek that while the precise timeline is uncertain, borrowers should expect at least a month’s notice before needing to transition to a new plan. He also warned that those who do not actively select a repayment plan may be placed in the standard 10-year repayment plan, which carries the highest monthly payments.

For those seeking lower payments, options such as Income-Based Repayment (IBR) and Pay As You Earn (PAYE) remain available, but borrowers may need to provide updated income information to qualify.

Kantrowitz also noted that switching to a new repayment plan will immediately end the interest-free forbearance that has been in place since the initial court injunction. “If a borrower on the SAVE plan were to switch to another repayment plan today, they would no longer receive the interest-free forbearance from that point onward,”…