At this writing, as many are getting ready to conduct student loan exit counseling, there is a lot of confusion and concern regarding the status of the Saving on a Valuable Education (SAVE) repayment plan and other income-based repayment options. Below we attempt to answer the most common questions on the topic.
Q: What is SAVE and how is it different from other repayment options?
A: SAVE was introduced in June 2023 and was intended to replace the Revised Pay as You Earn (REPAYE) income-driven repayment option. SAVE offers the following benefits not found in other plans
- Early forgiveness for loans with balances of $12,000 or less — 10 years as opposed to 20 or 25 years.
- An interest subsidy when the calculated monthly payment is less than the interest accrued.
- For loans borrowed to pay for undergraduate study, only 5% of discretionary income is used in the monthly payment calculation.
Q: Who is eligible to select this program?
A: Any borrower who was already repaying in an income-driven or contingent program was encouraged to switch. Borrowers in the REPAYE program where automatically switched in August 2023.
Q: That all sounds great, so what’s the problem?
A: In July 2024 several state attorneys general filed lawsuits against the Department of Education (ED) to end SAVE, and in February of this year an injunction was issued preventing them from implementing any facet of SAVE as well as processing time-based loan forgiveness in any of the income-driven or contingent programs. As a result, ED has made applications for all programs unavailable.
Q: What happens to the borrowers who were already a part of the SAVE program?
A: Borrowers in the SAVE program, both new applicants and those moved from the REPAYE program, have been placed in forbearance until further notice. No interest will accrue unlike a borrower-requested forbearance, which is good news. However, for those seeking Public Service Loan Forgiveness (PSLF), this period will not count toward meeting the required number of payments even if they elect to make payments during the forbearance period. Borrower also cannot elect to stay in active repayment status.
Q: Are there any options for borrowers in the SAVE program who are working toward PSLF?
A: Yes, these borrowers will be able to apply for a different income-driven or contingent repayment program. At this writing, applications for all programs have been shut down, but it is anticipated that programs except SAVE and REPAYE (which was replaced by SAVE) will start taking applications again shortly.
Q: What about students who had applications in process for SAVE or another income-driven plan?
A: Student loan servicers will place borrowers held up by the litigation in forbearance for 60 days so they will not have to make payments while waiting for their applications to be processed. In the meantime, these borrowers should consider selecting a different plan since we don’t know how long it will take for SAVE to resume accepting applications or even if it will continue to exist.
Q: Where can I get more information about the status of these loan repayment options?
A: Federal Student Aid has a dedicated page with updates for borrowers. ED also has information for borrowers on its website. At this writing, the FSA website has the most current information.
As always, if you need additional guidance or assistance planning your exit counseling program, don’t hesitate to contact the Higher Education Assistance Group at info@heag.us or learn about our other resources at heag.us.
Resources:
https://freestudentloanadvice.org/repayment-plan/save-litigation-updates-and-faq/
