Student Loan Forgiveness Lawsuit Updates - December 2024

• Donald Trump plans to dismantle the Department of Education, potentially shifting loan servicing to the Department of Treasury.

• Biden’s new plan for hardship-based and long-standing debt forgiveness is frozen after Missouri courts reinstated an injunction.

• Trump’s incoming administration is expected to cancel or significantly alter the SAVE Plan starting January 2025.

The SAVE Plan lawsuit has created a lot of uncertainty for student loan borrowers. Several states are challenging the plan in court, and no decision has been made yet.

Here’s an overview of what you need to know:

• The lawsuit: Attorneys general from seven states, including Missouri and Florida, filed a lawsuit against the SAVE Plan in April 2024. The case has not been resolved yet.

• Court hearing: On October 24, a court questioned whether President Biden has the legal authority to implement the SAVE Plan. A decision could come soon, but delays are possible due to the holidays and the upcoming presidential inauguration.

• New administration: Donald Trump will take office on January 20, 2025. His administration is expected to either cancel the SAVE Plan or make major changes, which adds to the uncertainty.

• Biden’s earlier plan: An earlier attempt by Biden to forgive student loans under a different law is still blocked by legal challenges.

• Another case: A separate case, Sweet v. Cardona, is moving forward. This case focuses on borrowers who believe they were misled by their schools.

With so much happening, it’s easy to feel overwhelmed. Borrowers should stay informed about these ongoing cases and the changes that may come. This guide is here to keep you updated and help you understand what’s next.

Related reading:

• Can You Still Apply For Student Loan Forgiveness?

• What Happens to Student Loans if Trump Wins?

The ongoing lawsuit over the SAVE Plan has left many borrowers unsure about their future, especially those working toward Public Service Loan Forgiveness or Income-Driven Repayment forgiveness.

With delays in court decisions and a new administration taking office soon, borrowers are wondering what steps they should take next.

Where Things Stand

On October 24, 2024, the 8th U.S. Circuit Court of Appeals heard arguments about the legality of the SAVE Plan. The judges raised concerns about the Department of Education’s authority under the Higher Education Act to forgive federal student loans at the end of the SAVE Plan specifically and all IDR Plans broadly.

A decision could come at any time, but with the holidays and Donald Trump set to take office on January 20, 2025, borrowers may not get clarity for weeks.

For borrowers enrolled in the SAVE Plan:

• Payments are on hold, and no interest is building up during the current forbearance period.

• But, this forbearance period does not count toward forgiveness under PSLF or IDR, frustrating those relying on progress toward loan discharge.

Ongoing IDR Forgiveness Delays

The one-time account adjustment, designed to retroactively count past payments toward forgiveness for borrowers with gaps in qualifying payments is another key issue tied to the SAVE Plan.

The Department of Education has announced this adjustment but has not been officially applied to borrower accounts.

Borrowers can check their updated payment counts by logging into StudentAid.gov and accessing the payment count summary. This provides a glimpse of progress, but many have reported inconsistencies or unclear updates, leaving them uncertain about how close they are to forgiveness.

Related: When Will The IDR Account Adjustment Happen?

Right now, there are a lot of questions and few answers. And answers might not appear until the spring. By then, the lawsuit over the SAVE Plan will likely be resolved, Donald Trump will have been sworn in, and his administration’s actions—whether dismantling the Department of Education, abandoning the SAVE Plan, or reshaping loan forgiveness policies—will have started to take shape.

In the meantime, borrowers are stuck in a frustrating limbo, with delays impacting both forgiveness progress and financial stability:

Forgiveness Progress Paused

Borrowers pursuing PSLF or IDR forgiveness are unable to make progress while payments remain paused in forbearance. This time doesn’t count toward forgiveness, leaving many feeling stuck.

Compounding the frustration, the one-time account adjustment, designed to retroactively count past payments, hasn’t been fully implemented. And the Education Department hasn’t updated its article about the adjustment in months, leaving borrowers eager for updates on their payment counts.

Some borrowers use our free TXT tool to try and get that information. Others have tried checking their preliminary payment counts on StudentAid.gov using a backdoor link.

But neither of these methods gives borrowers the certainty they deserve, leading to widespread confusion and disrupting financial plans. Borrowers applying for home loans often can’t provide proof of enrollment in an IDR plan, complicating their ability to qualify.

Recertification dates for income-driven plans have been delayed repeatedly, adding to the uncertainty.

Trump Administration Concerns

With Donald Trump set to take office in January, borrowers fear that his administration’s policies could undo forgiveness efforts entirely.

Trump has pledged to dismantle the Department of Education and has appointed Linda McMahon as Secretary of Education, signaling a potential overhaul of federal loan policies. Borrowers are unsure if they’ll face stricter repayment terms, lose forgiveness opportunities, or encounter additional challenges.

Regret Over SAVE Plan Enrollment

Borrowers who switched to the SAVE Plan now question whether it was the right decision. Many believe they would have been better off staying on the older REPAYE Plan, which wasn’t tied up in litigation.

The inability to make progress during this period has left some wishing they had never switched plans, especially as uncertainty about the SAVE Plan’s future looms.

Plan B Forgiveness

The Biden administration’s efforts to cancel student loans through the Higher Education Act have faced major legal challenges. After the Supreme Court struck down a previous plan to provide broad loan cancellation of $10,000 to $20,000 per borrower, the administration announced a new plan in April 2024 with several parts, including hardship-based forgiveness and relief for long-standing debt.

But before the rules could be finalized, a coalition of Republican-led states filed a lawsuit in Georgia, arguing the plan would harm state finances and disrupt loan servicers like MOHELA. In October, a federal judge dismissed the case in Georgia but transferred it to Missouri, where MOHELA is headquartered.

Shortly after, Missouri courts reinstated an injunction, halting implementation of this broad relief plan. This decision effectively froze the April 2024 initiatives, leaving the Biden administration scrambling to salvage other parts of the plan, such as hardship-based forgiveness, which faces an uncertain future.

For borrowers, this means the promised relief is unlikely to materialize soon, especially with the incoming Trump administration signaling plans to roll back student loan forgiveness policies entirely.

And with Republicans controlling Congress for the next 2 years, it’s unlikely the federal government will step in to provide relief.

Sweet v. Cardona

Separate from the SAVE Plan and Plan B lawsuits, the Sweet v. Cardona case involves borrowers seeking loan forgiveness under the Borrower Defense to Repayment program, claiming fraud by for-profit schools. In 2022, a settlement was reached to cancel approximately $6 billion in loans for over 200,000 borrowers. The terms of that agreement were upheld over 2 years later in a separate action.

The terms of the settlement are clear, but the Department of Education has faced delays in processing and discharging loans. As of late 2024, many eligible borrowers still await relief, leaving them frustrated and uncertain.

With the incoming Trump administration signaling potential overhauls to the Department of Education, there are growing concerns about whether the settlement will be fully implemented or face new challenges.

You can stay up to date on the progress of this lawsuit via the Project on Predatory Student Loan Lending and the Borrower Defense subreddit.

Borrowers are anxiously awaiting clarity, but the reality is that we’re unlikely to see significant action until after Donald Trump is sworn in as president on January 20, 2025.

By then, the lawsuit over the SAVE Plan will likely have been resolved, and the new administration’s stance on the student loan forgiveness program will start to take shape.

Here’s what borrowers can expect as we move into this uncertain period:

Will My Loans Be Forgiven if the SAVE Plan Lawsuit Is Resolved?

It’s unlikely that the student loan forgiveness plan will directly result in forgiveness for most borrowers. Even if the district court ruling ultimately sides with the Biden-Harris administration, Trump is expected to abandon the program.

Borrowers will need to rely on forgiveness through other means, such as Public Service Loan Forgiveness or Income-driven repayment plans.

Forgiveness depends on which repayment plan borrowers are enrolled in. For example, if the SAVE Plan is eliminated, borrowers can still pursue relief through other Income-driven repayment plans like IBR or PAYE. But, these plans often result in higher payments and stricter requirements.

Related: Income-Based Repayment (IBR) Loan Forgiveness

What Happens if the SAVE Plan or Forgiveness Is Abandoned?

If the SAVE Plan is dismantled, most borrowers will need to revisit their repayment options. Many will turn to IBR as the best alternative, but payments under IBR may be higher than those under the SAVE Plan. Timing and financial planning will be critical:

• Borrowers whose income has changed since last year or who are preparing for major life transitions like retirement should update their financial information with their servicer to ensure payments reflect their current situation.

• Errors from student loan servicers could increase during the transition, especially if oversight diminishes under the Trump administration.

Will the One-Time Account Adjustment Be Affected?

The one-time account adjustment, announced by the U.S. Department of Education, isn’t directly tied to the SAVE Plan, so it’s expected to proceed. But borrowers who haven’t yet accrued 20 or 25 years of qualifying time toward forgiveness may face challenges:

• Those still far from the forgiveness threshold must enroll in an eligible plan, and payments under alternatives like IBR may triple.

• Borrowers close to forgiveness may find the adjustment easier to manage, but they’ll still need to ensure they remain in good standing.

Will Borrower Defense Forgiveness Be Clawed Back?

The Sweet v. Cardona settlement, which offers loan discharges to borrowers defrauded by schools, is unlikely to be reversed by Trump’s administration.

But, the settlement process may slow down or pause entirely. Borrowers waiting for forgiveness should expect delays but shouldn’t worry about previously granted relief being rescinded.

What If the Department of Education Is Dismantled?

If the U.S. Department of Education is dismantled, as Trump has proposed, borrowers’ debt will likely transfer to the Department of the Treasury. This wouldn’t erase the debt, but it could cause widespread administrative disruption.

Borrowers might face delays in processing payments, limited resources for dispute resolution, and fewer safeguards against errors by loan servicers.

This scenario could create long-term challenges for borrowers, but repayment obligations will remain intact.

With many unresolved lawsuits and the uncertainty of what might happen next year as Trump takes office, student loan borrowers are feeling overwhelmed and worried. We understand—it’s hard to deal with so many changes and not know what’s next.

That’s why we’re here. We’re committed to keeping you informed with the latest updates on student loans and helping you feel more confident about your situation.

Sign up for our newsletter to stay in the loop, or if you need clarity about your loans or want to discuss your options, book a consultation with one of our student loan experts. Let’s work through this together.

Related reading:

• Do Student Loans Ever Go Away?

• Did Student Loan Forgiveness Pass?

• PSLF Updates You Should Know

• How to Apply For Student Loan Forgiveness

• Student Loan Recertification — On Hold For Until 2025