Key Points
- The Justice Department asked a federal judge on July 14 to dismiss Havens v. U.S. Department of Education, the last active lawsuit trying to stop the SAVE plan shutdown.
- The government says the lead plaintiffs' tax injury is "self-inflicted" because they skipped a December 31, 2025 deadline that would have made their loan forgiveness tax-free at no cost.
- Without the tax claims, the government says the case comes down to about $1,320 in higher payments, which the government could refund.
The Justice Department told a federal judge on July 14 that the last active lawsuit trying to stop the SAVE plan shutdown should be dismissed. They argue that the borrowers are suing over a potential tax bomb they ignored by not taking action in 2025, miscalculated payments, forgiveness timelines that wouldn't have made a difference due to the OBBBA, and that the rest of the case amounts to $1,320 the government has already promised to refund if it loses.
The 58-page filing in Havens v. U.S. Department of Education opposes the borrowers' request for a preliminary injunction and asks the court to dismiss the case outright.
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Why It Matters
This lawsuit is the only remaining legal effort standing between roughly 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 move to a new plan is September 29, 2026. The current SAVE timeline estimates that all borrowers will receive a notice by March 2027.
If the injunction is denied, the transition proceeds on schedule.
It's important to note that this lawsuit isn't asking for SAVE to be restored, but rather REPAYE to be restored as well as any forgiveness due under REPAYE to be processed between now and July 1, 2028.
What The Government Argues
The filing's sharpest attack targets the two lead plaintiffs, who say switching plans in 2026 will make their eventual loan forgiveness taxable because the federal tax exemption on forgiven student debt expired at the end of 2025.
The government calls that harm "self-inflicted." Under a court-supervised agreement in a separate case (AFT v. Department of Education), the Department committed in October 2025 that it would not report discharges to the IRS as taxable income for borrowers who applied for a new repayment plan by December 31, 2025.
Both plaintiffs were already discharge-eligible and did not take the deal. In the government's words, plaintiffs "have already forfeited their best opportunity to solve their tax problem — for free."
The filing also argues:
- Without the tax claims, the case is about roughly $55 per month across two plaintiffs (about $1,320 total before REPAYE-style plans sunset under the One Big Beautiful Bill Act in July 2028) and the Department states it will refund any overpayments if the borrowers ultimately win.
- The 8th Circuit Court of Appeals already ruled in February 2025 that REPAYE's forgiveness provisions suffer the same legal defect as SAVE, so a court cannot order the Department to bring REPAYE back.
- The 11-day window in early 2026 when the SAVE rule was technically enforceable created no permanent rights, because the 8th Circuit's reversal applies retroactively.
The Department concedes it "does not know" how the IRS would classify a discharge if borrowers were switched back to REPAYE in 2026 — the tax question at the center of the case remains genuinely unsettled.
And the borrowers themselves are hedging: they also moved to intervene in the Missouri case in the 8th Circuit, which the government says proves this suit is a collateral attack on another court's ruling.
How This Connects
As we reported when the borrowers filed for emergency relief in June, prior borrower lawsuits over SAVE and REPAYE have all failed, and this case was the last pending suit before forced plan switches begin.
This filing shows the government believes it can win on standing and timing without a court ever weighing whether ending SAVE two years before Congress's 2028 deadline was fair to borrowers. For borrowers weighing what staying put has already cost, our analysis found SAVE forbearance has cost the average borrower about $3,500 in added student loan balances and lost forgiveness progress.
A hearing is expected this week. If the judge denies the injunction, SAVE borrowers should expect their 90-day switch notices to keep arriving in batches and should compare Income-Based Repayment against the new RAP plan before the government chooses for them.
Borrowers can apply for RAP online at StudentAid.gov now, and our RAP calculator can estimate payments before switching.
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Editor: Colin Graves
Robert Farrington is the founder of The College Investor and is widely recognized as one of the nation’s leading voices on student loan debt and saving for college. He holds an MBA from UC San Diego Rady School of Management and has spent over 15 years researching, writing, and advising on student loans, 529 plans, financial aid programs, and saving and investing for young professionals.
Robert has been featured in the The New York Times, The Wall Street Journal, The Washington Post, NBC News, and Forbes, where he has been a regular personal finance contributor for over a decade. His work combines both professional expertise and personal experience – he successfully navigated his own student loan repayment journey and has helped thousands of readers do the same.
He is committed to making the intersection of personal finance and education transparent and accessible. You can learn more about Robert on the About Page or on his personal site RobertFarrington.com.