The Biden administration’s latest student loan repayment plan, known as SAVE, has faced a multitude of legal challenges that have put the program on hold indefinitely. The White House revealed that approximately 8 million individuals are currently enrolled in the Saving on a Valuable Education plan. Despite being hailed as the most affordable student loan plan ever, the SAVE plan has been the subject of intense scrutiny since its introduction in the summer of 2023. The core features of the new income-driven repayment plan include significantly reduced monthly payments compared to other federal student loan repayment plans, as well as quicker debt erasure for those with minimal balances.
Republican-led states have taken legal action against the U.S. Department of Education over the SAVE plan, alleging that the agency has exceeded its jurisdiction and is attempting to circumvent the Supreme Court’s decision to block a comprehensive debt forgiveness plan earlier in June 2023. Despite having already forgiven $5.5 billion in student debt for 414,000 borrowers through SAVE, the Education Department has been unable to proceed with the plan due to the ongoing legal challenges. Individuals who have already benefited from the program are not affected by the current pause in implementation.
Amidst the legal battle, federal student loan payments for SAVE participants have been placed on hold, with the Education Department initiating an administrative forbearance for these borrowers. During this period, interest accrual is also suspended, mirroring the policies implemented during the Covid-era payment pause. Higher education expert Mark Kantrowitz stated that the duration of the forbearance is uncertain, potentially lasting for several months or even up to a year. The Supreme Court’s involvement in reviewing the legality of the plan could further prolong the delays in its implementation.
Unlike previous payment pauses, the months spent in forbearance under SAVE do not contribute towards borrowers’ eligibility for loan forgiveness. Individuals aspiring to have their debts cleared through income-driven repayment plans or Public Service Loan Forgiveness may not receive credit for this inactive period. Nonetheless, options such as the buyback alternative for PSLF hopefuls who missed payments offer a chance to retroactively compensate for previous months. Borrowers determined to maintain their progress towards debt forgiveness can switch to alternate income-driven repayment plans, although the transition may require several months to finalize.
Despite the temporary halt in progress towards debt forgiveness, SAVE participants are currently benefiting from a $0 monthly payment. Kantrowitz emphasized that individuals do not lose any benefits due to the pause, aside from the passage of time. Transitioning between repayment plans or exploring buyback options can help borrowers navigate the challenges posed by the ongoing legal issues surrounding the SAVE plan. It is crucial for borrowers to stay informed and consider their alternatives while the program remains in limbo.
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