The Department of Education is reportedly pausing repayments for around 3 million student loan borrowers.
The pause comes as the White House defends its new repayment plan against a spate of GOP-backed lawsuits, CNBC reported Sunday (June 30). Enrollees in the Saving on a Valuable Education, or SAVE plan, and have a monthly payment above $0 will not owe anything for now, the Education Department told the network.
The SAVE plan lets borrowers pay just 5% of their discretionary income to repay their student loans each month. People who make $32,800 or less have a $0 monthly payment. The program also expedites the timeline after which many borrowers’ debts are fully canceled.
However, last week saw federal judges in Kansas and Missouri temporarily halt major parts of SAVE, after a group of Republican-led states filed suit arguing the White House was overstepping its authority and trying to find a way to forgive student debt after the Supreme Court blocked the Biden administration’s efforts last year.
Despite the court ruling, the Department of Education has continued to cancel debt for borrowers, including another 160,000 last month: members of the SAVE plan, public service workers like teachers and nurses, or borrowers who were approved for relief because of fixes the department made to its Income-Driven Repayment program.
Also in May, the government forgave $6.1 billion in loans for graduates of the Art Institutes, saying those people were misled by the now defunct chain of for-profit arts schools.
In April, the administration announced a plan that would cancel the debt for 30 million borrowers, a group that includes people who owe more now than when they started repayments due to interest, borrowers who entered repayment 20 or more years ago, students who attended schools that “failed accountability measures or failed to provide enrollees with sufficient financial value,” and borrowers dealing with financial hardships.
These debt cancellation efforts come as consumers are facing increased pressures. As PYMNTS’ Karen Webster wrote in a recent column — with a nod to PYMNTS Intelligence research, corroborated by government stats on retail sales and sentiment — “the other consumer spending shoe is starting to drop.”
Two-thirds of consumers say they are trading down, while a little more than half of consumers are switching to cheaper merchants. PYMNTS has consistently chronicled that about 60% of American households live paycheck to paycheck.