The Biden administration has implemented a new income-driven repayment plan, known as SAVE, which has resulted in millions of federal student loan borrowers being placed in administrative forbearance. This means that eligible borrowers enrolled in the SAVE plan will not have to make any payments on their debt while the legal battle surrounding the program unfolds. Additionally, interest will not accrue on their loans during this forbearance period.
The SAVE plan has been met with controversy since its introduction in the summer of 2023. It has been described as “the most affordable student loan plan ever”, offering lower monthly payments and quicker debt erasure for those with small balances. However, Republican-led states have filed lawsuits against the Education Department, arguing that the agency exceeded its authority in implementing the SAVE plan. These legal challenges have brought uncertainty to the future of the program.
One of the key implications of the forbearance period for borrowers enrolled in the SAVE plan is that the months spent in forbearance will not count towards their progress towards loan forgiveness. This is particularly concerning for those hoping to qualify for the income-driven repayment plan’s terms or Public Service Loan Forgiveness program. The PSLF program allows certain non-profit and government employees to have their debt cleared after 10 years of payments.
While borrowers cannot opt out of the forbearance period due to the temporary block on the SAVE repayment plan, they can explore other repayment options. However, switching to a different repayment plan may result in a higher monthly loan payment. Higher education expert Mark Kantrowitz advises borrowers to stay in the SAVE plan to avoid losing any benefits, despite the delay in loan cancellation.
The pause on federal student loan payments for borrowers enrolled in the SAVE plan has raised concerns about the impact on loan forgiveness programs and the future of the relief plan itself. While the SAVE plan offers generous terms, its legality is being contested in court, leaving borrowers in limbo. It is crucial for borrowers to stay informed about their options and seek guidance from experts to navigate the complexities of student loan repayment during this uncertain time.