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On July 18, 2024, a federal court issued a stay preventing the Department of Education from implementing the Saving on a Valuable Education (SAVE) plan. The decision has significant implications for millions of borrowers who rely on this program.
Today, the Department of Education released guidance explaining what borrowers can expect in the coming weeks and months.
Specifically, the Ministry of Education highlighted:
- Borrowers currently enrolled in SAVE are in administrative deferment, meaning no payments are required and no interest accrues.
- This administrative deferral will NOT count toward Public Service Loan Forgiveness or IDR Loan Forgiveness.
- Credit servicers have temporarily suspended the processing of IDR applications until they can ensure that the applications are processed correctly.
- Online applications for loan consolidation and income-based repayment plans are suspended; borrowers must use paper forms.
Immediate impact on borrowers
Under the court's ruling, borrowers participating in the SAVE plan will be placed in a forbearance period. During this time, no payments are required and no interest will accrue on their loans. However, the forbearance will not count toward loan forgiveness under the Public Service Loan Forgiveness (PSLF) or Income-Driven Repayment (IDR) programs.
The job of loan servicers is to notify SAVE plan borrowers of their forbearance status. Those who have already received bills for August will also be placed in forbearance status to ensure that no payments are required during this time.
The Department of Education and loan servicers will provide regular updates to borrowers affected by the court decision.
During the forbearance period, borrowers will not receive a credit toward PSLF. However, there is an opportunity to potentially “buy back” months of PSLF credit for the time spent in forbearance due to the court's stay. Eligible borrowers can make additional payments to cover those months, provided they meet certain criteria, including an outstanding loan balance and approved qualifying employment.
Options for borrowers
Borrowers affected by the forbearance have several options. They can choose to remain in forbearance or contact their lender to change repayment plans. Those nearing the end of their PSLF period may need to explore alternative paths to ensure their payments count toward forgiveness.
For those looking to enroll in the SAVE plan or other IDR plans, the recent court ruling has temporarily suspended online applications on the Federal Student Aid website. Borrowers can still apply by submitting a PDF application to their servicer via upload, mail, or fax. However, due to the suspension, processing of these applications is currently delayed.
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