SAVE Plan: What’s Next for Borrowers After Lawsuit Dismissed

Student loan borrowers were hit with a surprising turn of events last week when a federal judge dismissed a crucial legal challenge to President Joe Biden’s Saving on a Valuable Education repayment plan, known as SAVE. This decision dealt a blow to the Trump administration’s efforts to reform student loans, as they had hoped to replace SAVE with the Repayment Assistance Plan outlined in President Donald Trump’s One Big Beautiful Bill Act.

Despite this setback for the Trump administration, the dismissal does not necessarily mean a win for the millions of borrowers still enrolled in the SAVE program. Betsy Mayotte, the president of The Institute of Student Loan Advisors (TISLA), described the situation as a new level of legal limbo for borrowers who have been caught in this ongoing battle for years. Mayotte believes that the Education Department is unlikely to reinstate the SAVE program without putting up a fight.

The SAVE plan was introduced by President Biden in 2023 as a more affordable student loan repayment option. It set payments based on 5% of a borrower’s discretionary income, with eligibility criteria that allowed many middle- and lower-income borrowers to qualify for smaller payments, sometimes as low as $0 per month, while working towards loan forgiveness in as little as 10 years.

However, legal challenges quickly arose, leading to a pause in the program in June 2024. By that time, around 8 million borrowers had enrolled in SAVE, with 150,000 already receiving loan forgiveness under its terms. The program was put on hold as the legal battle unfolded.

When President Trump took office, the lawsuit against SAVE was effectively stalled. The OBBBA then officially ended the SAVE program, with plans to dissolve it by July 2028. In December, the Trump administration proposed settling the lawsuit to end Biden’s “illegal SAVE plan” once and for all, pending court approval.

In a surprising turn of events, on February 27, federal judge John Ross dismissed the lawsuit that had halted SAVE entirely. The plaintiffs requested a temporary halt to the decision while they appealed the dismissal, but Ross denied this request, stating that since both the plaintiffs and the Trump administration opposed the SAVE plan, there was no active controversy to address.

Ross emphasized that clarity on the fate of SAVE must come from the Department of Education, not the court. As of now, the Education Department has not publicly addressed the dismissal. Education Secretary Linda McMahon and the department’s press team have not responded to requests for comment on the matter.

The future of the SAVE program remains uncertain, leaving millions of borrowers in a state of legal limbo as they wait for clarity on the fate of their student loans. Don’t count on a quick resolution

While the legal battle over the SAVE program continues to unfold, borrowers shouldn’t hold their breath for a quick resolution. The Education Department has shown no signs of reinstating the program, and experts warn that the process of re-implementing SAVE, if it were to happen, could be lengthy and complex.

“These things can’t be turned on and off on a moment’s notice,” says Betsy Mayotte of TISLA. “By the time all of this works its way through, I think we’ll be in 2028 and it will be a moot point anyway.”

Adam Minsky echoes this sentiment, cautioning borrowers to be prepared for the possibility of higher payments under other repayment plans once the temporary forbearance ends. It’s important for borrowers to consider their options carefully and plan accordingly for any changes that may arise in the future.

In the meantime, borrowers enrolled in the SAVE program can continue to benefit from the payment pause that is currently in effect. While the program may be on shaky legal ground, those already enrolled can still take advantage of the forbearance to manage their finances until a final decision is reached.

Overall, the future of the SAVE program remains uncertain, but borrowers can take steps to protect themselves and stay informed as the legal challenges play out. Keeping abreast of updates from reliable sources and seeking advice from student loan experts can help borrowers navigate this challenging landscape and make informed decisions about their financial future.

With the recent federal court ruling on SAVE and the impending end of the program in 2028, borrowers are being advised to start looking at other repayment plans to ensure they are prepared for the transition. While some may be hesitant to leave SAVE, experts are urging borrowers to explore their options sooner rather than later.

One viable alternative for borrowers currently on SAVE is the Income-Based Repayment (IBR) plan. IBR is the only income-driven repayment option that will survive the repayment system overhaul, making it a safe choice for those looking to switch from SAVE before it ends. Under IBR, monthly payments are capped at 10% to 15% of discretionary income, depending on when the loan was taken out. The Education Department has recommended IBR as the best option for SAVE hold-outs.

In addition to IBR, there are two other income-driven repayment plans available for the next few years: Pay As You Earn (PAYE) and Income-Contingent Repayment (ICR). While these plans offer similar benefits to IBR, they will also end in 2028. Borrowers should weigh the pros and cons of switching to these plans for a shorter period versus making the jump to IBR.

For borrowers looking for forgiveness benefits, the new Repayment Assistance Plan (RAP) will be introduced in July. RAP is an income-driven plan with a forgiveness component that requires about 30 years of qualifying payments. Monthly payments under RAP range from 1% to 10% of the borrower’s adjusted gross income, with a minimum monthly payment of $10. After 360 months of on-time payments, remaining balances will be canceled.

Overall, borrowers on SAVE should start exploring their options now to ensure a smooth transition to a new repayment plan. The Education Department’s loan simulator can help borrowers determine the most affordable plan for their situation. Whether choosing IBR, PAYE, ICR, or RAP, it’s essential to consider the long-term implications and benefits of each plan before making a decision.