(NEXSTAR) — Despite two federal injunctions handed down last week, millions of student loan borrowers will not have to make a payment on their debt in July.
The one-month forbearance is part of what was intended to be a new phase of benefits for borrowers enrolled in the Saving on a Valuable Education plan, otherwise known as the SAVE plan.
In July, early forgiveness and other benefits were set to take effect for many SAVE borrowers, including recalculating and/or reducing the payments owed by many. As part of that process, impacted borrowers were set to be placed in “a brief processing forbearance” through July. That means they would not have to make a monthly payment and their interest rates would temporarily drop to 0%.
But, when two federal judges handed down two injunctions related to the SAVE program last week, the forbearance appeared to be in jeopardy.
What are the injunctions?
In one ruling, a Kansas judge determined the Education Department cannot enact the full scope of the SAVE Plan because it did not receive authority from Congress. In the other, a Missouri judge ruled the department can’t forgive any loans under the SAVE Plan because it illegally deprives state loan operators of revenue — this ruling did, however, say monthly payments could be lowered.
The determinations do not impact the roughly 400,000 borrowers who have seen over $5.5 billion in debt forgiveness under the plan already. But, for now, the Biden administration cannot forgive any more debt for borrowers on the SAVE Plan, and cannot cut payments for borrowers as planned in July.
Will SAVE program borrowers still get forbearance?
While much of the SAVE program is now on hold, about 3 million enrolled borrowers with non-zero dollar payments will still be placed in forbearance for July.
Borrowers set to benefit from the forbearance will be notified by the Education Department in the coming days, if they haven’t already.
It’s unclear how many borrowers were originally on track to be placed into forbearance. A spokesperson for the Education Department previously told The New York Times the 4.6 million borrowers on the SAVE plan who have $0 monthly payments would not be placed into forbearance.
Following the injuctions, what else is the Education Department doing?
For now, the Education Department is not accepting any online applications to enroll in income-driven repayment programs or loan consolidation while it updates its systems to provide accurate information. The entire process is expected to take between four and six weeks.
Paper applications are, however, still being accepted for income-driven repayment programs and loan consolidation. While applications are reviewed, borrowers will be placed into a forbearance, if they have non-zero payments.
According to the Education Department, “many of the cost-savings provisions of the SAVE Plan remain in effect.”
What happens next?
The orders are preliminary, meaning the injunctions imposed by the judges would remain in effect through a trial of the separate lawsuits. However, to issue a temporary order each judge had to conclude that the states were likely to prevail in a trial.
That also means it’s too soon to say what longer-term impact the injunctions will have on the SAVE Plan.
The White House said it strongly disagrees with the judges’ rulings and would continue to defend the program, and use every available tool to give relief to students and borrowers.
In a statement shared with Nexstar, an Education Department spokesperson echoed those sentiments:
“Republican elected officials continue to fight to block their own constituents from saving money, having their monthly payments cut in half, and receiving relief. President Biden, Vice President Harris, and Secretary Cardona remain committed to fixing a 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 relief, no matter how many times Republican elected officials and their allies try to stop them.”
More than 8 million borrowers have enrolled in the SAVE Plan since it launched last summer.
The Associated Press contributed to this report.