The Biden administration’s ambitious student loan repayment plan, known as SAVE, has come under intense scrutiny and legal challenges, causing uncertainty for the roughly 8 million borrowers enrolled in the program. With its promise of lower monthly payments and quicker debt erasure, SAVE was hailed as the most affordable student loan plan ever introduced. However, Republican-led states have sued the U.S. Department of Education, arguing that the agency exceeded its authority with the program.
The legal battles surrounding the SAVE plan have put a pause on federal student loan payments for millions of borrowers, as the Biden administration fights to defend the program in court. This has resulted in these borrowers being placed in administrative forbearance, where interest accrual is also suspended. While it is uncertain how long this forbearance will last, experts suggest it could be months or even a year. Unfortunately, the time spent in forbearance will not count towards borrowers’ timeline to loan forgiveness, impacting those enrolled in SAVE who are working towards debt clearance through income-driven repayment plans or Public Service Loan Forgiveness.
Despite the challenges and delays caused by the legal issues surrounding the SAVE plan, borrowers pursuing student loan forgiveness are advised to explore alternative options. For instance, the Education Department offers a buyback option for borrowers seeking Public Service Loan Forgiveness, allowing them to retroactively make payments to get credit for previous months. Additionally, borrowers who wish to avoid losing credit for the months spent in forbearance may consider switching to another income-driven repayment plan. However, this transition process could take several months, with some borrowers facing delays of up to 90 days.
While the legal challenges have created uncertainty and delays for SAVE enrollees, there are some benefits to consider. Despite not making progress towards debt forgiveness during the forbearance period, enrollees are still benefitting from a $0 monthly payment. This means that borrowers do not lose anything during the pause, other than time. However, the lack of progress towards debt forgiveness and the uncertainty surrounding the future of the SAVE plan remain key concerns for borrowers.
The legal challenges facing the Biden administration’s SAVE plan have created a sense of uncertainty and delay for millions of borrowers. While the program offers significant benefits in terms of lower monthly payments and quicker debt erasure, the ongoing legal battles have put a pause on loan payments and created questions about the future of the program. Borrowers are advised to explore alternative options and stay informed about any developments related to the SAVE plan to make informed decisions about their student loan repayment strategy.