SAVE Plan Overturned: The Future of Loan Forgiveness at Risk 

SAVE Plan Overturned: The Future of Loan Forgiveness at Risk

On February 18, 2025, the 8th Circuit Court of Appeals issued a ruling significantly impacting student loan forgiveness under several income-driven repayment (IDR) plans.

In addition to effectively blocking the implementation of the Saving on a Valuable Education (SAVE) plan, this decision expands upon a previous injunction, raising questions about the future of loan forgiveness under other IDR plans.

Key Takeaways from this Ruling

The 8th Circuit upheld the lower court’s ruling on SAVE and broadened its impact to ICR and PAYE plans, declaring that 20- and 25-year forgiveness under ICR, PAYE, and SAVE is unlawful since Congress did not explicitly authorize it.

We’ve been updating our dedicated blog post about the SAVE plan as new breaks. In the meanwhile, here are some key takeaways from this most recent ruling:

1. Majority of SAVE Forgiveness Deemed Likely Illegal

The court found that the $188.8 billion in loan forgiveness granted to 5.3 million borrowers under the SAVE plan exceeds the authority of the U.S. Secretary of Education.

2. Education Secretary’s Authority Questioned

The ruling states that the Secretary does not have unilateral power to erase hundreds of billions in student loan debt.

3. Full Block on SAVE Plan

While some lower court rulings only paused the forgiveness component of SAVE, this orders the entire SAVE plan to be blocked.

4. ICR and PAYE Forgiveness in Jeopardy

The court’s decision enjoins forgiveness under these plans but maintains that borrowers must continue making payments.

5. Department of Education’s Response Pending

The DOE is assessing how this decision will affect IDR plans moving forward.

What This Means for Borrowers

We’ve been following any and all action on the lawsuits against the SAVE Plan since July 2024. Check out our dedicated blog post detailing action borrowers should take. But in short:

• Borrowers enrolled in the SAVE plan remain in forbearance, but don’t expect it to last much longer. DOE cannot justifiably keep borrowers in that status, especially with no interest accrual, now that SAVE has been defeated in the courts.
• Those pursuing Public Service Loan Forgiveness (regardless of which IDR plan you’re on) DO NOT need to switch plans at this time.
• Those expecting IDR (20/25yr) forgiveness under ICR, PAYE, and SAVE plans will need to adjust their repayment strategies in the coming months.
• Forgiveness under the Income-Based Repayment (IBR) plan, which was explicitly created by Congress with a forgiveness component, remains unaffected…for now.
• Monthly payments for some borrowers may increase later this year if they are forced to switch to more expensive repayment plans.
• The age of IDR interest subsidies (DOE slashes some or all of your interest when your monthly payment is less than your monthly interest) is effectively over. This is a major shift in dynamics for many borrowers, particularly medical residents and other APP’s who have more debt than annual income.

What’s Next?

While this is a major ruling, we’re confident more big headlines are coming:

• This case now returns to the lower court for further implementation of the expanded injunction. DOE will need to provide guidance from there.
• Congress is considering legislation that could repeal not only SAVE, but all IDR plans, replacing them with a new structure
• DOE was likely planning to release new guidance on SAVE and other IDR plans unrelated to this ruling.
• Guidance for return-to-payment and IDR recertifications could change.
• And yes, changes have been proposed which impact PSLF directly or indirectly. Don’t panic. We don’t think they will stick!

If you believe these recent changes may be impactful to you, please consider registering for a consultation sooner than later. Graduation season is right around the corner, and our consultation calendar will begin to fill up weeks out. Returning customers click here to complete an abbreviated registration form.

Stay tuned for more updates.