Millions of SAVE Plan-enrolled student loan borrowers will start getting notices on July 1, along with a countdown. Before being automatically transferred to one of the more costly options the government offers, they will have ninety days to choose a new repayment plan. For many borrowers, this change will result in much higher monthly payments. Additionally, some people might have to reimburse money they were informed they had already paid.
Austin Hinkle, managing partner at Public Goods Practice, is working to avoid that circumstance. His company filed a motion in U.S. District Court on the evening of June 23, requesting a judge to halt the forced transfer of SAVE Plan borrowers while a more comprehensive lawsuit against the Department of Education, which was first filed on March 9, proceeds through the legal system. According to the motion, borrowers shouldn’t be forced into the new Tiered Standard Plan or the Standard Repayment Plan, both of which have higher fixed payments. They ought to be transferred to REPAYE, the income-driven plan that initially took the place of SAVE.
This place has something worthwhile to sit with. Many borrowers were forced to abandon REPAYE when they first switched to the SAVE Plan. The president and founder of the Student Debt Crisis Center, Natalia Abrams, put it simply: since borrowers had no choice but to opt out of REPAYE at the time, removing that option completely now feels, in her words, like a matter of fairness.
The Biden administration’s SAVE Plan was widely regarded as the most economical federal repayment option. For enrolled borrowers, it shortened debt relief timelines and decreased monthly payments, according to the National Consumer Law Center. 7.5 million people were using it at its height. The Public Goods Practice SAVE lawsuit directly challenges the Trump administration’s decision to do away with it in March.
Borrowers who do not proactively switch plans will be placed on either the new Tiered Standard Plan, which has repayment windows ranging from 10 to 25 years depending on the loan amount, or the Standard Repayment Plan, which has a 10-year fixed schedule. After July 1, a third option—the Repayment Assistance Plan, or RAP—will be accessible. Although loan forgiveness under it only begins after 30 years of on-time payments and is only available in specific circumstances, it ties monthly payments to 1 to 10 percent of income.
The urgency has been made clear by Hinkle. “Once borrowers start getting transferred over, injuries for lots of borrowers could start to happen right away,” he stated, highlighting the immediate financial burden that increased payments would cause. In a letter to the Department of Education in April, Democratic lawmakers urged the agency to provide borrowers with better information and more time before enforcing any transition.
A portion of the initial lawsuit also raises an issue that is difficult to ignore: borrowers who were on the verge of loan forgiveness under SAVE’s terms and had already made all required payments could be negatively impacted by the transfer, left to pay on a debt they may no longer owe. The language used by Braxton Brewington of the Debt Collective, whose members include the plaintiffs in the lawsuit, is likely to resonate with a number of families who are quietly stretching their budgets. “The federal government should work for working people instead of intentionally forcing millions of American families to make room in their budgets for payments that they cannot afford.”
The Department of Education is advising borrowers to sign up for a repayment option that it deems legal, such as the new RAP, and has contested the legal arguments in the motion. Before borrowers begin receiving transition notices, it is still unclear if the court will approve the motion. For millions of people whose financial futures depend on what transpires in that courtroom, the coming weeks will undoubtedly be crucial.
