Student Loan Forgiveness Court Challenges Continue
Last week, the 8th Circuit panel of judges questioned the Biden administration’s authority under the Higher Education Act to grant debt forgiveness in the Saving on a Valuable Education (SAVE) plan.
The SAVE plan has been under a federal injunction since August. Borrowers in the SAVE plan have been placed into an administrative forbearance, and will not be required to make any payments until the court cases play out. Applications for income-driven repayment plans are still available, and borrowers who apply for the SAVE plan will be placed in forbearance.
Supreme Court will Likely Have the Final Ruling over SAVE
The SAVE plan forbearance is expected to last six more months. The Education Department’s latest update has indicated that IBR, ICR, and PAYE applications received before July 1 will be processed soon. The Department also has plans to make PAYE and ICR available to new applicants.
The 8th Circuit hasn’t released its ruling yet on the SAVE plan, but all signs point to the judges striking down the plan. If that happens, the case will likely be appealed to the Supreme Court which will have the final ruling. The Supreme Court struck down the Biden administration’s first attempt at mass debt relief in 2023.
Borrowers Can Now Apply to Separate Joint Consolidation Loans
Married borrowers who wanted to combine their student loan debt could do so through a Joint Spousal Consolidation Loan. The program was designed to make it easier to manage student loan payments, especially if couples had multiple student loan servicers.
However, if the couple divorces, ex-spouses would remain jointly responsible for the entire student loan balance. To address this issue, Congress passed the Joint Consolidation Loan Separation Act (JCLSA) in 2022. But for the past two years, the Education Department didn’t have a process to implement separation.
Two Phases Involved: Requesting and Separating
Last month, the Education Department launched two phases to allow borrowers with joint consolidation loans to separate their loans. Each borrower will need to submit a separate App/Note to the Consolidation Originator to create a new, individual Direct Consolidation Loan for each co-borrower.
Once the separation and re-consolidation are complete, the co-borrowers will no longer have a JCL debt obligation. The Department will also retroactively apply borrower benefits such as PSLF and IDR account adjustment.
If you need assistance with an income-driven repayment application or navigating the Joint Consolidation Loan Separation Application, please contact an IonTuition counselor.