Your student loan payments may still be cut in half—what borrowers on the SAVE plan need to know

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The news has been a little confusing for student loan borrowers over the past couple of weeks.

Last week, two federal judges blocked President Joe Biden and his administration from moving forward with its plan to forgive more debt and lower monthly payments for student loan borrowers on the Saving on a Valuable Education income-driven repayment plan.

Borrowers were expecting to see their monthly payments drop this month, a move opponents say goes beyond the administration's authority. 

The injunctions, issued by federal judges in Kansas and Missouri, stopped the administration from going ahead with the plan to lower monthly payments to 5% of borrowers' discretionary income from the current 10%. Additionally, the administration had to pause on more loan forgiveness until the courts reached a final decision.

But over the weekend, the Court of Appeals for the Tenth Circuit said the administration can move forward with lowering payments

This decision doesn't dismiss or rule on either of the lawsuits that led to the injunctions, but allows borrowers to still see their monthly payments lowered while the courts work on a ruling. Forgiveness for more SAVE borrowers is still on hold.

Here's what borrowers currently enrolled in SAVE can expect in the meantime.

If you see a lower payment on your statement, pay it

Borrowers who've already enrolled in the SAVE plan will fall into four groups for July's payment, according to the Department of Education:

  • Borrowers who qualify for a $0 monthly payment will continue to have that payment and should have no impact
  • Borrowers who have received a bill for July with the new, lower payment should pay it
  • Borrowers placed in forbearance while their servicer recalculated their monthly payment will have their first payment in August
  • Borrowers placed in forbearance due to the injunctions will also remain in forbearance in July with their new lower payment due in August

Your servicer should be communicating any new payment amounts and due dates directly. ED also encourages borrowers to check their accounts online for the most up-to-date information.

The injunction in the Missouri-based suit prevents the administration from forgiving more debt for borrowers on the SAVE plan and implementing the shorter timeline to forgiveness until the court makes a final decision on the lawsuit either permanently stopping forgiveness or allowing it to proceed.

Borrowers who originally had balances of $12,000 or less would have their loans forgiven after 10 years of payments on the plan, rather than 20 years for undergraduate borrowers with larger balances.

The administration had begun forgiving outstanding debt for these borrowers earlier this year.

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