As the Biden administration’s new income-driven repayment plan, known as SAVE, faces legal challenges, millions of federal student loan borrowers are currently on pause from making any loan payments. The U.S. Department of Education has placed eligible borrowers enrolled in the SAVE plan into administrative forbearance until the legal battle surrounding the program is resolved.
During the forbearance period, borrowers in the SAVE plan do not need to make payments on their debt, and interest will not accrue on their loans. It’s important to note that this pause does not count towards borrowers’ progress towards loan forgiveness. This means that those hoping to have their debt cleared either through the income-driven repayment plan’s terms or Public Service Loan Forgiveness are not making progress towards that goal during this time.
The SAVE repayment plan has faced criticism since its introduction, with Republican-led states suing the Education Department over its implementation. Critics argue that the program offers lower monthly payments and quicker debt erasure, potentially leading to student debt forgiveness by another name. The legal challenges have raised questions about the program’s future and its impact on borrowers currently enrolled in SAVE.
A federal appeals court in Missouri issued a ruling blocking the entire SAVE plan, leading to uncertainty about its future. Education Department officials have promised to defend the program, but the outcome remains unclear. Despite the legal challenges, the Education Department had already forgiven billions of dollars in student debt for hundreds of thousands of borrowers through the SAVE plan before the court ruling.
Options for Borrowers
While borrowers cannot opt out of the forbearance caused by the legal challenges, they can explore alternative repayment plan options. However, switching to a different plan may result in higher monthly payments. According to higher education expert Mark Kantrowitz, borrowers in the SAVE plan do not lose anything by staying in the program during the pause, except for time.
The Biden administration’s SAVE plan has provided relief to millions of federal student loan borrowers, but legal challenges have raised doubts about its future. Borrowers enrolled in the program face a pause on loan payments, which does not count towards progress towards loan forgiveness. The controversy surrounding the plan highlights the ongoing debate over student debt relief and the challenges faced by policymakers in addressing the issue.