Education Department Asks Court To Toss Final Lawsuit Blocking SAVE Plan Shutdown
- The Justice Department asked a federal judge on July 14 to dismiss Havens v. U.S. Department of Education, the latest active lawsuit is trying to stop the SAVE plan from being shut down.
- The government says the lead plaintiffs’ tax injury is “self-inflicted” because they missed the December 31, 2025 deadline that would have made their loan forgiveness tax-free.
- Without the tax claims, the government says the case comes down to about $1,320 in overpayments, which the government could recover.
The Justice Department told a federal judge on July 14 that the latest active lawsuit seeks to stop Save off the plan should be rejected. They argue that debtors sue for potential tax bomb they ignored by not taking action in 2025, miscalculated payments, forgiveness timelines that wouldn’t have made a difference because of OBBBA, and that the rest of the case is $1,320 the government has already promised to pay back if they lose.
The submission of 58 pages Havens v. US Dept. of Educ opposes the borrowers’ request for a preliminary injunction and asks the court to dismiss the case entirely.
Why is it important?
This lawsuit is the only remaining legal effort standing between approximately 7 million SAVE borrowers and forced repayment plan switches. The Department of Education began sending 90-day notices on July 1, 2026, and the earliest a borrower can be required to switch to a new plan is September 29, 2026. current estimates for the SAVE timeline that all debtors will receive notice by March 2027.
If the order is rejected, the the transition continues as scheduled.
It is important to note that this lawsuit is not seeking the return of SAVE, but rather more RETURN to be repaid as well as any forgiveness owed under REPAYE to be processed between now and July 1, 2028.
What does the Government claim?
The sharpest attack in the filing is aimed at the two lead plaintiffs, who say plans to change in 2026 would make their eventual loan forgiveness taxable because The federal tax exemption for forgiven student debt expired at the end of 2025.
The government calls that damage “self-inflicted”. According to an agreement under the supervision of a court in a special case (AFT v. Department of Education), the department committed in October 2025 that it would not report layoffs to the IRS as taxable income for borrowers who applied for a new repayment plan by December 31, 2025.
Both plaintiffs were already eligible for dismissal and did not accept the agreement. In the government’s words, the plaintiffs “have already lost their best opportunity to resolve their tax problem — for free.”
The filing also claims:
- Excluding tax claims, the case is about $55 per month for two claimants (a total of about $1,320 before REPAYE-style sunset according to One Big Beautiful Bill Act in July 2028) and the Department states that it will return any overpayments if the debtors ultimately prevail.
- 8. District Court of Appeal already reigned in February 2025 that the forgiveness provisions of REPAYE have the same legal defect as SAVE, such that a court cannot order the Department to reinstate REPAYE.
- The 11-day window beginning in 2026, when the SAVE rule was technically applicable, did not create permanent rights, because the 8th Circuit’s reversal applied retroactively.
The department admits it “doesn’t know” how the IRS would classify the exemption if borrowers return to REPAYE in 2026 – tax issue at the center of the case remains truly unsolved.
And the debtors themselves are hedging: they have also moved to intervene in Missouri case in the 8th Circuit, which the government says proves this lawsuit is a collateral attack on another court’s ruling.
How does this connect
How we reported when borrowers filed for emergency relief in June, The borrowers’ previous SAVE and REPAYE lawsuits failedand this case was the last litigation before forced plan transfers began.
This filing shows the government believes it can win on standing and timing without the court considering whether ending SAVE two years before the 2028 congressional deadline was fair to lenders. For borrowers weighing what it already cost to stay, our analysis found Forbearance SAVE cost the average borrower about $3,500 in added student loan balances and lost progress in forgiveness.
A hearing is expected this week. If the judge denies the injunction, SAVE borrowers should expect their 90-day switch notices to continue to arrive in batches and should compare income-based repayment with the new RAP plan before the government chooses for them.
Borrowers can apply for RAP online at StudentAid.gov now, ours too RAP calculator can estimate payments before transferring.
Don’t miss these other stories:
