The Biden administration’s new affordable repayment plan, known as SAVE, may be on hold for months, or even longer, due to a series of legal challenges. The White House has reported that approximately 8 million individuals are currently enrolled in SAVE, also known as the Saving on a Valuable Education plan. Despite being described as “the most affordable student loan plan ever,” the program has sparked controversy since its rollout in the summer of 2023.
The SAVE plan offers terms that are more generous than any previous income-driven repayment plan. Key provisions include lower monthly payments compared to other federal student loan repayment options and quicker debt erasure for borrowers with smaller balances. However, Republican-led states have filed lawsuits against the U.S. Department of Education, arguing that the agency has exceeded its authority and is attempting to forgive student debt through an indirect method after the Supreme Court blocked a similar plan in June 2023.
Despite the legal hurdles, the Education Department had already forgiven $5.5 billion in student debt for 414,000 borrowers through the SAVE plan before the challenges arose. Individuals who have already received debt relief are not affected by the current pause in the program. Federal student loan payments for SAVE participants have been put on hold while the Biden administration defends the program in court. Borrowers have been placed in administrative forbearance during this period, with interest accrual suspended.
It is uncertain how long the forbearance period will last, with some experts speculating it could take months or possibly a year before the legal issues are resolved. There are concerns about the Supreme Court potentially becoming involved in determining the plan’s legality, which could further prolong the process. Unlike previous payment pauses, the months spent in forbearance will not count towards borrowers’ timeline for loan forgiveness under the SAVE plan.
Despite the setbacks, borrowers pursuing student loan forgiveness are advised to explore alternative options. For instance, the Education Department offers a buyback option for individuals working towards Public Service Loan Forgiveness (PSLF) who may have missed payments. This allows borrowers nearing debt forgiveness to retroactively make payments and receive credit for previous months towards their forgiveness goal. Additionally, borrowers concerned about losing credit for the forbearance period may consider switching to a different income-driven repayment plan, although the transition process could take several months.
While enrollees in the SAVE plan may not be making progress towards debt forgiveness at the moment, they are benefiting from a $0 monthly payment. According to higher education expert Mark Kantrowitz, borrowers do not lose anything due to the pause in the program, other than the time it takes for the legal challenges to be resolved. Ultimately, while the future of the SAVE plan remains uncertain, borrowers are encouraged to explore all available options and stay informed about potential changes in the repayment landscape.