Republican Senators Introduce Bill to Block Biden’s SAVE Plan for Student Loans
After the Supreme Court blocked President Biden’s initial plan of forgiving up to $20,000 in student loan debt per borrower, the administration rolled out several other initiatives aimed at helping federal student loan borrowers. The most significant of these is a new income-driven repayment plan known as the Savings on a Valuable Education or SAVE plan.
Challenges for the SAVE Plan
While the SAVE plan has officially launched on the Department of Education’s website, that doesn’t mean it’s without challenges, and a big one was just revealed.
Republican Senators Introduce Bill
Just this past week, a group of Republican senators introduced a bill that would block the SAVE plan from being used to lower borrowers’ monthly payments and create an easier path to loan forgiveness for some borrowers. Here’s what we know so far, and what to watch.
Why are lawmakers seeking to block the SAVE plan?
In a nutshell, the bill that aims to overturn the SAVE plan claims that creating the plan is an overreach of presidential authority. It argues that it creates a burden on taxpayers, as 87% of Americans don’t have student loans.
To be fair, the SAVE plan is likely to be rather costly to U.S. taxpayers. One of the most significant provisions is that the government forgives any unpaid interest that accumulates on student loan accounts, while other income-driven plans add it to the borrower’s balance. Plus, with the plan significantly reducing monthly payment requirements for virtually all borrowers, and with any remaining balance forgiven after 20 or 25 years in repayment, it’s safe to say that this could result in higher forgiven balances down the road. A press release by the House Education and the Workforce Committee claims that the SAVE plan will pass $559 billion in student debt to taxpayers.
On the other hand, after a three-and-a-half-year payment pause and about $1.7 trillion in federal student debt outstanding, it’s also fair to say that resuming student loan payments will be a significant financial burden to millions of American families, and that’s what the SAVE plan aims to help.
What happens next?
The bill introduced by the group of Republican senators is using the Congressional Review Act to attempt to fast-track their bill. And it’s also worth noting that House Republicans have also introduced a companion bill that also seeks to block the SAVE plan.
To be sure, a president creating or modifying an income-driven repayment plan through executive action isn’t without precedent. In fact, President Obama created the Revised Pay as You Earn, or REPAYE, plan through executive action in 2014. It became the most widely used income-driven plan in the years after it was implemented. And SAVE is being created to replace the REPAYE plan. Plus, another of the Biden administrations’ relief efforts to fix the income-driven repayment loan forgiveness program was recently challenged by Republican lawmakers, and the challenge was dismissed in court. Roughly 800,000 borrowers are receiving $39 billion in forgiveness because of it.
The bottom line is that there’s no way to predict what will happen with the bill. For the time being, the SAVE plan is still implemented and enrolling student loan borrowers. But we should know more in the coming weeks as student loan payments are set to come due in October, millions of which are set to be calculated under the SAVE plan.