Student loan borrowers filed an amended lawsuit this week against the Education Department and Secretary of Education Linda McMahon, arguing that the department’s decision to deny critical benefits authorized under the SAVE plan and its predecessor, the REPAYE plan, are unlawful. The lawsuit argues that qualifying SAVE plan borrowers should have their student loans forgiven, and they shouldn’t be forced to move into other repayment plans, a process the department is set to begin implementing as soon as next week.
The Education Department is seeking to dismiss the legal challenge, contending that the termination of SAVE and REPAYE are essentially a done deal. Here’s where things stand.
Education Department Set To Force Student Loans Out Of SAVE Plan In July
After two years of legal battles, the Education Department is finalizing its efforts to start forcing borrowers in the SAVE plan to move their student loans into other repayment programs.
SAVE is an income-driven repayment plan established in 2023 under the Biden-Harris administration, intended to be the most affordable IDR option available. SAVE offered lower monthly income-based payments than other IDR programs, as well as multiple pathways to eventual student loan forgiveness. SAVE essentially served as an update and rebrand of the Revised Pay As You Earn (or REPAYE) plan, which was created in 2015. Borrowers who had been in REPAYE were automatically converted to the SAVE plan, while millions of other borrowers applied to enroll in SAVE from other, more expensive income-driven repayment plans.
But a group of Republican-led states filed legal challenges to try to block the SAVE Plan, arguing the program was an unlawful overreach by the Biden administration. The Eighth Circuit Court of Appeals issued an injunction in 2024 blocking the program nationwide, which forced millions of student loans that were enrolled in SAVE into an involuntary forbearance. The forbearance paused payments (and, for a time, interest accrual), but also suspended progress on student loan forgiveness.
The legal challenges ultimately ended last this spring after the Education Department, led by Secretary McMahon, entered into a settlement agreement with the state challengers to terminate both SAVE and REPAYE. The Eighth Circuit ordered the federal district court handling the lawsuit to implement the settlement agreement’s terms in March. Starting in July, the department will begin notifying borrowers in the SAVE plan that they will have 90 days to move their student loans to other repayment plans, or they will be forced into a Standard plan.
Amended Lawsuit Argues That Student Loans Should Be Forgiven Or Moved To REPAYE
In the new amended complaint, the plaintiffs (four student loan borrowers) argue that the Education Department’s handling of the SAVE plan’s termination was unlawful. The lawsuit concedes that Congress authorized the termination of SAVE in legislation passed last year; that legislation also phases out other income-driven plans like PAYE and ICR. But the legislation does not mandate the termination of these three programs until 2028. Because of this, and because there was a period during the litigation when SAVE was not blocked, borrowers who qualify should be able to receive the benefits of the program, such as student loan forgiveness if they reached their 20- or 25-year threshold. And everyone else in SAVE should be moved to the REPAYE plan, not kicked out.
“Based on political expediency and behind the veil of ‘settlement negotiations,’ the Department decided on this course of action long before Missouri v. Trump was resolved and without any form of notice and comment rulemaking or consideration of borrowers’ reliance interests,” says the amended complaint filed on Tuesday. “In effect, the Department’s actions have repealed not only SAVE but its precursor, Revised Pay As You Earn (’REPAYE’), an income-contingent repayment plan that has been in existence for nearly a decade without incident. Presumably based on this “shadow repeal” of REPAYE, Defendants intend to force Plaintiffs and millions of others off REPAYE, and onto less affordable repayment plans.”
“The Missouri Court’s final judgment did not authorize the Department to claw back discharges and buyback credit that had already accrued; it did not prohibit the Department from honoring the restored REPAYE Final Rule; and it did not require the Department to move any borrower off REPAYE onto a different plan – it was silent on all of these issues,” continues the complaint. “Today, the Defendants are pursuing a radical set of actions that do all three.”
“The government is required to grant immediate discharge to borrowers who satisfied the SAVE criteria before vacatur; honor the buyback credit they earned; administer the restored REPAYE Final Rule; and leave borrowers currently in REPAYE enrolled in that plan,” concluded the challengers.
The challengers also filed a request for a preliminary injunction, asking the court to temporarily block the Education Department’s efforts to repeal REPAYE or force student loan borrowers out of the SAVE plan.
Education Department Seeks Dismissal Of Efforts To Move Student Loans To REPAYE Or Grant Loan Forgiveness
The Education Department, however, is seeking a dismissal of the challenge, arguing that it is procedurally deficient and has no merit.
“This Court may not overturn the orders of another federal court,” wrote the department in its motion to dismiss the lawsuit. “That principle is fatal to their case here. Unless the Eastern District of Missouri overturns its past decision (which is unlikely to happen unless the Eighth Circuit changes its mind first), Plaintiffs’ theory of the case is legally unenforceable.”
The challenge was filed in the U.S. District Court for the District of Columbia. The prior lawsuit challenging the SAVE plan that resulted in the settlement that ended the program was in the U.S. District Court for the Eastern District of Missouri.
The department also argues that the court has no power to grant what the challengers are seeking, because the court must rule on the law as it exists today. And the law as it exists today, the department argues, does not authorize the existence of either the SAVE plan or REPAYE, because the regulations governing SAVE and REPAYE have already been effectively repealed following the Missouri court’s entry of the settlement agreement terms in March.
“Plaintiffs seek an injunction to provide prospective relief for an ongoing regulatory violation, but a ‘court must apply the law in effect at the time it renders its decision,’ said the department in its request for a dismissal. “There is no SAVE Plan Final Rule for this Court to enforce, so Plaintiffs’ complaint automatically fails.”
Student Loans Still On Track To Be Forced Out Of SAVE Plan
Student loan borrowers should understand that as of now, there are no indications that the Education Department’s plans to force borrowers out of SAVE are changing. Starting in early July, borrowers will begin to receive notices giving them 90 days to move their student loans to another income-driven plan.
“If you’re a borrower who has loans in forbearance because you enrolled in or applied for the SAVE Plan, you are required to select a new repayment plan,” said the Education Department in online guidance last updated in March. “If you don’t select a new repayment plan, your loan servicer will move you to a different plan.”
“The SAVE court case has now ended,” said Protect Borrowers in a blog post last month. “Late last year, the Trump Administration sold out borrowers in a backroom deal, agreeing to settle the case by agreeing to vacate the SAVE rule. As a result, borrowers can no longer access the SAVE program.”
“Beginning on July 1, 2026, servicers will start sending communications to SAVE borrowers,’” continued Protect Borrowers. “Once borrowers receive that email, they will have 90 days from the receipt of that email to switch into a different payment plan—so borrowers will need to switch starting before late September. If a borrower does not switch plans by then, ED will automatically place them in the current standard plan or the new tiered standard plan. To be clear, borrowers do not need to take any steps until they receive that notice from their servicer.”
Borrowers with student loans in the SAVE plan forbearance may want to monitor the developments in the ongoing lawsuit to restore REPAYE. But unless there is a significant ruling soon, borrowers should plan on having to select a different income-driven repayment plan if they want to maintain access to affordable payments and continue making progress toward eventual student loan forgiveness.
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