SAVE Plan Forbearance – What It Means for Borrowers

• You don’t need to make payments during the SAVE Plan forbearance, but remember that time in forbearance won’t count toward loan forgiveness like PSLF or IDR.

• You can use the ‘buyback’ option to earn credit for time spent in forbearance if you’re close to reaching PSLF by making extra payments.

• The SAVE Plan forbearance is temporary and may last until 2025 or beyond, depending on legal rulings that could change your repayment obligations.

You don’t have to make any payments under the SAVE Plan forbearance, and no interest will accrue on your loans. But here’s the catch—time spent in forbearance won’t count toward loan forgiveness under Public Service Loan Forgiveness (PSLF) or Income-Driven Repayment (IDR) forgiveness.

We know this situation feels uncertain, and while this forbearance is temporary, we don’t yet have a clear timeline for when it will end.

Related: SAVE: The New Student Loan Repayment Plan

The SAVE Plan forbearance impacts you in a few key ways:

1. No Payments for Now: You don’t need to make any monthly payments while you’re in forbearance. This break can help if you’re dealing with financial hardship or just feeling uncertain about your loans.

2. No Interest Added: A big benefit of this forbearance is that no interest will pile up on your loans. Usually, interest grows during forbearance, but under the SAVE Plan, your loan balance won’t increase while this pause is in effect.

3. No Progress Toward Forgiveness: Unfortunately, this time in forbearance won’t help you get closer to loan forgiveness. It won’t count toward programs like PSLF or IDR plans. So if you’re aiming for forgiveness, this pause won’t add to your qualifying months.

Right now, there isn’t a clear end date for the SAVE Plan forbearance. The forbearance will continue until legal challenges surrounding the SAVE Plan are resolved or until loan servicers are able to issue bills based on any new guidelines from the courts. The next key event in this case is the hearing scheduled for October 24, 2024.

But any decision made by the courts could be appealed, which means the final outcome might not be determined until 2025 or later. This means borrowers could remain in forbearance for an extended period, potentially until mid-2025, depending on how quickly the legal process moves.

During this time, you won’t be required to make payments, and no interest will accrue on your loans, but this period also won’t count toward loan forgiveness under PSLF or IDR.

It’s important to stay in contact with your loan servicer for updates and monitor legal developments to understand when your payments might resume.

Yes, depending on your situation, there are still ways to earn credit toward forgiveness during the SAVE Plan forbearance.

If You’re Close to PSLF, Use the Buy Back Option

If you’re nearing the 120 qualifying payments required for PSLF, the Department of Education offers a “buyback” option. This allows eligible borrowers to retroactively earn PSLF credit for time spent in forbearance or deferment. Here’s how it works:

• Submit a buyback request to your loan servicer.

• Make an extra payment equal to at least what you would have owed under an IDR plan during the months you want to buy back.

• Ensure that you still have an outstanding loan balance and qualifying employment for the months you want to buy back.

This option is ideal if you’re close to qualifying for PSLF and want to make sure you don’t lose progress during the forbearance period.

Related: PSLF Buyback Option: How it Works

If You’re Close to IDR Forgiveness, Consider Switching to Another IDR Plan

If you’re working toward forgiveness under an IDR plan, another option is to switch to a different IDR plan, like Income-Based Repayment (IBR) or Income-Contingent Repayment (ICR).

When you switch plans, you’ll be placed into a processing forbearance for up to 60 days while your application is processed. Time spent in processing forbearance does count toward PSLF and IDR forgiveness.

But there are a few important things to consider:

• Interest will accrue during processing forbearance.

• After 60 days, if your application isn’t processed, you may be moved into a general forbearance, which doesn’t count toward forgiveness.

• Payments under ICR or IBR are typically higher than under the SAVE Plan, so assess whether you can afford the new monthly payments before making the switch.

This option can help you continue earning credit, but be sure to weigh the financial impact and potential risks.

Note: To switch to a new IDR plan, you’ll need to submit a paper application directly to your loan servicer, along with your income information. Since the online application on StudentAid.gov is currently unavailable, this is the only way to apply.

After submitting the application, it’s important to call your servicer to confirm that your account is placed into a processing forbearance, which ensures that the time spent waiting for the application to be processed will count toward forgiveness.

Here are some proactive steps you can take to manage your federal student loans during this uncertain time:

Stay in Contact with Your Loan Servicer

It’s important to maintain regular communication with your loan servicer. They can provide updates on your forbearance status, repayment options, and any changes stemming from ongoing legal challenges.

Be sure to call your servicer if you submit any applications, as you may need to ensure your account is placed in a processing forbearance.

Evaluate Your Repayment Plan Options

If you’re aiming to earn credit toward forgiveness during this period, consider whether switching to a different IDR plan makes sense for your situation. This option could allow you to start earning credit again, but weigh the potential for higher monthly payments and any financial trade-offs.

Consulting with your loan servicer can help you determine the best course of action based on your financial circumstances.

Submit Consolidation and IDR Applications

If you’re considering enrolling in a new IDR plan or consolidating your loans, you can still submit an application, but the process is different right now.

Since the online application is unavailable, you’ll need to submit a PDF application and your income information to your loan servicer by mail, fax, or by uploading it to their website.

Once submitted, call your servicer to confirm they place your account into processing forbearance to ensure that the time counts toward forgiveness.

For official guidance on how to submit your applications, visit StudentAid.gov.

Why Is This Happening?

The current forbearance under the SAVE Plan is a direct result of recent court rulings. A legal injunction from the 8th Circuit Court of Appeals has prevented the U.S. Department of Education from fully implementing the SAVE Plan, a key initiative of President Joe Biden’s administration.

The court’s ruling has halted loan servicers from calculating accurate monthly payments, which has led to borrowers being placed into general forbearance.

Republican-led states have challenged the SAVE Plan, arguing that it places an unfair burden on taxpayers. As a result, millions of borrowers are stuck in limbo, unable to make payments or progress toward forgiveness under the SAVE Plan.

What Could Happen Next?

From my perspective as a student loan lawyer, the outcome of this case is uncertain, but it’s possible that the courts will defeat the SAVE Plan, regardless of the political landscape.

This holds true whether President Joe Biden’s administration continues, or if we see a shift in leadership with someone like Vice President Kamala Harris or former President Donald Trump winning the upcoming election.

Even if the courts rule against the SAVE Plan, a future administration, especially one under Harris, may try to implement a similar initiative to support millions of Americans burdened by student loan debt.

The next major hearing is scheduled for October 24, 2024. While this will be a pivotal moment, any ruling by the 8th Circuit Court of Appeals is likely to be appealed, meaning a final resolution may not be reached until 2025 or beyond.

How Does This Affect You?

Borrowers are placed into forbearance because servicers are unable to bill you accurately due to the court order. The forbearance will last until legal decisions are made or until servicers can calculate payments under any new guidelines.

For now, borrowers should expect the forbearance to continue, possibly until 2025, depending on how the legal battle unfolds.

What About Recertification and Payment Amounts?

If the courts ultimately strike down the SAVE Plan, borrowers will need to prepare for changes in their payment amounts.

Without the SAVE Plan, income-driven repayment (IDR) plans like IBR and ICR will remain options, but the more favorable terms of SAVE, like the lower payment caps and interest subsidies, would be lost.

This means borrowers may see higher payments once the legal challenges are resolved. For now, it’s essential to stay in communication with your loan servicer and be aware of any potential recertification deadlines or changes to your repayment plan.

The SAVE Plan forbearance temporarily pauses your payments and stops interest from accruing, but it doesn’t count toward loan forgiveness. While it offers immediate relief, it may extend the time it takes to qualify for forgiveness under PSLF or IDR.

Stay informed by keeping in touch with your loan servicer and monitoring court decisions that affect your repayment terms.

If you’re unsure about your next steps, schedule a consultation with one of our student loan experts to make the best financial decisions for your future.