What Can We Expect From Biden’s SAVE Plan?

By: Alexandria Henriquez

Edited by: Samantha yip and Ananya Chag

Over the last 3 years of his presidential term, following through on his campaign promises, Biden has pushed through several executive actions forgiving $146 billion in student debt. [1] The most recent addition to Biden’s student loan forgiveness initiative is the Saving on a Valuable Education (SAVE) Plan, an income-driven repayment (IDR) plan that amends the Revised Pay As You Earn (REPAYE) Plan. Those already holding undergraduate loans under the REPAYE plan will “have their payments reduced from 10% to 5% of their discretionary income,” and those with both undergraduate and graduate loans will pay something in between. By redefining discretionary income, the SAVE Plan also brings many individuals’ monthly loan payments to $0. Finally, borrowers under the SAVE plan will not have their loans grow from unpaid interest, and original loans of $12,000 or smaller will receive full forgiveness after 10 years of repayment. For each additional $1,000 borrowed, the plan adds an additional year of repayment. [2]

The SAVE plan comes as a response to Biden’s previous loan forgiveness plan. In June 2023, the Supreme Court nullified Biden’s federal loan forgiveness plan that would have forgiven up to $10,000 in student loans for Americans with incomes below $125,000 and up to $20,000 for those with Pell Grants. [3] The Biden Administration claims the ability to implement federal student loan forgiveness plans from the Higher Education Relief Opportunities for Students Act of 2003 (HEROES Act), which allows the Secretary of Education to “waive or modify any statutory or regulatory provision applicable to the student financial assistance programs under title IV of the Act as the Secretary deems necessary in connection with a war or other military operation or national emergency.” [4] The statute that the Biden Administration claimed to be modifying, using the HEROES Act, is The Higher Education Act of 1965 (Education Act). The Higher Education Act was originally created to increase accessibility to educational opportunities by developing a federal financial aid program and three types of federal student loans. In Biden v. Nebraska, the Supreme Court found that Biden’s plan to dismiss almost $20,000 of loans for certain borrowers went too far and could not be seen as a “modification.” They found that “the Act allows the Secretary to ‘waive or modify’ existing statutory or regulatory provisions applicable to financial assistance programs under the Education Act, not to rewrite that statute from the ground up.” [5] The court identified that significant loan forgiveness action was taken in response to the COVID–19 pandemic, and the timing of the new program was somewhat suspicious, since “over a year and a half passed with no further action beyond keeping the repayment and interest suspensions in place.” [6] Moreover, the Department of Education announced the waivers and modifications only a few weeks before Biden announced that the “pandemic is over.” [7]

This leaves us wondering whether a similar case or ruling will arise with the new SAVE plan. As of April 2024, eighteen states have filed a lawsuit against Biden, the Department of Education, and Secretary of Education Miguel Cardona to shut down the plan. [8] The two suits, split among the 18 states, argue that the Secretary of Education has overstepped again. However, a key difference between Biden’s recently rejected plan and the new SAVE plan is the SAVE plan’s format as a repayment plan. Nonetheless, its high stakes might provide a reason for the courts to require congressional approval.

Notes:

1. “President Joe Biden Outlines New Plans to Deliver Student Debt Relief to Over 30 Million Americans under the Biden-Harris Administration,” The White House, April 8, 2024, https://www.whitehouse.gov/briefing-room/statements-releases/2024/04/08/president-joe-biden-outlines-new-plans-to-deliver-student-debt-relief-to-over-30-million-americans-under-the-biden-harris-administration/. 

2. “Fact Sheet: The Biden-Harris Administration Launches The Save Plan, the Most Affordable Student Loan Repayment Plan Ever to Lower Monthly Payments for Millions of Borrowers.” The White House, August 22, 2023. https://www.whitehouse.gov/briefing-room/statements-releases/2023/08/22/fact-sheet-the-biden-harris-administration-launches-the-save-plan-the-most-affordable-student-loan-repayment-plan-ever-to-lower-monthly-payments-for-millions-of-borrowers/. 

3. Biden v. Nebraska, 600 U.S. 477, (2023), 2.

4. Higher Education Relief Opportunities For Students Act of 2003, Pub. L. No. 108-76, 117 Stat. 904 (2003).

5. Biden v. Nebraska, 600 U.S. 477, (2023), 12.

6. Biden v. Nebraska, 600 U.S. 477, (2023), 5.

7. Scott Pelley, “President Joe Biden: The 2022 60 Minutes Interview,” CBS News, September 18, 2022, https://www.cbsnews.com/news/president-joe-biden-60-minutes-interview-transcript-2022-09-18/. 

8. Tara Siegel Bernard, “Biden’s Student Loan Repayment Plan Is Being Challenged. Here’s What to Know.” The New York Times, April 13, 2024, https://www.nytimes.com/2024/04/13/business/biden-save-student-loans-courts.html. 

Bibliography:

Biden v. Nebraska, 600 U.S. 477, (2023)

“Fact Sheet: The Biden-Harris Administration Launches The Save Plan, the Most Affordable Student Loan Repayment Plan Ever to Lower Monthly Payments for Millions of Borrowers.” The White House, August 22, 2023. https://www.whitehouse.gov/briefing-room/statements-releases/2023/08/22/fact-sheet-the-biden-harris-administration-launches-the-save-plan-the-most-affordable-student-loan-repayment-plan-ever-to-lower-monthly-payments-for-millions-of-borrowers/. 

Higher Education Relief Opportunities For Students Act of 2003, Pub. L. No. 108-76, 117 Stat. 904, (2003).

Pelley, Scott. “President Joe Biden: The 2022 60 Minutes Interview.” CBS News, September 18, 2022. https://www.cbsnews.com/news/president-joe-biden-60-minutes-interview-transcript-2022-09-18/. 

“President Joe Biden Outlines New Plans to Deliver Student Debt Relief to Over 30 Million Americans under the Biden-Harris Administration,” The White House, April 8, 2024, https://www.whitehouse.gov/briefing-room/statements-releases/2024/04/08/president-joe-biden-outlines-new-plans-to-deliver-student-debt-relief-to-over-30-million-americans-under-the-biden-harris-administration/. 

Bernard, Tara. “Biden’s Student Loan Repayment Plan Is Being Challenged. Here’s What to Know.” The New York Times, April 13, 2024. https://www.nytimes.com/2024/04/13/business/biden-save-student-loans-courts.html.