The Biden administration’s new affordable repayment plan, known as SAVE, has faced numerous legal challenges that have put the program on hold for potentially months or even longer. The White House reports that approximately 8 million people are currently enrolled in SAVE, the Saving on a Valuable Education plan. This program has stirred controversy since its introduction in the summer of 2023, with the administration hailing it as the most affordable student loan plan ever. The terms of the SAVE plan offer the most generous income-driven repayment options to date, with lower monthly payments than any other federal student loan repayment plan and a quicker erasure of debt for those with small balances.
Republican-led states have filed lawsuits against the U.S. Department of Education, contesting that the agency has overstepped its authority with SAVE and is attempting to circumvent the Supreme Court’s block on a broader student debt forgiveness plan in June 2023. Despite these legal challenges, the Education Department had already forgiven $5.5 billion in student debt for over 400,000 borrowers through the SAVE plan before the controversy erupted. Those who have already received relief through the program will not be affected by any delays or pauses put on the SAVE plan due to legal battles.
As the Biden administration defends the SAVE program in court, federal student loan payments for millions of borrowers enrolled in SAVE have been placed on pause. These borrowers are now under administrative forbearance, during which the accrual of interest is also suspended, similar to the Covid-era payment pause. The duration of this forbearance is uncertain, with some experts speculating that it could last for months or even up to a year. The Supreme Court may eventually have to intervene in the legal standing of the SAVE plan, potentially prolonging the delays.
Unfortunately, the months spent in forbearance for SAVE enrollees will not count towards their timeline for loan forgiveness, unlike previous payment pauses on student loans. This means that individuals hoping to have their debt cleared under income-driven repayment plan terms or Public Service Loan Forgiveness will not receive credit for this period without making payments. However, borrowers pursuing loan forgiveness are advised to explore alternative options, such as the Education Department’s buyback option for PSLF applicants who missed payments. This feature allows borrowers close to debt forgiveness to retrospectively make payments and receive credit for previous months.
To prevent losing credit for months spent in forbearance, borrowers may consider switching to another income-driven repayment plan. However, this transition can take several months, with some servicers indicating a potential timeframe of up to 90 days. Despite the setback in progressing towards debt forgiveness, SAVE enrollees are benefitting from a $0 monthly payment. In the words of higher education expert Mark Kantrowitz, “Borrowers do not lose anything because of the pause, other than time.” It is crucial for borrowers to stay informed about their options and navigate the complexities of student loan repayment during this uncertain period.
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