Since 2021, the Biden administration has forgiven $138 billion in student loans for 3.9 million borrowers. The Administration announced on February 21 that another category of borrowers would have their loans forgiven by the end of the month. This $1.2 billion tranche of debt forgiveness for 153,000 borrowers is the result of the acceleration by the U.S. Education Department (ED) of its new Saving on a Valuable Education (SAVE) repayment plan. Most, but not all, provisions of SAVE went into effect last August, but, before the ED decided to kick it off early, this provision wasn’t due to be implemented until this coming July.

According to Katherine Knott of Inside Higher Education (February 22, 2024): “Student debt relief advocates praised Wednesday’s announcement and urged the department to keep the relief coming.”

Since the ED began rolling out SAVE last August, 7.5 million borrowers have registered and 4.3 million have obtained total loan forgiveness. Additional elements of SAVE will go into effect this summer that will lower or eliminate payments for more borrowers. Their final form has not yet been fully defined. The ED has been working with a panel of experts and the public to finalize them.

SAVE Replaces the REPAYE Plan

SAVE is a voluntary Income-Driven Repayment Plan (IDRP) that bases monthly loan payments on the borrower’s earnings and other factors.  It replaced REPAYE, the previous IDRP that had been in place since in 2015.

SAVE includes provisions that protect a certain amount of income from the calculation of monthly payments. Individuals with less than $32,800 in annual income or less than $67,500 for a family of four who have been making payments for 10 years do not need to make any more payments. These income levels represent 225% and 150% of the Federal poverty line, respectively.

REPAYE required borrowers to pay at least 10% of their discretionary income each month. Under SAVE, income-driven repayments for undergraduate loans are set to be no more than 5% of discretionary income.

Under the SAVE Plan, married couples who file income taxes separately will have their monthly debt payments calculated according to the income of the borrower only. This change also removes the need for the spouse to cosign a SAVE application, resulting in a simpler application process.

If a SAVE borrower makes a monthly payment but it isn’t enough to cover accrued interest, SAVE covers the rest of the interest for that month. This means that the SAVE plan prevents debt balances from ballooning due to unpaid interest.

Judicial Status of Debt Forgiveness Programs

The Administration’s student debt relief has elicited praise and frustration. Activists have applauded the use of existing debt relief programs and expanding them to cover more borrowers. At the same time, they implore Biden to do more to make up for the unexpected defeat of the Administration’s sweeping $400 billion debt forgiveness plan by the Supreme Court in July 2023 (Biden v. Nebraska).

The Court’s majority opinion cited the Major Questions Doctrine as the basis for the ruling. This Court adopted its own broad version of this doctrine in 2022 in West Virginia v. EPA. Legal scholars have criticized their interpretation by arguing that the doctrine is a symptom of judicial self-aggrandizement, that it is inconsistent with constitutional textualism and originalism, and that it ignores the normal tools of statutory interpretation.

Professor Mila Sohoni of the Harvard Law Review summarized the Court’s transition in major questions case law as follows; “The first crucial thing to understand about the major questions doctrine is what it did to administrative law. While ostensibly applying existing major questions case law, the Court in actuality altered the doctrine of judicial review of agency action in its method and content, in ways that will have momentous consequences.” This Court’s singular interpretation of the doctrine is likely to be in effect while the Court remains as currently composed and a Democrat is head of the Executive Branch.

 Defining Financial Hardship

 Since the Supreme Court’s decision in July 2023, the Biden Administration has been trying to craft other plans to provide debt relief to borrowers. Specifically, the Administration has been taking steps to extend debt relief to more borrowers experiencing hardship.

Defining hardship was the major point of discussion during meetings of a panel of higher education experts convened last fall by the ED to make recommendations. The original panel failed to produce a plan before being disbanded in December.

A successor panel was convened this year and members of the public were invited to participate. In an article in the Washington Post, education writer Danielle Douglas-Gabriel reported that, “A source familiar with the panel said it discussed the specific circumstances or characteristics of borrowers who could receive loan forgiveness under the hardship category. The department is working to identify pathways to debt relief for as many borrowers as possible without  running afoul of the Supreme Court.”

The ED’s proposal identified additional categories of borrowers for relief under SAVE:

  • Borrowers who attended career training programs that led to high debt,
  • Borrowers who are eligible for a forgiveness program but never applied, and
  • Borrowers who attended schools with high default rates or that consistently left students with unaffordable debt.

 In February, the second panel of experts agreed with the ED on some, but not all, of these categories. The ED announced that it is writing rules covering all matters discussed by the panel. It will move ahead on the modifications that the panel agreed upon unanimously but will develop its own solutions for those upon which the panel was divided.

Further Improvements Sought By Debt Forgiveness Advocates

In late February, Senator Elizabeth Warren led a group of congressional Democrats in urging ED Secretary Miguel Cardona to accept their recommendations for inclusion in the final definition of hardship.  They released a letter stating, “SAVE is a significant opportunity to cancel as much debt as possible for Americans getting crushed by student loans, including low-income borrowers, those doubling up on loans to pay for their kids’ educations, and borrowers who have been hit by unexpected economic blows.”

Senator Warren’s letter requests that borrowers experiencing additional categories of hardship be made eligible for debt relief under SAVE:

  • Borrowers with outstanding balances on their own college loans who have taken out loans to pay for the college education of their children,
  • Families of four with incomes below 300% of the Federal poverty line will have that amount excluded from the calculation of monthly debt payments. Other borrowers will also have their multiple of the poverty level increased.
  • Borrowers who have experienced large unexpected financial losses that are to be defined in SAVE, and
  • Borrowers eligibility for forgiveness based on the amount originally borrowed should be raised from $12,000 to a higher amount.

Senator Warren and her colleagues join a growing number of student advocate groups who are calling for further improvements in SAVE. A week before the Warren letter, 60 national advocate organizations wrote to the ED Secretary to urge that the hardship category be redefined to include a much larger subset of borrowers.