Update on Lawsuits Challenging the SAVE Plan and Options for Borrowers

January 07, 2025

Last spring, Missouri and several other states filed lawsuits challenging the U.S. Department of Education’s efforts to reduce student loan burdens through the new SAVE repayment plan. These lawsuits are ongoing and there are no financial decisions yet. But the lawsuits have already resulted in a series of changing court orders temporarily barring the Department of Education from offering key SAVE plan benefits. As a result, borrowers’ options to manage their loans have changed repeatedly and often quite suddenly. This has been frustrating and confusing for people trying to manage their loans.

In this post, we first explain where things currently stand for student loan borrowers as of January 7, 2025, and what options are available to borrowers. For those who want a deeper dive, we then provide background about the SAVE plan and the lawsuits challenging it. Because the litigation is ongoing and the situation will continue to change for borrowers, borrowers should check the Department of Education’s website for the most up-to-date information.

The SAVE plan is the newest income-driven repayment plan for federal student loans, created by the Biden Administration in 2023. For most borrowers, SAVE offers lower monthly payment amounts than other plans, prevents loan balances from growing so long as borrowers make their required payments, and reduces the amount of interest that borrowers will pay. It also shortens the number of years some borrowers need to make payments. Parts of the SAVE plan went into effect in the summer of 2023, and all of it was scheduled to go into effect on July 1, 2024, though many aspects of SAVE have been temporarily blocked by court order.

Where Do Things Currently Stand for Borrowers Enrolled in SAVE?

The SAVE Forbearance

Following a court order in August 2024 temporarily blocking the Department of Education from offering borrowers lower payments and other benefits through the SAVE plan, the Department of Education placed all borrowers who had already enrolled in SAVE in the “SAVE forbearance.”

The SAVE forbearance temporarily pauses billing and payments for borrowers enrolled in SAVE. Borrowers will not be charged interest while in the SAVE forbearance. We do not know how long the SAVE forbearance will last, as it will likely depend on the litigation and how the Department of Education responds to it, but in December the Department said they expect it to last for six more months or longer.

Here are key facts about the SAVE forbearance:

All borrowers who were approved for enrollment in SAVE should have been placed automatically in the SAVE forbearance. Borrowers cannot opt out of the forbearance.
Borrowers in the SAVE forbearance are not required to make payments and will not be charged interest for as long as the SAVE forbearance remains in effect.
Borrowers in the SAVE plan are not required to recertify their income while the SAVE forbearance is in effect.
Time spent in the SAVE forbearance does not count as qualifying time towards having loans eventually canceled through IDR or Public Service Loan Forgiveness (PSLF). This means borrowers in the SAVE forbearance are currently missing out on making progress toward becoming debt-free in those programs.

How Can Borrowers in the SAVE Forbearance Make Progress Toward Public Service Loan Forgiveness (PSLF) or IDR Cancellation Now?

Many borrowers in the SAVE forbearance are concerned about missing out on making progress toward having their loans canceled through PSLF (which offers cancellation after 10 years of qualifying payments while working in public service) or IDR (which offers cancellation after 10-25 years of qualifying payments in IDR plans).

The Department has said that borrowers in the SAVE forbearance cannot earn credit toward PSLF or IDR cancellation by opting out of the forbearance or simply continuing to make payments in SAVE. (The Department says that any payments borrowers in the SAVE forbearance make during the forbearance will simply be applied to the borrower’s future bills.)

Instead, the Department has said there are currently only two ways borrowers currently in the SAVE forbearance can earn credit toward PSLF or IDR cancellation:

1. Switch to a different, eligible repayment plan

Borrowers in the SAVE forbearance can apply to switch to a different, qualifying repayment plan that will allow them to continue making payments and earning credit toward loan cancellation in PSLF or IDR. Payments in any income-driven repayment plan or the 10-year standard plan are considered qualifying payments toward PSLF or IDR cancellation.

This fall, income-based repayment (IBR) was the only IDR option available for borrowers to switch into from SAVE. However, on December 18, 2024, the Department of Education announced that borrowers in SAVE can now switch to two additional IDR plans in addition to IBR: Pay As You Earn (PAYE) or Income-Contingent Repayment (ICR) – if they meet the eligibility requirements for those plans. The Department had previously closed PAYE and ICR to most new enrollments, but reopened the plans to give borrowers more options with SAVE under threat. Borrowers can apply for these IDR plans online here.

Unfortunately, for most borrowers, monthly payments will be much higher in PAYE, IBR, or ICR than in SAVE. Additionally, not all borrowers are eligible for each of these plans. Finally, while borrowers can now apply to switch to these plans, there will be delays in actually having their applications processed. IDR application processing was paused in August as a result of the court orders, and as of January 7 processing has not yet fully resumed. The Department has indicated that processing will resume soon, but borrowers should still expect lengthy delays as servicers catch up on a backlog of applications.

2. Request to Buy Back Credit in PSLF or IDR

Another option for borrowers in the SAVE forbearance is to request to “buy back” credit toward PSLF or IDR cancellation for time in the forbearance. New rules allow borrowers to “buy back” certain months that did not count towards PSLF or IDR cancellation by arranging to pay the amounts that the borrower would have needed to pay during those months under an eligible plan.

The PSLF buy back process is new and is still getting up and running. Right now, the PSLF “buy back” process is only available to borrowers who already have 120 months of eligible employment while in repayment, and whose use of the buy back process to get credit for time in the SAVE forbearance (or other forbearances) will complete their total 120 qualifying PSLF payments needed to reach forgiveness. So only a small number of borrowers are able to use the PSLF buy back process right now. Additionally, it is not entirely clear how the Department will calculate how much borrowers will owe under the buy back process for months the borrower was in the SAVE forbearance. For more information about how to “buy back” credit toward PSLF, see the student aid website.

The IDR buy back process is not yet available at all. The rules allowing borrowers to buy back IDR credit are new and haven’t yet been implemented—meaning there is a plan, but not yet an available process for borrowers to buy back credit towards IDR cancellation. We do not know when the process will be available to borrowers. Additionally, the IDR buy back credit process is part of the same rules that are being challenged in the SAVE litigation; it is therefore at risk from the SAVE lawsuits as well. All of this means that borrowers cannot currently use or count on the IDR buy back process to get credit toward IDR cancellation.

Where Do Things Currently Stand for Borrowers Not Already Enrolled in SAVE?

Payments Continue for Borrowers Enrolled In Other IDR Plans

Borrowers in the other IDR plans (ICR, IBR, and PAYE) are NOT part of the SAVE forbearance and should plan to continue making their regular payments.

Borrowers enrolled in ICR, IBR, or PAYE have until at least February 1, 2025 to recertify their income to stay enrolled in their plan (if they have not already done so following the payment pause). Recertification deadlines vary, and many borrowers will have recertification dates that are later in 2025 or as late as January 2026 – contact your servicer to find out your deadline to recertify to remain in your payment plan.

Borrowers That Want to Enroll in SAVE May Apply But Will Face Delays and Uncertainty

Borrowers who are not yet enrolled in SAVE may still apply for the SAVE plan. Borrowers can apply online here. However, for now, their applications will not be processed and will be put on hold as a result of the litigation.

While a borrower’s SAVE application is on hold, the Department has stated that its loan servicers should place the borrowers’ loans in forbearance. The terms of the forbearance are complicated:

Processing forbearance: The Department states that servicers should first place borrowers who apply for SAVE or other IDR plans in a “processing forbearance” of up to 60 days while the servicer processes the application. During the processing forbearance, borrowers will not have to make payments and will earn qualifying payment credit toward IDR or PSLF cancellation, but will be charged interest.
General forbearance: After 60 days, if the servicer has not finished processing the application or has placed it on hold, then the servicer should put the borrower into a “general forbearance” until the application is fully processed. During this general forbearance, borrowers will not have to make payments and will not be charged interest. However, they will not earn qualifying payment credit toward IDR or PSLF cancellation during this time.

For the most up-to-date information from the Department of Education, borrowers should check their website.

Further Reading: Background About The SAVE Regulations and the Lawsuits Challenging Them

The SAVE Regulations

In July 2023, the Department published final rules that changed portions of the existing Income-Driven Repayment (IDR) regulations and replaced the old REPAYE plan with a new, more affordable plan, SAVE. Later that month, the Department partially implemented the SAVE plan and put the following provisions into effect:

Substantially lowering monthly payments by increasing the amount of income excluded when the Department calculates a borrower’s monthly payments based on income;
Not charging any borrower enrolled in the SAVE plan interest that isn’t covered by their monthly payment–an important reform to ensure borrowers’ loan balances don’t go up even as borrowers make payments;
No longer counting spousal income for married borrowers who file their taxes separately in the SAVE plan (making it the same as the other IDR plans).

At the same time, the Department transferred all borrowers who were enrolled in REPAYE into SAVE, and allowed other borrowers to begin enrolling in SAVE.

In February 2024, the Department began implementing another portion of the SAVE plan that shortened the number of years some borrowers need to make payments to as few as 10 years of payments, and canceled 153,000 borrowers’ loans.

On July 1, 2024, the rest of the regulations were scheduled to go into effect. Those provisions included:

Reducing monthly payments by half–from 10% of income to 5% of income–for loans that paid for a borrower’s undergraduate education on the SAVE plan;
Providing new options to allow borrowers to share their tax income with the Department of Education so that it is easier to enroll and stay enrolled in any income driven repayment plan without having to fill out a paper application;
Stopping interest capitalization when borrowers leave the ICR, PAYE, or SAVE plans;
Streamlining and improving aspects of all of the income driven repayment plans, like providing a common “family size” definition and providing credit for time spent in specific forbearances and deferments;
Allowing borrowers to keep credit towards IDR cancellation for payments made before they consolidated their loans.

The Lawsuits Seeking to Block the SAVE Plan

In Spring 2024, over half a year after the Department began implementing portions of the SAVE plan, two groups of state attorneys general filed lawsuits challenging the regulations that created the SAVE plan:

Eleven states, led by Kansas, filed suit in Kansas federal court.
Six states, led by Missouri, filed suit in Missouri federal court.

Many of the states challenging the SAVE plan had also challenged President Biden’s student loan cancellation plan, which was struck down by the Supreme Court in June 2023. In particular, Missouri argued that it should be allowed to challenge the SAVE plan, just as it had been allowed to challenge the cancellation plan, because it would reduce the number of people in student loan debt and thus reduce the amount of money that its state-affiliated loan servicer, MOHELA, earned from government servicing contracts.

In challenging the SAVE plan, the states argued that the plan is too generous to borrowers and that the Department of Education lacks authority to create a plan with payments this low, or to promise loan forgiveness after even 20 or 25 years of payments. These lawsuits surprised many people familiar with the student loan system, as Congress ordered the Department of Education to create payment plans based on borrower income 30 years ago and every presidential administration since has created or continued to offer similar plans.

The states challenging the SAVE plan asked the court for a preliminary injunction ordering the Department of Education to stop applying the SAVE regulations while the lawsuits are ongoing. This has already resulted in a number of conflicting and changing court orders temporarily blocking different parts of the plan as well as other portions of the rules applicable to ICR and PAYE. This has caused tremendous disruption and confusion for borrowers.

There have been no final decisions yet. We anticipate that as this litigation continues, there may be more orders that create more upheaval. Additionally, there has recently been reporting that the Republican majority in Congress is considering permanently blocking the SAVE plan.

To follow the SAVE litigation, you may use the links below to track the court dockets: