Student Loan Forgiveness: The Latest on the SAVE Plan

For millions of federal student loan borrowers, the promise of lower payments and faster forgiveness has hit a significant roadblock. The Saving on a Valuable Education (SAVE) plan, introduced by the Biden-Harris administration as the most affordable repayment option in history, is currently entangled in federal court battles. If you are confused about whether you need to make a payment this month or if your interest is growing, you are not alone.

The Legal Blockade: Why the SAVE Plan is Paused

The current chaos stems from two major lawsuits filed by Republican-led states, specifically led by attorneys general in Missouri and Kansas. These lawsuits argue that the Department of Education overstepped its legal authority by creating the SAVE plan without explicit congressional approval. They specifically target the plan’s generous terms, such as the accelerated forgiveness timeline and the reduction of payments from 10% to 5% of discretionary income.

In response to these filings, the 8th U.S. Circuit Court of Appeals issued a far-reaching injunction. This court order did not just pause specific parts of the plan; it blocked the entire program. As a result, the Department of Education has been forced to pause all activities related to SAVE while the litigation proceeds.

This legal standoff leaves three main provisions in limbo:

  • Payment Reduction: The scheduled cut that would have lowered payments for undergraduate loans to 5% of discretionary income.
  • Interest Subsidy: The provision that prevented unpaid interest from capitalizing (growing) on your balance.
  • Early Forgiveness: The track that allowed borrowers with smaller initial balances to see forgiveness in as little as 10 years.

Status for Borrowers Currently Enrolled in SAVE

If you were already enrolled in the SAVE plan before the court order, your loans have likely been placed into an interest-free administrative forbearance. This is a holding pattern designed to protect you while the courts make a decision.

Here is exactly what this means for your finances right now:

1. No Payments Required

You do not need to make a monthly payment while your account is in this specific administrative forbearance. Your loan servicer (such as MOHELA, Nelnet, EdFinancial, or Aidvantage) should have notified you of this status. If you have auto-pay enabled, it should be suspended automatically, but you should log in to your servicer’s portal to verify this to avoid accidental withdrawals.

2. 0% Interest Rate

During this forbearance period, interest will not accrue on your loans. Your balance will remain exactly where it is today. This is different from a standard forbearance where interest usually piles up.

3. Impact on Forgiveness Counts

This is the most critical downside of the current pause. Time spent in this specific court-ordered administrative forbearance does not count toward Public Service Loan Forgiveness (PSLF) or Income-Driven Repayment (IDR) forgiveness. Under normal circumstances, administrative forbearance counts, but the court rulings explicitly prevent the Department of Education from crediting this time toward forgiveness.

Options for Public Service Workers (PSLF)

If you are working toward PSLF, the fact that these months do not count is frustrating. However, you do not need to panic yet. The Department of Education has indicated that a “buyback” option will be available.

The PSLF Buyback allows you to make retroactive payments for months that did not originally count. Once you reach 120 months of qualifying employment, you can submit a request to “buy back” the months you spent in this forbearance. You would pay what you would have owed under an income-driven plan for those months.

Action Item: Do not attempt to buy back these months now. You must wait until you have 120 months of certified employment to submit a buyback request. For now, continue to submit your employment certification forms annually.

Applying for IDR Plans During the Blockade

The legal injunction has paralyzed the application process for Income-Driven Repayment plans.

  • Online Applications: The online IDR application tool on StudentAid.gov is currently disabled. You cannot apply for SAVE or any other IDR plan digitally.
  • Paper Applications: You can still submit a paper PDF application to your loan servicer. However, servicers have paused processing these forms. Your application will sit in a queue until the legal situation is resolved.

If you are not on SAVE and need to lower your payments immediately, your options are limited. You can request a general forbearance or a hardship deferment from your servicer, but remember that interest usually accrues during these standard relief periods.

Is the SAVE Plan Dead?

The plan is not dead, but it is in severe jeopardy. The case is expected to move through the appeals process and could potentially reach the Supreme Court.

While the SAVE plan is frozen, the Income-Based Repayment (IBR) plan remains the only income-driven option clearly protected by statute, as it was created by Congress rather than through agency regulations. However, switching to IBR is difficult right now due to the processing pause mentioned above.

For now, the Department of Education advises borrowers to sit tight. They are updating StudentAid.gov regularly with news. If you are in the interest-free forbearance, the best financial move is typically to take the money you would have paid toward your student loans and place it in a high-yield savings account. If the plan survives, you can use that money to make payments later. If the plan is struck down, you have a lump sum ready to tackle the debt under a different arrangement.

Frequently Asked Questions

Will my payments go up if the SAVE plan is cancelled? If the courts permanently strike down the SAVE plan, borrowers may be moved to the older REPAYE plan or the IBR plan. These plans generally calculate payments at 10% or 15% of discretionary income, which is higher than the 5% promised by SAVE for undergraduate loans.

Can I switch to a different plan right now? Technically, yes, but practically, no. You can submit a paper application to switch to a different plan like IBR, but servicers are currently paused on processing these applications. You will likely be placed in a processing forbearance while you wait.

Does this affect the “One-Time Account Adjustment”? No. The IDR Account Adjustment (often called the payment count update) is a separate administrative action. The Department of Education is continuing to review accounts to give credit for past forbearance or deferment periods toward forgiveness. This process is expected to conclude in late 2024.

Should I consolidate my loans right now? Proceed with caution. While consolidation is necessary to make older FFEL loans eligible for federal programs, consolidating right now could leave you stuck in processing limbo. If you have already applied for consolidation, the application will proceed, but placing those new loans onto an IDR plan will be delayed.