In response to the latest federal court ruling, the U.S. Department of Education released guidance for borrowers enrolled in the Saving on a Valuable Education (SAVE) Plan. Among other provisions, this guidance temporarily places affected borrowers into an interest-free forbearance, meaning that payments and interest have been suspended, likely until the legal challenges are resolved.
The guidance follows a series of conflicting federal circuit court rulings in response to legal challenges to the program initiated by two groups of Republican-led states. The most recent ruling by the 8th Circuit Court of Appeals on July 18 temporarily halted both the program’s loan relief provisions (which aimed to lower borrowers’ monthly payments based on income) and the program’s loan forgiveness provisions (which sought to forgive student loan balances entirely after a certain number of payments) while the court considers a request for a preliminary injunction. If granted, both aspects of the program would remain blocked for the foreseeable future.
