What Recent Student Loan Litigation Means For You

Recent court decisions on loan forgiveness and repayment plans will impact millions of federal student loan borrowers. It can be challenging for borrowers to keep up with these changes as multiple cases inch their way through court. However, knowing where these cases — and you — stand can help you be proactive as you plan your repayment strategy.

SAVE repayment plan deemed illegal, repealed

On Feb. 18, 2025, the 8th Circuit Court of Appeals issued a decision that blocked the entire regulation that created the Saving on a Valuable Education (SAVE) repayment plan, not just the repayment plan itself. It remanded the case to the lower court, the U.S. District Court for the Eastern District of Missouri, which issued an injunction on April 14, 2025, that blocked the SAVE repayment plan rule.

The court decision also ended forgiveness in the Income-Contingent Repayment (ICR), Pay-As-You-Earn Repayment (PAYE) and SAVE repayment plans. It did not end forgiveness in the Income-Based Repayment (IBR) plan, as that forgiveness is established by statute.

The Trump administration did not appeal either ruling within 30 days, so these decisions are final.

In addition, Section 82001 of the One Big Beautiful Bill Act (OBBBA) effectively repeals the SAVE repayment plan.

What’s happening to forbearance?

The nearly 8 million borrowers in the SAVE repayment plan were placed in an interest-free forbearance on July 19, 2024, while the litigation was ongoing.

Time spent in this forbearance does not count toward forgiveness under income-driven repayment (IDR) plans or Public Service Loan Forgiveness (PSLF), but is eligible for the PSLF Buyback option. The PSLF Buyback option allows borrowers to make payments retroactively for deferment and forbearance periods that took place while the borrower was working for a qualifying employer.

Interest began accruing again for loans in the SAVE forbearance on Aug. 1, 2025, so these borrowers have had about 12 months of an interest-free forbearance. The cost of the interest-free forbearance to the federal government was about $28 billion in waived interest, or about $3,500 per borrower.

The U.S. Department of Education has not said when the forbearance will end, but the Biden administration previously suggested that it would end in fall 2025, potentially as early as September 2025.

Other consequences of the court decision

The SAVE rule also counted certain deferment and forbearance periods towards forgiveness. The court decision means that these deferment and forbearance periods will no longer count toward forgiveness under IDR or PSLF.

• Newly excluded deferment and forbearance types
  

  • Cancer deferment

  • Rehabilitation training program deferment

  • Unemployment deferment

  • Military service deferment

  • Post-active-duty student deferment

  • National service forbearance

  • National Guard duty forbearance

  • DoD Student Loan Repayment forbearance

  • Administrative forbearance

  • Bankruptcy forbearance (for required payments on a confirmed bankruptcy plan)

The economic hardship deferment will continue to count toward time-based forgiveness but not PSLF. This means many borrowers, including military members and those suffering financial hardship due to unemployment or illness, will have to make more payments to qualify for forgiveness.

IBR forgiveness on hold due to SAVE decision

IBR was created by the College Cost Reduction and Access Act of 2007, but was made available to borrowers starting on July 1, 2009. The remaining debt is forgiven after 25 years of payments. Congress reduced this to 20 years of payments for new borrowers as of July 1, 2014.

Although the soonest borrowers who repaid their loans solely in IBR could qualify for forgiveness is 2034, payments made under ICR and other income-driven repayment plans can count toward IBR forgiveness. So, borrowers who started in ICR and then switched to IBR could have qualified for forgiveness as early as 2019. Payment count adjustments may also have increased the number of qualifying payments for some borrowers.

In other words, some borrowers already qualify for IBR forgiveness.

But the U.S. Department of Education has paused IBR forgiveness, even though IBR forgiveness is enshrined in law and the 8th Circuit Court of Appeals decision did not block IBR forgiveness (and even affirmed it).

In a FAQ posting last updated on July 9, 2025, the U.S. Department of Education described the suspension of IBR forgiveness as temporary and triggered by the 8th Circuit Court of Appeals decision.

SAVE made changes to count more deferments and forbearances toward forgiveness. The decision of the 8th Circuit Court of Appeals blocks these additional deferments and forbearances from counting toward forgiveness, so the U.S. Department of Education needs to make changes to the qualifying payment counts.

Borrowers have said that the U.S. Department of Education has failed to provide IBR forgiveness since April 2025.

It should not take this long for the U.S. Department of Education to update the payment counts. The U.S. Department of Education laid off half its staff on March 11, 2025, which may have contributed to the processing delays.

Borrowers are concerned because the tax-free status of IBR loan forgiveness will terminate at the end of 2025. Plus, they must continue making payments until they receive forgiveness, so delaying forgiveness creates a financial burden.

The U.S. Department of Education has not provided a specific timeline for when IBR forgiveness will resume.

Senator Bernie Sanders and 10 colleagues sent a letter to the U.S. Department of Education on August 18, 2025 about the suspension of IBR forgiveness. He wrote:

What should borrowers do?

Borrowers in SAVE forbearance should switch to IBR. IBR and the forthcoming Repayment Assistance Plan (RAP) are the only income-driven repayment plans with forgiveness of the remaining debt, after 20 or 25 years in IBR or 30 years in RAP. The RAP repayment plan has not yet been implemented.

As of Q2 of FY2025, there are:

• 1.97 million borrowers in IBR

• 1.19 million in ICR, 1.30 million in PAYE

• 7.84 million in SAVE

That’s a total of 12.3 million borrowers in the Direct Loan program who are in income-driven repayment plans. An additional 1.15 million borrowers are in IBR under the Federal Family Education Loan Program (FFELP).

The more than 10 million borrowers who are not in IBR could switch to IBR to qualify for forgiveness. However, there is currently a yearlong backlog for processing IDR Plan Request forms — and the backlog may grow.

Litigation reveals PSLF, IDR processing backlog

On March 18, 2025, the American Federation of Teachers (AFT) filed a lawsuit against the U.S. Department of Education in the U.S. District Court for the District of Columbia because the ED closed applications for IDR plans and student loan consolidation. This hindered borrowers’ progress toward PSLF.

The U.S. Department of Education announced on March 26, 2025, that it would reopen the applications. The court is requiring the U.S. Department of Education to submit monthly status reports concerning the processing of IDR Plan Request forms and PSLF Buyback option forms.

These reports reveal a significant backlog in processing these forms.

This table shows the progress in processing IDR Plan Request forms.

The July results are consistent with 179,746 new forms being submitted that month. This suggests that it will take about 11 more months to clear the backlog, assuming that new forms are submitted at the same rate.

If the nearly 8 million borrowers in the SAVE repayment plan switch repayment plans when the forbearance ends, that will add five years until the processing backlog is cleared.

The ED is moving even more slowly on processing PSLF Buyback forms.

This table shows linear growth in the processing backlog. Assuming that no new forms are submitted, it will take nearly two years to clear the backlog. But, if new forms are submitted at the current rate, the U.S. Department of Education is unlikely to ever completely clear the processing backlog. In July, 10,562 new forms were submitted, but only 3,280 forms were processed.