SAVE Plan Put On Pause—Here’s What Borrowers Should Do Next

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Hello and welcome to Forbes Advisor’s Weekly Brief, where each week, we dive into the realities of consumer finance and empower you with knowledge to help make your financial journey easier.

Millions of student loan borrowers are in limbo as a recent court ruling has paused the Department of Education's Saving on a Valuable Education (SAVE) plan. This plan has helped lower monthly student loan payments for millions of consumers and stops interest from snowballing on their loans. 

On July 18, 2024, the 8th Circuit Court of Appeals blocked all elements of the Biden-Harris administration’s SAVE plan that were not already on hold after a June ruling by another court. The court order affects borrowers with pending SAVE applications, and those planning to enroll can’t apply—applications for SAVE were closed as of Friday morning.

Currently, payments for SAVE borrowers are on hold while courts review the legality of the plan. During this forbearance period, no interest will be added to loans, but this time won’t count toward loan forgiveness.

This week, we’ll explore what might happen next with the SAVE plan and what borrowers can prepare to do next. 

SAVE Plan Put On Pause—Here’s What Borrowers Should Do Next

According to the White House, more than 400,000 people have already had their student loans forgiven through the SAVE plan, and nearly 8 million people are currently enrolled. The recent court orders won't affect people who have already had their loans forgiven under the program.

For borrowers enrolled in the SAVE plan and placed in forbearance, there is no need to worry about making payments right now. However, if the SAVE plan ends up being scrapped. other income-driven repayment (IDR) plans might still be options to lower monthly payments. 

Mike Pierce, executive director of the Student Borrower Protection Center, a nonprofit focusing on student loan debt, stated that the court’s decision has thrown the student loan system into chaos, and borrowers are suffering as a result. Pierce emphasized that the Biden Administration has the power and responsibility to protect borrowers from this legal battle by halting student loan payments while the court battle plays out.

As the situation unfolds, borrowers may want to explore alternative options in case the SAVE plan is discontinued. Here’s where you should look:

Loan forgiveness: There are other income-driven repayment programs offering loan forgiveness once the repayment term is complete. For more details on all available loan forgiveness options, visit studentaid.gov/forgiveness

Private loans: Private loans aren't eligible for the SAVE plan, but in some instances you may be able to refinance to another servicer with a better rate and more flexible payment options. It's advisable to contact your private lender directly for more information. (Experts generally advise against borrowers with federal student loans from refinancing to private loans due to risks laid out here.)

Parent Plus loans: Parent Plus Loans don't qualify for the SAVE plan. Borrowers with these loans should visit studentaid.gov/loan-simulator to explore other repayment plans. However, if you also have other federal student loans, they may still be eligible for the SAVE plan.

Related Stories: 

• Biden Student Loan Forgiveness FAQs: The Details, Explained
• How To Lower Your Student Loan Payments

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