Federal Student Loan Repayment Plans Face Legal and Legislative Overhaul

Court rulings and congressional proposals threaten to eliminate key income-driven repayment options and forgiveness programs, potentially raising costs for millions of borrowers.

• The Eighth Circuit Court of Appeals has issued an injunction blocking the SAVE plan and signaling that loan forgiveness under other income-driven repayment (IDR) plans may also be deemed illegal.
• Republican lawmakers are considering replacing current IDR plans with a new system that eliminates forgiveness after 20 or 25 years, potentially leaving lower-income borrowers in lifelong debt.
• If the SAVE plan and other IDR forgiveness programs are struck down, borrowers may need to switch to less generous repayment plans, such as Income-Based Repayment (IBR), which is not currently under legal challenge.
• Proposed changes could lead to significant increases in monthly payments, with estimates suggesting average borrowers could see payments rise by nearly $200 per month under alternative plans.
• The uncertainty impacts over 10 million borrowers currently enrolled in IDR plans, and experts stress that Congress must act to provide clarity and stability in the student loan repayment system.

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