(NEXSTAR) — Despite two federal interim injunctions announced last week that millions of student loan borrowers do not have to repay any debts in July.
The one-month deferment is part of a planned recent benefit phase for borrowers participating in the Saving on a Valuable Education plan, also known as the SAVE plan.
In July: early debt relief and other benefits should come into force for many SAVE borrowers, including recalculating and/or reducing the payments owed by many. As part of this process, affected borrowers should be placed in a “short processing forbearance” through July. This means they will not have to make a monthly payment and their interest rates will temporarily drop to 0%.
But when two federal judges issued two preliminary injunctions related to the SAVE program last week, leniency seemed to be in danger.
What are the interim injunctions?
In A judgmenta judge in Kansas ruled that the Department of Education could not fully implement the SAVE plan because it had not been given authority from Congress. In another case, a judge in Missouri ruled that the department could not forgive loans under the SAVE plan because it illegally deprived state lenders of revenue — but that ruling said monthly payments could be reduced.
The decisions will not affect the roughly 400,000 borrowers who have already had more than $5.5 billion in debt forgiven under the plan. But for now, the Biden administration cannot forgive any more debt to borrowers under the SAVE plan, and Payments for borrowers cannot be reduced as planned in July.
Will borrowers continue to receive a deferral under the SAVE program?
While much of the SAVE program is currently on hold, about 3 million registered borrowers with non-zero payments for July are still eligible for forbearance.
Borrowers who benefit from the deferment will be notified by the Department of Education in the next few days, if they have not already been notified.
It is unclear how many borrowers were originally on track to go into forbearance. A Department of Education spokesperson previously said The New York Times The 4.6 million borrowers in the SAVE plan whose monthly payments are $0 would not be eligible for any forbearance.
What else is the Ministry of Education doing after the injunctions?
Currently, the Ministry of Education not accepting no online applications to enroll in income-driven repayment programs or to consolidate loans while systems are updated to provide exact information. The entire process is expected to take between four and six weeks.
However, paper applications for income-driven repayment programs and loan consolidation will continue to be accepted. While applications are being reviewed, borrowers whose payments are nonzero will be granted a payment deferral.
According to the Education Department“Many of the cost-saving provisions of the SAVE Plan remain in effect.”
What happens next?
The orders are provisional, meaning the injunctions issued by the judges remain in effect while each lawsuit is heard. However, to issue a preliminary injunction, each judge had to conclude that the states were likely to prevail in a trial.
This also means that it is too early to say what longer-term impact the injunctions will have on the SAVE plan.
The White House said it strongly disagrees with the judges’ decision, will continue to defend the program, and will employ every available tool to provide relief to students and borrowers.
In a statement provided to Nexstar, a Department of Education spokesperson reiterated these views:
“Republican officials continue to fight to prevent their own constituents from saving money, cutting their monthly payments in half, and getting aid. President Biden, Vice President Harris, and Secretary Cardona remain committed to fixing the broken student loan system and making college more affordable for more Americans. They will not stop vigorously defending the SAVE Plan, the most affordable repayment plan in history, and will continue to fight for this long-overdue aid, no matter how many times Republican officials and their allies try to stop them.”
Since its launch last summer, more than 8 million borrowers have enrolled in the SAVE plan.
The Associated Press contributed to this report.
