SAVE's Recent Legal Journey

SAVE's Administrative Stay

In mid-July, the 8th Circuit Court of Appeals granted an administrative stay filed by a handful of Republican-led states, blocking the entirety of the Department of Education's newest income-driven repayment plan, the SAVE plan. I'm not a lawyer, but an administrative stay is "...a court order that pauses the process of an action that is already pending." This stay impacts:

1. Borrowers who were already enrolled in SAVE,
2. Borrowers who recently applied for SAVE, and 
3. Borrowers wanting to apply for SAVE

In response to the administrative stay, the Secretary of the Department of Education stated, "Today's ruling...could have devastating consequences for millions of student loan borrowers crushed by unaffordable monthly payments if it remains in effect." To say he was correct is a severe understatement.

Since then, the Department of Education hasn't been able to:

1. Process monthly SAVE payments
2. Process forgiveness under PSLF who were enrolled in SAVE
3. Reduce monthly SAVE payments as planned (they were supposed to be reduced from 10% to 5% of a borrower's discretionary income for undergrad loans)
4. Accept new SAVE applications from borrowers wanting to enroll in the plan

SAVE's Injunction

Then, in mid-August, the 8th Circuit Court of Appeals issued an injunction against SAVE, replacing the administrative stay. Again, not a lawyer, but an injunction "...is a court order or judgment that prohibits a person or entity from doing something." This has nearly guaranteed that the case will eventually appear before the U.S. Supreme Court, likely later this fall. 

This may sound daunting, but there is some hope for borrowers: while the U.S. Supreme Court leans conservatively, it's much less conservative than the 8th Circuit Court.

Getting back to the injunction, the Biden Administration's top lawyer at the Department of Justice, Solicitor General Elizabeth Prelogar, harshly criticized the court and asked for clarification on its potentially far-reaching impacts based on its language.

Page 9 of the injunction reads: "The Government is, for any borrowers whose loans are governed in whole or in part by the terms of the Improving Income-Driven Repayment for the William D. Ford Federal Direct Loan Program and the Federal Family Education Loan (FFEL) Program, 88 Fed. Reg. 43820, enjoined from any further forgiveness of principal or interest, from not charging borrowers accrued interest, and from further implementing SAVE's payment-threshold provisions. This injunction will remain in effect until further order of this court of the Supreme Court of the United States. The administrative stay is hereby superseded."

In the Department's efforts to clarify, they stated, "The Department therefore believes that the Court did not intend to enjoin either (1) loan forgiveness offered under statutory authorities other than ICR (such as IBR or PSLF) or (2) loan forgiveness offered to borrowers enrolled in previously existing ICR plans."

While they waited for clarification, the Department of Education deactivated the online income-driven repayment (IDR) and online consolidation applications, both of which remain unavailable. Though loan borrowers can submit the paper IDR application to their servicers, servicers have stopped processing them, leaving borrowers stuck between a rock and a hard place at no fault of their own.

Two Words: Motion Denied

As you probably saw coming, in another legal blow to borrowers yesterday, the court denied the Department of Justice's request to clarify the injunction. 

Next stop: the U.S. Supreme Court

This court case, Biden V. Missouri, is listed as Docket 24A173 on the Supreme Court's emergency shadow docket, which "...consists of applications seeking immediate action from the court. Unlike the merits docket, these cases are handled on an expedited basis with limited briefing and no oral argument, and the court often resolves them in unsigned orders with little or no explanation." 

It was submitted to Justice Kavanaugh on August 13th with a request for his response by 4 pm EDT on August 19th, which has obviously since passed. 

Considerations for Borrowers 

Here is how things stand today for the three groups I mentioned at the start of this blog post:

1. Borrowers already enrolled in SAVE: Have recently been placed in administrative forbearance until further notice (likely until November at the earliest). No interest accrues, and no payments will be due. Currently, time spent in this forbearance does not count toward PSLF or IDR forgiveness.
2. Borrowers who recently applied for SAVE: Your application will not be processed until the legal challenges play out, and you'll likely remain on the plan you were on previously OR be placed on the Standard plan.
3. Borrowers wanting to apply for SAVE: While you technically *can* submit a paper IDR application and apply for SAVE, it won't be processed anytime soon. 

To be clear: ANY borrower hoping to switch to a new/different income-driven repayment plan right now *can* submit a paper IDR application to their loan servicer, but it will not be processed for the foreseeable future. The Department of Education is seemingly waiting for the Supreme Court's decision.

Borrowers are truly stuck between a rock and a hard place at no fault of their own. Many of us are crossing our fingers that Brett Kavanaugh (on behalf of the Supreme Court) weighs in on the injunction soon so we know what to expect moving forward. In the meantime, the best thing to do is remain calm and patient.