Written by 08:23 Business

Student Loan Payments Paused for 3 Million Enrolled in SAVE Plan

Roughly three million borrowers with federal student loans will see their monthly payments paused in the coming days, as the Biden administration tries to recalculate their bills to comply with a federal court order in Kansas.

The recalculations are necessary because key parts of President Biden’s new student loan repayment program, SAVE, were temporarily blocked by two federal judges on Monday, just a week before many borrowers’ payments were scheduled to be reduced by as much as half.

The judges, in Kansas and Missouri, issued separate preliminary injunctions this week, leaving the SAVE plan’s eight million enrollees in limbo until lawsuits, filed in the spring by two groups of Republican-led states seeking to topple the program, are resolved. The Justice Department recently filed a request on behalf of the Education Department to stop the Kansas injunction.

“If the injunction takes effect,” the filing said, “it will inflict irreparable harm on the federal government in the form of unrecoverable disruption costs and create extraordinary confusion and chaos for borrowers.”

The injunctions affect enrollees in SAVE, which bases their payment amount on their income and household size, in two ways. The Kansas order suspended parts of the program that were not already in place, including a big drop in monthly payments for people with undergraduate debt — to 5 percent of their discretionary income from 10 percent — which was to take effect this Monday. The judge in Missouri blocked any new debt cancellation achieved through the SAVE program, though legal experts say it wasn’t entirely clear how widely that provision should be interpreted.

Now, about three million borrowers who have monthly payments in SAVE will be placed in forbearance, putting their bills on hold.

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Last modified: 2 July 2024
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