This blog post explains the legal implications of recent court orders in ongoing lawsuits challenging the SAVE plan. For what this means for borrowers, see Part 2 here.
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; 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 suddenly multiple times. This has been frustrating and confusing for people trying to manage their loans.
In this post, we explain where things stand as of March 20, 2025 in the SAVE litigation. For those who want more information, we then provide additional background about the SAVE plan and the lawsuits challenging it. In Part 2, we break down exactly what the recent court orders mean for student loan borrowers.
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.
What is the latest in the litigation challenging the SAVE plan?
In February 2025, the Eighth Circuit Court of Appeals affirmed a district court’s order preliminarily enjoining (i.e., temporarily blocking) the Department of Education from providing loan cancellation to borrowers enrolled in the SAVE plan who had reached the end of their repayment term by making 10 to 25 years of qualifying payments (with the applicable number of years dependant on the size of the borrower’s loan and whether they borrowed for graduate school). The Eighth Circuit also instructed the lower court to expand the scope of the preliminary injunction to block the “entire SAVE Rule,” not just the cancellation provided through the SAVE plan.
It is not clear whether the Eight Circuit’s order only blocks the SAVE plan, or whether it blocks the entire set of income-driven repayment rules that the Department of Education adopted in 2023 that included the SAVE plan. The Department of Education has not yet stated how it interprets the order. As a result, there is uncertainty about whether other aspects of the 2023 rules are blocked, including provisions that protect borrowers from losing credit for all of their prior payments towards IDR cancellation when they consolidate their loans, provisions changing how payments are calculated for borrowers who file taxes as Married Filing Separately across all IDR plans, and changes that reduce burdens on borrowers and unnecessary defaults by simplifying recertification and enrolling borrowers who fall behind on standard plan payments in IDR plans.
The Eighth Circuit did not provide a final decision on the legality of the SAVE plan. It only decided whether the Department can offer borrowers the benefits of the SAVE plan while the plan is being challenged in court. The case now returns to the district court to continue.
How has the Department of Education responded to the new court decision?
In response to Eighth Circuit’s February order, the Department of Education has temporarily suspended access to all income-driven repayment (IDR) plans, including the Income-Based Repayment (IBR) plan, Pay As You Earn (PAYE) plan, Income-Contingent Repayment (ICR) plan, and the SAVE plan. It has done so by suspending the online income-driven repayment application, removing links to the paper/PDF IDR application, and by pausing processing of all IDR applications, including the applications that had been submitted before February but had not yet been processed.
This means that borrowers cannot currently enroll in any of the IDR plans. Additionally, it means that borrowers already enrolled in IDR cannot switch from one IDR plan to another, or complete their annual recertification of their income needed to keep their payments affordable in their plan. This is causing tremendous frustration, fear, and financial problems for borrowers.
The Department has also temporarily removed its online application to consolidate loans, though paper/PDF consolidation applications are still available on its website. Borrowers may find that if they are seeking to consolidate and repay their new consolidation loan via IDR, that they cannot have their applications processed right now and cannot get into IDR. Additionally, there is some risk that borrowers that do consolidate may lose any IDR-qualifying time that they earned on their loans before consolidation.
For more information about how the Court order impacts borrowers, visit Part 2 here.
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:
Missouri case:
- Eastern District of Missouri Court Docket
- 8th Circuit Court of Appeals Docket
- US Supreme Court Docket on the Missouri Case
