Court Ruling Affirms Blocking of SAVE Plan While Next Steps for the Program Remain Uncertain
By Megan Walter, Senior Policy Analyst
In the spring of 2024, a federal court issued an injunction preventing the U.S. Department of Education (ED) from fully implementing the Saving on a Valuable Education (SAVE) repayment plan. Since that ruling the program’s fate has remained uncertain, and now that the 8th Circuit Court has affirmed the blockage of SAVE it is unclear whether borrowers will be able to remain in the payment plan.
Following the federal ruling in the spring of 2024, ED was barred from canceling loans eligible for forgiveness under the SAVE, Pay As You Earn (PAYE) and Income-Contingent Repayment (ICR) plans.
By July 2024, the 8th Circuit Court of Appeals blocked the SAVE plan in its entirety which led to borrowers who were able to enroll in the program being placed into an interest-free forbearance, where they have remained since.
On February 18, 2025, the 8th Circuit Court of Appeals issued its long-awaited ruling, siding with the Republican-led states that filed suit against former President Biden’s administration. The court upheld the injunction, continuing to block the SAVE plan in its entirety, including the forgiveness provisions, which subsequently blocked the administration from processing forgiveness for borrowers enrolled in PAYE and ICR plans as well.
Notably, the ruling also directed the lower court to strengthen the injunction, stating that the block on the SAVE plan should be broader. The decision explicitly ordered the lower court to enjoin both the full SAVE plan ruling and what has been referred to as the "hybrid rule."
The hybrid rule was ED's attempt to continue processing time-based forgiveness applications by relying on the forgiveness provisions of the 2015 Revised Pay As You Earn (REPAYE) plan as well as establishing monthly payments for the SAVE plan using the REPAYE plans calculation that used 10% of discretionary income, versus the SAVE plans expected 5%. The 8th Circuit’s recent ruling continues the block for this effort and effectively prevents ED from approving forgiveness applications under both SAVE and REPAYE provisions. ED in late 2024 reestablished the PAYE and ICR plans (which had been sunsetted in the regulations establishing the SAVE plan) so borrowers had additional choices for repayment plans, but debt forgiveness was and remains blocked for these plans as they fall under the same statutory affirming language as the SAVE and REPAYE plans.
It is important to note that Public Service Loan Forgiveness (PSLF) is established separately in statute and is not threatened by legal challenges to the SAVE plan.
The case will now return to the Eastern Missouri lower district court, which is tasked with issuing a final ruling on the fate of the SAVE plan. There has been no public reaction to the ruling of the 8th Circuit Court by the plaintiffs or the Trump administration, so it’s hard to assume what the next steps will be.
NASFAA will be following the case as it continues to the lower court.
Publication Date: 2/25/2025
Jeff T | 2/27/2025 11:51:16 AM
The court's decision is sickening, it's logically, morally, ethically, and mathematically divorced from reality. Here's a thought: unlike PSLF forgiveness, which is always tax-free at the federal level, by what authority is IDR forgiveness taxed IF, as these hyper partisan judges assert, time-based forgiveness through the IDR plans created by the ICR statute isn't even legal?
David S | 2/25/2025 11:8:57 AM
One must ask what the motivation was behind the suit designed to deny needy students a more affordable means of repaying their loans (spoiler alert, it was politics). This is consistent with what we're seeing every day now, a new scorched earth approach to every government service that helps people. Virtually all counseling we've been providing to student borrowers for years is being contradicted; even if it's not our fault, who could blame people for not seeing financial aid professionals as reliable sources of information?
And the people blocking this are the same ones chomping at the bit to give massive tax breaks to billionaires.
Luis J | 2/25/2025 10:21:25 AM
I didn't voted for Trump, but I must pay the broken dishes. Is going to be hard to explain to students about this mess.
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