The Supreme Court on Wednesday kept a temporary freeze on the Biden administration’s new student loan repayment plan, which means monthly bills for millions of borrowers will also remain on hold.
The SAVE program, which ties a borrower’s loan payments to income and household size, is more affordable than the income-driven repayment plans that came before it. The program would have cut many borrowers’ bills by as much as half.
Given its higher costs, two separate groups of Republican-led states filed legal challenges in the spring, seeking to upend the program. A flurry of legal activity followed, disabling pieces of the repayment plan, and a federal appeals court later granted a request to temporarily suspend the program until the lawsuits were resolved. The Supreme Court’s order on Wednesday refused the Biden administration’s emergency request to lift that hold.
That keeps the eight million borrowers who are enrolled in SAVE in a state of financial uncertainty. They don’t know whether the plan’s terms will change, or if the program will survive at all. Many borrowers may find it difficult to plan a monthly budget until the legal challenges are resolved.
Here are some answers to questions borrowers may have.
Does this mean I don’t currently have to make payments?
Borrowers enrolled in SAVE will continue to have their payments frozen until the legal situation changes, the Education Department said on its website.
The pause began in July, after the U.S. Court of Appeals for the Eighth Circuit in St. Louis granted a request by a group of Republican-led states for an administrative stay that blocked the plan.
SAVE participants have been placed in an interest-free forbearance, which means they aren’t required to make any payments and interest will not accrue. But borrowers also won’t receive any payment credits toward the Public Service Loan Forgiveness program, or any of the income-driven repayment plans.
What if I want to continue to make payments?
You can still make payments, and employers can make payments on your behalf, but those will be applied to future bills after the forbearance period ends.
Can I still enroll in SAVE?
Technically, yes. But loan servicers are holding SAVE and all other income-driven repayment plan applications for the moment. The applications essentially come in and sit on the shelf for now, said Scott Buchanan, the executive director of the Student Loan Servicing Alliance, an industry group. That’s because the Education Department needs to ensure that they will be processed correctly, and the legal situation remains fluid.
The future of SAVE — and its terms — depends on how the legal challenges are resolved. As it stands, not all of SAVE’s benefits have been put into effect because of the court orders.
Applications for SAVE and other income-driven repayment plans are temporarily unavailable on StudentAid.gov. But borrowers can still submit a PDF application to their loan servicer by uploading it to the servicer’s website (mail or fax also works). The same applies to loan consolidation applications.
If you apply to SAVE, expect a “lengthy delay” in processing. There are no estimates on how long it may take. The Education Department suggests checking its website for updates.
Can I apply to other income-driven repayment plans?
There are limitations. In addition to SAVE, borrowers can apply to the Income-Based Repayment plan. But that program carries different terms, so you will need to be sure it makes sense for your circumstances.
Enrollments are no longer being accepted for the Pay as You Earn plan, known as PAYE, or the Income-Contingent Repayment plan, called I.C.R., though there are two exceptions:
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You applied to PAYE or I.C.R. before July 1 or between July 18 and Aug. 9.
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Borrowers who applied for a consolidation loan that repaid a parent PLUS loan are also permitted to enroll in I.C.R. (but not PAYE).
Are there any other types of forbearance?
Yes, unfortunately — and that’s led to a lot of confusion. Borrowers will be placed in a “processing forbearance” for up to 60 days if a servicer needs time to process applications. Interest does accrue during that time, but qualifying payments toward Public Service Loan Forgiveness and income-driven repayment plans also count during the period.
If an application is not processed within that window, loans will be moved into a general forbearance in which interest does not accrue and borrowers do not receive credits toward forgiveness.
There’s more! Once an application is processed, borrowers in SAVE may be placed in the forbearance related to ongoing litigation. Loans won’t accrue interest, and payments aren’t credited toward any forgiveness programs.
What happens next?
The federal appeals court for the Eighth Circuit is considering the Biden administration’s appeal to reinstate the plan; it’s expected to act swiftly.
After the appeals court makes its ruling, either or both of the cases brought by the two groups of Republican-led states may return to the Supreme Court, according to Scotusblog, which is written by legal experts who analyze the highest court’s decisions.
For now, the Biden administration said it would “work to minimize further harm and disruption to borrowers as we await a final decision from the Eighth Circuit.”
Borrowers can check StudentAid.gov and the Education Department’s website for updates and more information.