Federal Judge Rejects Trump Administration's Legal Challenge to Student Loan Program
A federal judge has dismissed a legal challenge from the Trump administration that sought to terminate a widely used student loan repayment program. This ruling ensures that millions of borrowers will continue to benefit from lower monthly payments and a faster path to loan forgiveness, marking a temporary victory for student borrowers and consumer advocates.
Court Order Preserves SAVE Plan for Millions
Judge John Ross of the U.S. District Court for the Eastern District of Missouri issued the order on Friday, dismissing the multistate lawsuit that aimed to block the enactment of the Saving on a Valuable Education (SAVE) repayment plan. According to a report by CNBC, this decision removes legal barriers to the program's implementation.
"As of today, not only is there no legal barrier to delivering those rights through the SAVE plan, but the secretary has a legal obligation to do so," said Winston Berkman-Breen, legal director at Protect Borrowers, as cited by CNBC. The Department of Education did not immediately respond to requests for comment regarding the ruling.
Impact on Borrowers and Program Enrollment
More than 7 million student loan borrowers remain enrolled in the SAVE program, according to the Department of Education's fourth-quarter update. During the legal dispute, these borrowers were placed in forbearance, which paused their monthly payments while interest continued to accrue. The court's ruling now allows these borrowers to access the full benefits of the program, at least temporarily.
The SAVE plan, introduced in 2023 under the Biden administration, has been described as "the most affordable repayment plan ever created." One of its key features is a significantly faster timeline to forgiveness compared to traditional income-driven repayment plans, which typically require 20 to 25 years of payments.
How the SAVE Plan Works for Borrowers
The SAVE program offers several important benefits to student loan borrowers:
- Faster Loan Forgiveness: Borrowers who originally took out $12,000 or less in loans could see their debt forgiven after just 10 years of payments. For higher loan balances, repayment periods increase incrementally—up to 20 years for undergraduate loans and 25 years for graduate loans.
- Income-Based Payments: Monthly payments are capped at 10% of discretionary income and were scheduled to drop to 5% in 2024. Borrowers at or below the federal poverty level can qualify for $0 monthly payments.
- Interest Protection: The plan includes a waiver of interest that accrues when the amount owed exceeds the monthly payment made by the borrower. This ensures individuals won't be required to pay more than they can afford, even if their debt increases due to interest accumulation.
For example, an undergraduate borrower with a $15,000 loan balance would need to make payments for approximately 13 years to qualify for forgiveness under the SAVE plan.
Future Uncertainty and Political Context
Despite the court's favorable ruling, the future of the SAVE program remains uncertain. The Trump administration has proposed phasing out the program by July 1, 2028, as outlined in legislation referred to as the "big beautiful bill." This means the relief provided by the court's decision may be temporary, setting the stage for continued political and legal battles over student loan policies.
The dismissal of this legal challenge represents a significant development in the ongoing debate over student debt relief in the United States, affecting millions of Americans burdened by educational loans.
