Major Developments in Student Loan Forgiveness and Payment Pause as SAVE Plan Forbearance Continues

The Education Department has announced new details regarding a payment pause that will impact student loan forgiveness and repayment plan programs for eight million borrowers enrolled in the SAVE program. The SAVE program is an income-driven repayment plan imposed by the Biden administration to lower monthly payments and hasten student loan forgiveness for specific borrowers. However, legal challenges from Republican-led states have led to a court order blocking the program, resulting in a temporary halt as litigation continues.

In response to the court order, the Education Department has halted payments and interest for affected borrowers. The department clarified that the SAVE plan forbearance will not count towards student loan forgiveness through Public Service Loan Forgiveness (PSLF) or IDR. This has caused confusion among borrowers who were unsure about the impact of the forbearance, especially considering other forbearances that may count towards loan forgiveness.

Although borrowers will not make progress towards loan forgiveness under PSLF or IDR during the SAVE plan forbearance, they have the option to switch to a different IDR plan. However, the process may be challenging due to delays in processing applications following the court order. Borrowers can apply to switch plans using a paper application but should be prepared for extended processing times and potentially higher monthly payments under a different IDR option.

Borrowers pursuing loan forgiveness through PSLF can also switch to a different IDR plan as a workaround to the SAVE plan forbearance. Additionally, borrowers on track for PSLF can choose to remain in the SAVE plan forbearance and utilize a “buy back” program to gain credit for months spent in forbearance. This program allows borrowers to make extra payments to cover past months that were not counted as qualifying payments.

Despite the court-ordered stay, borrowers are still permitted to apply for the SAVE plan, although the application process will be significantly delayed. The Education Department warned that significant processing delays are expected, particularly for borrowers applying for the SAVE/REPAYE plan. Further developments related to PSLF, IDR, and the SAVE plan are likely as the situation remains fluid with ongoing litigation and challenges in various court circuits.

Education Secretary Miguel Cardona expressed disappointment over politically motivated lawsuits hindering relief for borrowers, and the Biden administration will continue to defend the SAVE plan in court. As updates continue to be provided to affected borrowers, the future of the SAVE plan, student loan forgiveness, and repayment programs remains uncertain while legal battles persist.