In July, millions of student loan borrowers will have their bills reduced. Here's what else you need to know.

• The SAVE plan, a new repayment scheme for student loan borrowers introduced by the Biden administration, is facing legal challenges.
• Here's what relief borrowers can still expect.

Last week, a legal challenge to the Biden administration's new relief plan halted millions of student loan borrowers' hopes for smaller monthly bills come July.

On June 30, the federal appeals court approved the implementation of a significant provision of the US Department of Education's new Saving on a Valuable Education, or SAVE, plan.

As pledged, the majority of borrowers should witness a decrease in their July bills.

Here are some answers to other questions borrowers might have.

Why is the SAVE plan being challenged?

In the summer of 2023, President Joe Biden introduced the SAVE plan, which he claimed to be the most affordable student loan plan ever. Since its launch, approximately 8 million borrowers have enrolled in the new income-driven repayment plan, as per the White House.

Under IDR plans, borrowers' monthly payments are determined by a portion of their discretionary income. After a set period, typically 20 or 25 years, they receive loan forgiveness. (The Education Department's former REPAYE option, or Revised Pay As You Earn plan, has been replaced by SAVE.)

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The current controversy surrounding the SAVE plan arises from its generous terms.

Borrowers under REPAYE now need to pay only 5% of their discretionary income monthly towards their undergraduate student debt, instead of the previous 10%.

Individuals earning less than $15 per hour receive a monthly bill of $0, while borrowers with smaller balances are eligible for loan forgiveness within a decade.

Mark Kantrowitz, a higher education expert, stated in a previous interview with CNBC that the SAVE plan is extremely generous to borrowers, almost like a grant after the fact.

Where do the lawsuits against SAVE stand?

Earlier this year, lawsuits were filed against the SAVE plan by states backed by the Republicans, including Florida, Arkansas, and Missouri.

The SAVE plan, which was intended to provide relief to student debtors, was blocked by the Supreme Court last year. In an attempt to circumvent this obstacle, the Biden administration has been accused of overstepping its authority. Two federal judges in Kansas and Missouri have temporarily put a hold on significant parts of the SAVE plan in response to these allegations.

The new income-driven repayment plan prevented the Biden administration from forgiving debt on a faster timeline and reducing borrowers' payments in July.

The U.S. Department of Justice and the Education Department took action to challenge the rulings that came down before payments were set to drop for many SAVE borrowers. As a result, payments were temporarily paused while the legal proceedings played out.

The Education Department can now proceed with reducing borrowers' bills due to the Biden administration's successful appeal against an injunction that prevented it from lowering payments. However, the case has not yet been decided.

The federal judge in Missouri issued a second injunction against the SAVE plan, which prohibits expedited loan forgiveness, last week.

What does this mean for me?

The Biden administration is currently implementing the SAVE plan provision, which reduces borrowers' monthly payments to 5% of their discretionary income, resulting in many people seeing their bills cut in half.

You should plan to pay the bill sent by your loan servicer in July, as per the Education Department's advice.

If your loan servicer is still calculating your new lower payment or anticipating bills will be temporarily paused during the legal drama, you should aim to make your first payment in August and have it reduced.

If a borrower has a $0 monthly bill under SAVE, they will not owe anything and will be considered up to date on their payments, according to the department.