How Legal Challenges Dismantled Income-Driven Repayment Forgiveness and Left Millions of Borrowers in Limbo
The Saving on a Valuable Education (SAVE) plan, launched in 2023 as the most generous federal student loan repayment program, has been effectively eliminated through legal challenges brought by Republican-led states. This report chronicles how the creation of SAVE led to the sunset of the REPAYE plan, and how subsequent lawsuits not only blocked SAVE but also eliminated forgiveness under PAYE and ICR plans, leaving millions of borrowers without a clear path to loan forgiveness.
The Department of Education rolls out the SAVE plan, replacing REPAYE. Key features include: increased income protection (225% of poverty line vs. 150%), eliminated interest capitalization, and reduced payments to 5% of discretionary income for undergraduate loans.
Major Benefit to BorrowersAll borrowers on the REPAYE plan are automatically transferred to SAVE. The REPAYE plan effectively ceases to exist as an option for new enrollees, consolidated into the new SAVE framework.
Automatic TransitionDepartment begins forgiving loans for borrowers who originally borrowed $12,000 or less and made 10+ years of payments. 153,000 borrowers receive immediate forgiveness. This marks the beginning of accelerated forgiveness timelines.
$1.2B ForgivenTwo groups of Republican-led states file separate lawsuits challenging SAVE. Missouri leads 7 states arguing the plan exceeds statutory authority, while Kansas leads 11 states in a parallel challenge. States claim the Secretary lacks authority to forgive loans through ICR plans.
Legal Challenge BeginsFederal court blocks implementation of key SAVE provisions, including the reduced payment calculations and expedited forgiveness timelines. ED places all SAVE borrowers into administrative forbearance with 0% interest accrual.
SAVE Partially BlockedAppeals court expands injunction to block SAVE plan in its entirety. 7.5 million enrolled borrowers placed in indefinite forbearance. Months in forbearance don't count toward PSLF or IDR forgiveness. ED attempts to revive REPAYE forgiveness provisions as workaround.
Complete SAVE ShutdownIn response to ongoing litigation, Department reopens ICR and PAYE plans that had been sunset in July 2024. This provides alternative IDR options for borrowers, though forgiveness provisions remain uncertain due to court challenges.
Limited Options ReturnCourt affirms that Secretary lacks authority to forgive loans through ICR plans. Ruling blocks forgiveness under SAVE, PAYE, ICR, and resurrected REPAYE provisions. Trump administration removes all IDR applications from website, creating chaos for millions of borrowers.
All IDR Forgiveness BlockedAfter AFT lawsuit, ED restores applications for IBR, PAYE, and ICR plans. However, forgiveness remains blocked for all plans except IBR. Nearly 2 million applications backlogged. Processing expected to take over 2 years at current rate.
Partial System RestoreTrump administration announces interest will resume accruing on August 1 for all borrowers in SAVE forbearance. Borrowers face difficult choice: remain in limbo with growing balances or switch to IBR with higher payments but path to forgiveness.
Financial Pressure ReturnsThe federal student loan repayment system is in unprecedented chaos, with millions of borrowers caught in legal and administrative limbo:
~7 million borrowers remain in forbearance. Interest now accruing but no payments required. No progress toward any forgiveness programs. Expected to remain in limbo until at least fall 2025.
1.98 million pending IDR applications as of April 2025. Processing only 79,000/month. Estimated 2+ years to clear existing backlog at current rate.
SAVE: Completely blocked
PAYE: Forgiveness blocked
ICR: Forgiveness blocked
IBR: Only plan with functioning forgiveness
11.3% of federal loans delinquent. 4.2 million borrowers 90+ days late. Forbearance/deferment usage doubled since 2024 as borrowers struggle with limited options.
From 2021 through early 2025, student loan borrowers experienced unprecedented access to loan forgiveness:
18.5%
Hope Credit Clients Forgiven
425 out of 2,300 total clients achieved complete loan forgiveness
4.9%
National Forgiveness Rate
~2.1M forgiven out of 43M+ borrowers nationwide (IDR Adjustment, PSLF Waiver, SAVE)
Key Insight: Hope Credit clients achieved forgiveness at 3.8 times the national rate, demonstrating the critical value of expert guidance during this golden era of forgiveness opportunities. This success was largely driven by strategic use of PSLF, OTA (IDR Adjustment), and BDR programs before the legal challenges began.
$29.8 Million
Hope Credit Client Debt Forgiven
414 clients with $71,934 average forgiveness
$90.2 Billion
National Debt Forgiven
IDR Adjustment ($39B) + PSLF ($50B) + SAVE ($1.2B)
Perspective: While Hope Credit's $29.8 million represents just 0.033% of national forgiveness dollars, the firm's 18.5% client success rate far exceeds the 4.9% national average. This demonstrates that smaller, specialized firms achieved disproportionately high success rates in securing forgiveness for their clients, even if the total dollar amounts were modest compared to national figures.
The current forbearance creates a perfect storm of problems:
Strongly Consider Switching to IBR
Switch to IBR Immediately
Consider AGI Reduction Strategies and Alternative Repayment Options
Strategy 1: Maximize Pre-Tax Deductions to Lower IBR Payments
Before switching away from IDR plans, high earners should explore AGI reduction strategies using Hope Credit's AGI Calculator (hopecredit.net/agi-calculator). Key pre-tax deductions that reduce both AGI and IDR payments include:
Example: A borrower earning $150,000 who maxes out 401(k), HSA, and FSA contributions could reduce AGI by $34,850, potentially saving $3,485 annually on IBR payments.
Strategy 2: Evaluate Non-IDR Options
Strategic Forbearance Considerations
The collapse of SAVE and elimination of forgiveness under most IDR plans represents a fundamental shift in federal student loan policy. Key implications include:
