SAVE Plan Blocked…Student Loan Repayment Uncertainty Continues

Student loan repayment continues to be a source of tension between Democrats and Republicans. The Biden Administration’s efforts to assist student loan borrowers have faced challenges from the Republicans. The most recent SAVE (Saving on a Valuable Education) repayment plan, introduced in 2023, aimed to provide favorable loan repayment terms and the potential for loan forgiveness for some. However, in July, the plan was blocked by two U.S. appeals courts questioning its legality.

For those enrolled in the SAVE repayment plan, loans are now in forbearance indefinitely. This means no payments are due until the issue is resolved, and no interest will accrue during this period. However, unlike previous forbearance periods, individuals will not earn credits towards Public Student Loan Forgiveness (PSLF) or Income Dependent Repayment (IDR) forgiveness.

With SAVE repayments paused, borrowers are advised to take certain steps:

• Check your student loan account to ensure no interest is accruing and correct any errors by loan servicers.
• Utilize the opportunity to strengthen your emergency fund, save towards a goal, or pay down high-interest credit card debt with the money that would have gone towards monthly loan payments.
• Avoid spending the saved money elsewhere in your budget to prevent difficulties when loan payments resume.
• Consider changing repayment plans if you are close to the 120 monthly payment milestone for PSLF to avoid delaying forgiveness.
• Explore other repayment plans in case the SAVE plan ends to prepare for the future.

FAQs

Q: Will I be charged interest during the SAVE plan forbearance period?

A: No, interest will not accrue on your loan while it is in forbearance.

Q: What should I do with the money I would have used for student loan payments?

A: Consider building your emergency fund, saving towards a goal, or paying down high-interest credit card debt.

Q: Will I still earn credits towards PSLF or IDR forgiveness during the SAVE forbearance?

A: No, credits towards forgiveness will not accumulate during this period.

Conclusion

The uncertainty surrounding student loan repayment and loan forgiveness continues to pose challenges for borrowers. While the SAVE plan is currently blocked, individuals can take advantage of the forbearance period to focus on other financial goals. It is important to stay informed, check your loan accounts regularly, and consider alternative repayment options to plan for the future.

If you need assistance in navigating these uncertain times and optimizing your financial strategy, reach out to a financial advisor for guidance.