Judge Dismisses SAVE Plan Lawsuit — SAVE Borrowers Still In Limbo

0:00This is the College Investor audio show. We're so glad you're hanging out with this today. Today we take a look at this article from thecollegeinvestor.com. Anytime you hear a topic on the podcast, you can always dive into the article, get go deeper, find the resources, the links and everything else at thecollegeinvestor.com. You can also follow us like us, ask questions, comment, everything. Just follow or just search for us on social media. You'll find us, just search for the words the college investor. All right, so judge dismisses save plan lawsuit, save borrowers still in limbo. That is our topic today. Let's take a look at this. All right, this is pretty timely. So, depending on when you're listening to this, a federal judge on Friday, February 27th, 2026, dismissed the central lawsuit, challenging the Biden-era save student loan repayment plan, not because the court endorsed it, but because there's no longer a dispute to decide.

1:00Huh? The ruling clarifies the legal posture of the case, but doesn't immediately end the administrative forbearance for the roughly 7 million borrowers enrolled in this plan. The decision, you can find the PDF file associated with it inside this article at thecollegeinvestor.com. Just in case you want to read legalese, issued by Judge John A. Ross of the US District Court for the Eastern District of Missouri, ends the case, state of Missouri versus Trump, without prejudice and rejects a joint request from the parties to vacate the save rule outright. The judge notes this, and I quote, that clarity must come from the Department of Education and not from this court, which is no longer empowered to weigh the merits of a case, that is now moot, end quote. Here's what the judge actually said. The lawsuit was originally filed in April, 2024 by Missouri and other states, challenging the education department's 2023 rule,

2:03creating the save income-driven repayment plan. So in June, 2024, the court found the states were likely to succeed on their claim that the Secretary of Education exceeded statutory authority and granting loan forgiveness through save and entered a preliminary injunction blocking further loan forgiveness under the plan. The US Court of Appeals for the eighth district circuit, rather, later affirmed that injunction and instructed the District Court to broaden it to block the entire save rule, not just the forgiveness provisions, the District Court complied in April of 2025. Now here we are again. The political landscape has shifted, right? After a change in presidential administration, the federal defendants stopped defending the save rule. On July 4th, 1770, I'm just kidding, 2025, President Donald Trump signed into law, the OBBA, one big beautiful bill act,

3:03which the court said, quote, effectively ends the save plan with a phasing out period. End quote. At that point, both Missouri and the federal government jointly asked the court to enter final judgment vacating the save rule. Judge Ross was like, no, article three of the Constitution, federal courts may only decide active, quote, cases or controversies, okay? So because both sides now sought the same result and no longer had adverse legal positions, the court was like, there's no dispute to resolve. The case is just dismissed because why it's moot, I like that word. This is not an immediate revival of save repayment, by the way. As a result of the decision on the 27th, the law of allowing save is currently in full force, though the education department has not immediately taken

4:06any action to re-implement what was paused. The judge concluded that because Congress has already passed legislation phasing out save and because the current administration no longer defends it anyway, the court simply has no role. My hands are tied, I don't know what to do. It's basically what he's saying. So the practical result here's this. Even without this lawsuit, save was already on wind down, right? The proposed settlement would have just accelerated the process, the judge declined to rubber stamp it. So with that said, there are now pressing questions of what will happen to forgiveness, repayment and all that stuff. So for save borrowers, if you are in this camp, repayment under the plan is neither abruptly dead, nor is it abruptly restored. It just remains subject to legislative phase out and administrative implementation.

5:06Student loan expert, Mark Cantrowitz, sums it up really well here and I quote, it's a wonderful quote. It's a zombie and cannot be resurrected. Bam, might drop. Okay, so here's what this means for the seven million borrowers in save forbearance. In short, nothing. Nothing new is happening for borrowers in the save forbearance. Barriers currently in forbearance are just gonna remain in forbearance until the Department of Education does something about that. Our current save timeline estimates, put the highest likelihood of repayment surrounding the launch of rap, which would be happening very soon, July of 2026. What borrowers should not assume, three things. You should not assume that payments will automatically restart immediately. You should not assume that forgiveness will automatically be processed.

6:07You should also not assume that you must act urgently to switch plans. The administrative forbearance remains in place until the Department of Education directs servicers otherwise. The judge explicitly signaled that implementation decisions now belong to the department. Barriers will eventually need to select a new repayment plan or the Department of Education may undertake a negotiated rulemaking session to automatically move borrowers. Waiting in the save plan is likely not the best financial move but there is no immediate urgency. At least as of this podcast for that to happen. What happens next? Okay, so as of right now, we're simply just kind of waiting on the final timeline for when borrowers will have to leave the save plan. But here are some things to watch out for and we will be watching, trust me. The Department of Education issues guidance on court actions, the implementation rules for the statutory save it phase out

7:08and operational details of the new rap, repayment assistance plan launching July 1st, 26. So for now, the case is closed. And yes, save is still ending. And annoyingly for borrowers, the final timeline is still uncertain. Ugg, you know, but we will keep our eye on it and help you any way we possibly can. You can always follow us and like us and all the things on social media. If you search for the college investor, that way you can always be up to date on what's going on here. Drop a comment, you know, all that kind of thing. You can also follow this article because we'll probably update this as well. Just bookmark it at thecollegeinvestor.com. Thanks so much for stopping by today and we'll talk to you again real soon. We'll talk to you again real soon. We'll talk to you again real soon. We'll talk to you real soon. We'll talk to you real soon. We'll talk to you real soon. We'll talk to you real soon.