Editor’s note: This weekly update from the government relations office at the American Association of Community Colleges (AACC) provides the latest on what’s happening in Washington and how AACC is advancing policies to support community colleges and students. Send questions, feedback and more to: kgimborys@aacc.nche.edu.
- Department of Education releases new information on the 2025-26 FAFSA testing period
- SCOTUS leaves SAVE repayment plan in legal limbo
Department of Education releases new information on the 2025-26 FAFSA testing period
On Tuesday, the Department of Education (ED) released a new Electronic Announcement (EA) providing more details on the upcoming “beta testing” period for the 2025-26 Free Application for Federal Student Aid (FAFSA). As a reminder, ED previously announced a new “phased rollout” process for the 2025-26 FAFSA, with the online form set to become available to a limited set of volunteer students and institutions on October 1. Additional students and institutions will gain access to the form throughout the fall, with the goal of having the form open to all students by December 1.
As covered in the Community College Daily, ED will work with community-based organizations (CBOs), high schools, institutions of higher education, states, and students and contributors to identify any problems with the form before it opens to a wider student pool. Each beta test will look at student and contributor experiences filling out and submitting the form, transmission of Institutional Student Information Records (ISIRs) to states and institutions, and student- and institution-initiated corrections. As the first step in this process, ED has opened an application for CBOs that work with students and will partner with institutions to be part of “Beta 1” testing. The application closes on September 5.
The American Association of Community Colleges (AACC) is carefully monitoring the rollout of the 2025-26 FAFSA. Please contact AACC’s Office of Government Relations (OGR) to discuss these issues further.
SCOTUS leaves SAVE repayment plan in legal limbo
On Wednesday, the U.S. Supreme Court (SCOTUS) declined to lift an injunction on the Biden Administration’s new Saving on a Valuable Education (SAVE) income-driven repayment (IDR) plan. As a reminder, the SAVE plan would lower monthly payments, raise the amount of income sheltered from repayment, ensure that balances do not grow due to unpaid monthly interest, and – critically for community college borrowers – shorten the timeline to forgiveness for borrowers with original balances of $12,000 or less. While the plan is extremely borrower-friendly, it is also predicted to be extremely costly. The plan was met with opposition from Republicans in Congress and a legal challenge from Missouri and six other Republican states.
Earlier this month, the U.S. Eighth Circuit Court of Appeals issued a nationwide injunction, arguing that it was likely that the Department of Education had overstepped its executive authority in creating the SAVE plan. The Biden Administration appealed to SCOTUS to reinstate the policy. Instead, the Court wrote that the decision should be rendered by the Eighth Circuit. This decision means that borrowers who had enrolled in the SAVE plan are in limbo until the Eighth Circuit decides on the case (and likely even after that, as the Biden Administration is expected to appeal to SCOTUS again if the Eighth Circuit finds the SAVE plan unconstitutional).
While the injunction remains in effect, ED is unable to provide loan forgiveness under SAVE, must continue charging accrued interest, and cannot implement changes to income protection or repayment amounts under the plan. Furthermore, while borrowers can still fill out an application to enroll in SAVE, whether and when those applications will be processed is unclear. The eight million borrowers who had already enrolled in the program will continue to be in interest-free forbearance as litigation continues. While these borrowers do not owe payments and are not at risk for default, they are not able to earn credits towards forgiveness under IDR or Public Service Loan Forgiveness (PSLF).
While community colleges have low rates of student borrowing, the ongoing challenges to SAVE present a difficult environment for loan counseling. The American Association of Community Colleges (AACC) will continue to monitor the student loan repayment landscape and its implications for students and institutions.