Kamal Ghorui
A federal judge has dismissed a legal challenge from the Trump administration aimed at ending a widely used student loan repayment program, ensuring that millions of borrowers continue to benefit from lower monthly payments and a faster path to loan forgiveness. The ruling marks a temporary victory for student borrowers and consumer advocates alike.Judge John Ross of the U.S. District Court for the Eastern District of Missouri issued the order on Friday, dismissing the multistate lawsuit that sought to block the enactment of the Saving on a Valuable Education (SAVE) repayment plan, according to a report by CNBC.Millions of Borrowers AffectedMore than 7 million student loan borrowers remain enrolled in the SAVE program, the Department of Education reported in its fourth-quarter update. During the legal dispute, these borrowers were placed in forbearance, pausing monthly payments while interest continued to accrue. The court’s ruling now allows these borrowers to access the full benefits of the program, at least for the time being.“As of today, not only is there no legal barrier to delivering those rights through the SAVE plan, but the secretary has a legal obligation to do so,” said Winston Berkman-Breen, legal director at Protect Borrowers, as cited by CNBC. The Department of Education did not immediately respond to requests for comment.How the SAVE Plan WorksIntroduced in 2023 under the Biden administration, the SAVE plan was billed as “the most affordable repayment plan ever created.” One of its key features is a faster timeline to forgiveness compared to traditional income-driven repayment plans, which typically take 20 to 25 years. Under SAVE, borrowers who originally took out $12,000 or less in loans could see their debt forgiven after just 10 years of payments, with repayment periods increasing incrementally for higher loan balances—up to 20 years for undergraduate loans and 25 years for graduate loans.For example, an undergraduate borrower with a $15,000 loan balance would need to make payments for 13 years to qualify for forgiveness. Monthly payments were capped at 10% of discretionary income and scheduled to drop to 5% in 2024. Borrowers at or below the federal poverty level could qualify for $0 monthly payments.Interest Cap Offers Additional ReliefThe other important aspect of SAVE is the waiver of interest that accrues when the amount owed by the borrower is more than the monthly payment made by the individual. This means that the individual will not be required to pay more than the actual amount that they can afford, even if the amount owed increases due to the accrual of interest.Although the court’s decision provides relief to the individuals, it is likely to be only for a short period. This is because the Trump administration has also proposed a plan, as outlined in the so-called “big beautiful bill,” to phase out the SAVE program by July 1, 2028.
