The Education Department has announced new details regarding a large-scale payment pause that will impact student loan forgiveness and repayment plan programs for at least eight million borrowers enrolled in the SAVE program. The SAVE plan, which is an income-driven repayment program established by the Biden administration, aims to reduce monthly payments and accelerate student loan forgiveness for eligible borrowers. However, the program has been facing legal challenges from Republican-led states, leading to a court order that temporarily blocked its implementation.
Following the court order, the Education Department has suspended payments and interest for affected borrowers. The department clarified that the SAVE plan forbearance will not count toward student loan forgiveness through programs like Public Service Loan Forgiveness and Income-Driven Repayment. Despite some confusion, the department confirmed that although payments and interest will be suspended, progress towards loan forgiveness will not be made during the forbearance period.
Borrowers who wish to make progress towards student loan forgiveness can switch to a different IDR plan such as Pay As You Earn, Income-Contingent Repayment, or Income-Based Repayment. However, the application process for changing plans may be complicated and lengthy, as the online IDR application has been taken down for updates. Borrowers may also experience higher monthly payments under a different IDR option compared to the SAVE plan. Additionally, borrowers pursuing loan forgiveness through the Public Service Loan Forgiveness program can consider switching to the 10-year Standard repayment plan instead of an IDR plan.
The Education Department highlighted a workaround for PSLF borrowers in the SAVE plan forbearance to buy back months of PSLF credit by making extra payments. Borrowers who still have an outstanding balance on their loans and meet certain eligibility criteria can purchase back months during which they were in forbearance. However, this option has specific rules, and borrowers cannot buy back months preemptively or in real-time through voluntary payments.
Despite the ongoing litigation and temporary stay on the SAVE plan, borrowers are still allowed to apply for the program. If a borrower applies for the SAVE plan while the program is blocked, they will be put into a forbearance until their application is processed. The situation surrounding PSLF, IDR programs, and the SAVE plan remains fluid, as legal challenges continue in various courts. The Education Department assured borrowers that updates will be provided as the situation evolves and defended the SAVE plan in court against politically motivated lawsuits.
