Millions of federal student loan borrowers are currently benefiting from a pause in loan payments thanks to the Biden administration’s new income-driven repayment plan known as SAVE. The program, which stands for Saving on a Valuable Education Plan, has placed eligible borrowers into an administrative forbearance while legal battles over its implementation continue. During this forbearance period, borrowers do not have to make any payments on their debt, and interest will not accrue on their loans.
Although the SAVE program boasts the most generous terms to date in terms of federal student loan repayment plans, it has not been without its share of controversy. Republican-led states have challenged the program, arguing that the Education Department exceeded its authority with SAVE. They claim that the program is a covert attempt to forgive student debt after the Supreme Court blocked a similar plan in June of 2023. Despite the legal challenges, the Education Department had already forgiven $5.5 billion in student debt for 414,000 borrowers through the SAVE Plan.
The future of the SAVE program remains uncertain as a federal appeals court in Missouri issued a ruling blocking the entire plan on July 18th. Education Department officials are committed to defending the program, but its fate hangs in the balance. Unlike previous payment pauses on student loans, the months during the forbearance period under SAVE will not count towards borrowers’ progress towards loan forgiveness. This means that those enrolled in SAVE will not receive credit towards debt clearance under the program’s terms or Public Service Loan Forgiveness.
Repayment Options for Borrowers
According to higher education expert Mark Kantrowitz, borrowers cannot opt-out of the forbearance period while the SAVE repayment plan is temporarily blocked. While borrowers can explore alternative repayment options, such as switching to a different plan, this typically results in a higher monthly loan payment. By remaining in the SAVE plan, borrowers do not lose anything other than time. Therefore, borrowers are advised to stay the course and wait for further developments in the legal battle surrounding the program.
The current pause in federal student loan payments under the Biden administration’s SAVE program provides much-needed relief for millions of borrowers. However, the program’s future remains uncertain due to ongoing legal challenges. Borrowers are encouraged to stay informed of any updates and to consider their repayment options carefully to navigate the evolving landscape of student loan forgiveness and repayment programs.