A major repayment plan for millions of student-loan borrowers is once again blocked.
On Thursday, the 8th Circuit Court of Appeals ruled that the SAVE plan, intended to lower borrowers’ monthly payments and give many of them a shorter timeline for loan forgiveness, cannot be implemented as the legal process continues.
It follows a series of legal challenges to the plan. Earlier this year, two separate groups of GOP state attorneys general filed lawsuits to block the SAVE plan, and at the end of June, two federal courts placed preliminary injunctions on the plan.
However, just days later, the 10th Circuit appeals court granted the Biden administration’s request to stay one of the rulings, allowing provisions that were set to go into effect in July — including cheaper payments — to move forward.
Thursday’s ruling from the 8th Circuit blocked all provisions of SAVE in a one-sentence ruling: “Appellants’ emergency motion for an administrative stay prohibiting the appellees from implementing or acting pursuant to the Final Rule until this Court rules on the appellants’ motion for an injunction pending appeal is granted.”
The Education Department did not immediately respond to a request for comment from Business Insider on what this ruling will mean for borrowers.
Thursday’s ruling was in response to the lawsuit led by Missouri’s attorney general. Kansas is leading the other lawsuit to block SAVE, which it has requested the Supreme Court take on. SCOTUS has not yet said if it will.
However, the Education Department recently filed a response to the Supreme Court detailing the steps the department and borrowers would be forced to take should the SAVE plan be blocked. Solicitor General Elizabeth Prelogar wrote that if the plan cannot be carried out, the department must put borrowers on forbearance as they recalculate new payments.
“Many have already received bills that reflect the decrease in monthly payments to 5% of their discretionary income,” she wrote. “Many would experience intense confusion when they are told that their payments must be recalculated and that they must be placed in forbearance — which would delay any eventual loan forgiveness.”
The back-and-forth rulings have already prompted payment delays and confusion among borrowers. After the 10th circuit allowed SAVE’s June provisions to move forward, the Education Department moved to direct servicers to begin processing the new, lower payments for borrowers. The department also clarified at the time that due to the lawsuits, payments will not become due until July or August.
That timeline is now in flux, and borrowers will once again be waiting for clarity on the status of their payments and what will happen to their SAVE benefits now that the plan is blocked.
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