(NEXSTAR) — Millions of student loan borrowers will not have to pay back their debt in July, despite two federal injunctions issued last week.
The one-month grace period is part of what was meant to be a new benefit for borrowers enrolled in the Worthwhile Education Savings Plan (also known as Worthwhile Education Savings). SAVE Plan.
Early release and other benefits in July It was scheduled to come into effect A range of measures will be implemented for many SAVE loan borrowers, including recalculation and reduction of repayment amounts. As part of that process, affected borrowers will be placed on a “short-term moratorium” until July, meaning no monthly payments will be required and interest rates will temporarily drop to 0%.
But the moratorium appeared to be in jeopardy last week after two federal judges issued two injunctions related to the SAVE program.
What is an injunction?
In one case, a Kansas judge ruled that the Department of Education could not enforce the full scope of the SAVE Plan because it did not receive authority from Congress to do so. In another case, a Missouri judge ruled that the Department of Education could not forgive loans under the SAVE Plan because it illegally deprived state lenders of revenue, although the ruling did allow for monthly payment reductions.
The decision does not affect the approximately 400,000 borrowers who have already received more than $5.5 billion in debt forgiveness under the plan. However, at this time, the Biden Administration cannot forgive any more debt for SAVE Plan borrowers or reduce payments to borrowers that were scheduled for July.
Will borrowers in the SAVE program still be able to access forbearance?
While the majority of the SAVE program is currently on hold, roughly 3 million enrolled borrowers whose payments aren’t zero will continue to be in forbearance in July.
Borrowers who are set to benefit from the forbearance measures are expected to receive notice from the Department of Education in the next few days if they have not already done so.
It’s unclear how many borrowers were originally expected to be eligible for forbearance. A Department of Education spokesman previously said The New York Times Among SAVE Plan borrowers, 4.6 million with zero monthly payments are not eligible for payment deferral.
What else is the Department of Education doing in response to this order?
For now, the Ministry of Education Not Accepted The agency will not be accepting online applications to enroll in the Income-Contingent Repayment Program or loan consolidation while it updates its systems to provide accurate information. The entire process is expected to take four to six weeks.
However, paper applications are still being accepted for income-contingent repayment programs and loan consolidation. Borrowers with non-zero outstanding payments will be eligible for forbearance while their applications are being reviewed.
by Education Department“Many of the cost-saving provisions of the SAVE Plan remain in effect.”
What happens next?
The orders are temporary, meaning the judges’ injunctions will remain in place while the individual cases are being heard, but to issue them, the judges had to conclude that each state was likely to prevail at trial.
This also means that it is too early to say what long-term impact the injunction will have on the SAVE plan.
The White House said it strongly disagrees with the judges’ ruling and will continue to defend the program and use all available tools to provide relief to students and borrowers.
In a statement shared with Nexstar, a Department of Education spokesperson echoed similar sentiments.
“Republican elected officials continue to fight to stop their constituents from saving money, cutting their monthly payments in half, and getting relief. President Biden, VP Harris, and Secretary Cardona remain committed to fixing our broken student loan system and making college affordable for more Americans. They will vigorously defend the SAVE Plan, the most affordable repayment plan in history, and will continue to fight for this long-overdue relief, no matter how many times Republican elected officials and their allies try to block it.”
More than 8 million borrowers have enrolled in the SAVE Plan since it launched last summer.
The Associated Press contributed to this report.
