The Biden administration’s new relief program for federal student loan borrowers, known as the Saving on a Valuable Education Plan (SAVE), has caused a significant stir in the educational landscape. Under this program, eligible borrowers are placed into an administrative forbearance, which means that they do not have to make any payments on their debt while the legal battle surrounding SAVE plays out. Additionally, interest will not accrue on their loans during this time. The White House has reported that approximately eight million people are enrolled in the SAVE program, making it a massive initiative that impacts millions of borrowers.
Since its inception, the SAVE Plan has faced intense scrutiny and legal challenges. The program offers lower monthly payments and faster debt erasure for borrowers with small balances, making it one of the most generous income-driven repayment plans to date. However, Republican-led states have sued the Education Department over SAVE, claiming that the agency exceeded its authority by implementing the program. They argue that the government is attempting to circumvent the Supreme Court’s decision to block a previous comprehensive student debt forgiveness plan. Despite these challenges, the Education Department had forgiven $5.5 billion in student debt for 414,000 borrowers through the SAVE Plan before the legal disputes arose.
A federal appeals court in Missouri issued a ruling blocking the entire SAVE Plan on July 18, creating further uncertainty about the program’s future. While Education Department officials have vowed to defend the plan, its fate remains in limbo. One of the key drawbacks of the forbearance period for borrowers enrolled in SAVE is that the months during this pause will not count towards their progress for loan forgiveness. This puts borrowers who hope to have their debt cleared under an income-driven repayment plan or the Public Service Loan Forgiveness (PSLF) program at a disadvantage. The PSLF program, which allows certain non-profit and government employees to have their debt forgiven after ten years of payments, does not recognize the forbearance period under SAVE as progress towards loan cancellation.
According to higher education expert Mark Kantrowitz, borrowers in the SAVE Plan cannot opt out of the forbearance period due to the program being temporarily blocked. While borrowers have the option to explore other repayment plans, doing so would result in higher monthly loan payments. Despite the setbacks of the forbearance period, Kantrowitz notes that remaining in the SAVE Plan does not result in any financial losses for borrowers, other than the additional time it takes for progress towards debt cancellation.
The Biden administration’s student loan relief program has been met with both praise and criticism. The SAVE Plan’s generous terms and benefits for borrowers are offset by legal challenges and uncertainties surrounding its future. As borrowers navigate through this period of uncertainty, it is crucial for them to stay informed about their options and seek guidance from experts in the field to make informed decisions about their student loans.
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