The Biden administration’s new affordable repayment plan, known as SAVE, is currently facing a multitude of legal challenges that have put the program on hold. The plan, also known as the Saving on a Valuable Education plan, was introduced by the White House with the promise of being the most affordable student loan plan ever. It offers lower monthly payments compared to other federal student loan repayment plans and leads to quicker debt erasure for those with small balances. However, Republican-led states have filed lawsuits against the U.S. Department of Education, arguing that the agency overstepped its authority with SAVE after the Supreme Court blocked a previous debt forgiveness plan in June 2023. Despite the controversy, the Education Department had already forgiven $5.5 billion in student debt for 414,000 borrowers through the SAVE plan before the legal challenges arose.
The legal challenges to the SAVE plan have resulted in a pause on federal student loan payments for the approximately 8 million borrowers enrolled in the program. These borrowers have been placed into administrative forbearance by the Education Department, during which the accrual of interest is also suspended. While the duration of this forbearance is uncertain, experts suggest that it could last for months or even a year. Unlike previous payment pauses, the months spent in forbearance under SAVE will not count towards borrowers’ timeline for loan forgiveness, which may impact those hoping to utilize income-driven repayment plans or Public Service Loan Forgiveness. Despite the pause, borrowers are still advised to explore their options for debt forgiveness, such as the Education Department’s buyback option for PSLF participants or switching to alternative repayment plans.
Though the legal challenges have caused delays and uncertainty for SAVE enrollees, they are still benefiting from a $0 monthly payment during this period. While they may not be making progress towards debt forgiveness, borrowers are not losing any benefits due to the pause, according to higher education expert Mark Kantrowitz. Transitioning between repayment plans or taking advantage of relief options may take time, but it’s important for borrowers to stay informed and proactive about their student loan obligations. The ultimate fate of the SAVE plan remains uncertain, with some experts predicting that the Supreme Court may have to intervene in the future.