SAVE Plan Blocked…Student Loan Repayment Uncertainty Continues
Student loan repayment continues to be a sticking point between the Democrats and Republicans. The Biden Administration has made two attempts over the last four years to help student loan borrowers which were both challenged by the Republicans. The Administration’s latest SAVE (Saving on a Valuable Education) repayment plan was rolled out in 2023. Millions of borrowers are enrolled in the plan which offers favorable loan repayment terms and the possibility of loan forgiveness for some. But this July, the SAVE plan was blocked by two U.S. appeals courts which are questioning the legality of the plan.
If you are in the SAVE repayment plan, your loan is now in forbearance indefinitely. That means no loan payments are due until this issue is resolved, which could take a while. You also will not be charged any interest on your loan while it is in forbearance.
The important difference with the SAVE forbearance relative to the previous pandemic forbearance is that you will not earn Public Student Loan Forgiveness (PSLF) or Income Dependent Repayment (IDR) forgiveness credits. This could ultimately lead to forgiveness taking longer than you planned. Click here to access the U.S. Department of Education’s updates.
With SAVE repayments paused what should you be doing?
- Login to your student loan account and make sure that you are not accruing interest on your loan, loan servicers can make mistakes.
- Use this opportunity to shore up your emergency fund, save toward a goal or pay down high interest credit card debt by redirecting your monthly loan payment.
- Don’t let the money that would otherwise go toward monthly student loan payments get spent elsewhere in your budget, then when loan payments resume, you will have to make difficult adjustments.
- If you are in the PSLF close to the 120 monthly payment milestone, you may decide to change your repayment plan to avoid delaying forgiveness. Carefully weigh the pros and cons of making a change.
- It is possible that the SAVE repayment plan will end. Explore the other repayment plans so you know what to expect and can start planning for your future!
It has been an interesting few years for student loan borrowers with repayment stopping and re-starting. In addition, the uncertainty of loan forgiveness may be making planning for the future difficult. On the bright side of things…you have a wonderful opportunity to get ahead on your other financial goals right now! If you want to take full advantage of this opportunity but don’t know where to begin, give us a call and we would be happy to help!
