Key Points
- Borrowers enrolled in the SAVE Plan are being placed into forbearance.
- Forbearance periods will not count toward loan forgiveness programs like PSLF or IDR.
- Online loan repayment changes and consolidations are paused. Borrowers must use paper forms and expect processing delays.
On July 18, 2024, a federal court issued a stay preventing the Department of Education from operating the Saving on a Valuable Education (SAVE) plan. The decision has significant implications for millions of borrowers relying on this program.
Today, the Department of Education released guidance for what borrowers could expect in the coming weeks and months.
Specifically, the Department of Education highlighted:
- Borrowers currently enrolled in SAVE will be placed in administrative forbearance, meaning no payments are required and no interest will accrue.
- This administrative forbearance will NOT count towards Public Service Loan Forgiveness Or IDR Loan Forgiveness
- Loan servicers have temporarily paused processing of IDR applications until they can ensure applications are processed correctly.
- Online loan consolidation and income-driven repayment plan requests are paused, borrowers must use paper forms.
@thecollegeinvestor SAVE student loan repayment plan update! Yes forbearance, No PSLF coubts. #studentloans #loanforgiveness #studentloanforgiveness ♬ original sound - The College Investor
Immediate Impact On Borrowers
In the wake of the court’s ruling, borrowers enrolled in the SAVE Plan are being moved into forbearance. During this period, payments are not required, and no interest will accrue on their loans. However, the time spent in forbearance will not count toward Public Service Loan Forgiveness (PSLF) or Income-Driven Repayment (IDR) loan forgiveness.
Loan servicers are tasked with notifying SAVE Plan borrowers about their forbearance status. Those who have already received bills for August will also be moved to forbearance, ensuring that payments are not necessary during this period.
The Department of Education and loan servicers will provide regular updates to borrowers affected by the court’s decision.
During the forbearance period, borrowers will not receive credit toward PSLF. However, there are options to potentially “buy back” months of PSLF credit for time spent in forbearance due to the court’s stay. Eligible borrowers can make extra payments to cover these months, provided they meet specific criteria, including having an outstanding loan balance and approved qualifying employment.
Options For Borrowers
Borrowers affected by the stay have several options. They may choose to remain in forbearance or contact their loan servicers to change repayment plans. Those nearing the end of their time on PSLF may need to explore alternative routes 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 halted 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, processing of these applications is currently delayed due to the stay.
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Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page or on his personal site RobertFarrington.com.
He regularly writes about investing, student loan debt, and general personal finance topics geared toward anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications, including the New York Times, Wall Street Journal, Washington Post, ABC, NBC, Today, and more. He is also a regular contributor to Forbes.
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