In response to a number of court orders in two lawsuits brought by state attorneys general, the Department of Education has put all borrowers in the SAVE plan into a temporary forbearance, meaning they do not need to make payments, until the lawsuits are decided or the court orders are lifted. This page provides background information about those lawsuits and how the Department of Education is responding to court orders, but for the most up-to-date information, check the Department of Education’s website.
The SAVE plan is the newest income-driven repayment plan. For most borrowers, it offers lower monthly payment amounts than other plans, prevents borrowers’ loan balances from growing, and reduces the amount of interest that borrowers need to repay. It also shortens the number of years some borrowers need to make payments. Parts of this plan went into effect in the summer of 2023, and all of it was scheduled to go into effect on July 1, 2024.
Where do things currently stand for student loan borrowers?
As of August 14th, 2024, Department of Education has taken its IDR application, IDR recertification, and consolidation application processes off of studentaid.gov. While borrowers can send paper (or upload PDF) IDR applications and recertification forms to their loan servicers, those servicers have paused processing applications, regardless of which plan the borrower is applying for. Borrowers can still submit a paper application to servicers to consolidate those loans and servicers have been processing those applications. However, what the court orders mean for borrowers changes depending on what the borrower’s situation is.
For the most up-to-date information from the Department of Education, borrowers should visit their website.
Borrowers Enrolled in SAVE
Right now, borrowers enrolled in the SAVE plan have been placed in a forbearance with 0% interest–meaning borrowers in SAVE will not be required to make payments and will not be charged interest. But the months spent in forbearance do not count towards IDR or Public Service Loan Forgiveness (PSLF), meaning borrowers are missing out on making progress toward becoming debt-free in those programs.
Many borrowers who want to keep making progress in IDR or PSLF wonder if they can continue to earn credits by opting out of the forbearance and continuing to make payments. So far the Department has said that the only certain way to continue earning credit in IDR or PSLF is to move into a different repayment plan, such as IBR or PAYE, and make payments under that plan. This, however, is tricky because, as of August 13, servicers are not currently processing any IDR applications. If borrowers want to remain in SAVE and to keep making SAVE payments, it is not clear whether those payments will count toward IDR or PSLF, as the court orders have temporarily blocked the Department from using the SAVE monthly payment calculations and from implementing many aspects of SAVE. The Department says on its website that payments made during the forbearance will be applied to the borrower’s future bills.
The SAVE forbearance poses a particular challenge for borrowers seeking PSLF forgiveness. The PSLF rules allow borrowers to “buy back” months that do not count towards PSLF by paying the amounts that they would have needed to pay under an IDR plan. However, this is a new process, so it is unclear how well it will work. Right now the “buy back” process is only available to borrowers that will be eligible for cancellation if these months in forbearance are counted–meaning, the borrower will have 120 months of qualifying payments and time in public service once the “bought back” months in forbearance are counted. It is unclear what plan the Department will use to calculate how much SAVE borrowers will owe under the buy back process during the months the borrower is in in the automatic SAVE forbearance, and it may depend on the outcome of the SAVE litigation.
Borrowers Enrolled In Other IDR Plans
Borrowers in the other IDR plans (Income Contingent Repayment, Income Based Repayment, and Pay As You Earn/PAYE) should plan to continue making their regular payments. Borrowers have until November 1, 2024 to recertify their income if they have not already done so following the payment pause. Because the Department has taken down its online recertification application, borrowers may submit a paper or PDF form to their servicer to recertify their income. However, as of August 13, 2024, servicers are not processing IDR recertification forms.
Borrowers That Want to Enroll in IDR
Borrowers can still submit paper and PDF applications to their servicer to enroll in SAVE and other IDR plans. If borrowers submit applications to enroll in an IDR plan, their servicer should put them in a processing forbearance until their application has been processed that allows borrowers to temporarily stop making payments and does count towards IDR and PSLF. However, as of August 13, 2024, servicers have put a pause on processing applications for all of the IDR plans and not all servicers are putting borrowers in the PSLF and IDR eligible processing forbearance. It is not clear when the Department of Education will require servicers to begin processing applications again, and even once it does, lengthy delays are expected as there will be a substantial backlog of applications to process. In the meantime, borrowers may call their servicer to request a forbearance, or may rely upon the student loan on-ramp that is in place until September 30th and choose not to make payments until the on-ramp is over. However, borrowers should be aware that months where they take advantage of the on-ramp will not count towards IDR or PSLF forgiveness.
Background About The SAVE Regulations and the States’ Lawsuits
In July 2023, the Department published final rules that changed portions of the existing Income-Driven Repayment (IDR) regulations and replaced the old REPAYE plan with a new, more affordable plan, SAVE. Last summer, the Department partially implemented the SAVE plan and put the following provisions into effect:
- Lowering monthly payments by increasing the amount of income excluded when the Department calculates a borrower’s monthly payments;
- Not charging any borrower enrolled in the SAVE plan interest that isn’t covered by their monthly payment;
- Stopped counting spousal income for married borrowers who file their taxes separately in the SAVE plan (making it the same as the other IDR plans).
At the same time, the Department transferred borrowers who were enrolled in REPAYE into SAVE, and allowed other borrowers to begin enrolling in SAVE. In February 2024, the Department began implementing the portion of the SAVE plan that shortens the number of years some borrowers need to make payments and canceled 153,000 borrowers’ loans.
On July 1, 2024, the rest of the regulations were scheduled to go into effect. Those provisions included:
- Reducing monthly payments for loans that paid for a borrower’s undergraduate education on the SAVE plan;
- Providing new options to allow borrowers to share their tax income with the Department of Education so that it is easier to enroll and stay enrolled in any income driven repayment plan without having to fill out a paper application;
- Stopping interest capitalization when borrowers leave the ICR, PAYE, or SAVE plans;
- Streamlining and improving aspects of all of the income driven repayment plans, like providing a common “family size” definition and providing credit for time spent in specific forbearances and deferments;
- Allowing borrowers to receive credit towards IDR forgiveness for payments made before they consolidated their loans;
In Spring 2024, several months after the Department began implementing portions of the SAVE plan, two groups of state attorneys general brought legal challenges to the regulations that created the SAVE plan. Eleven states, led by Kansas, filed suit in Kansas federal court, and six courts, led by Missouri, filed a Missouri federal court. Many of the states challenging the SAVE plan also challenged President Biden’s student loan cancellation plan, which was struck down by the Supreme Court in June 2023. In both cases, the states asked the court for a preliminary injunction, or an order that the Department stop applying the SAVE regulations, so that the states would not experience “harm” while the lawsuit was ongoing. However, neither court has issued a final decision about whether or not the SAVE regulations are legal.
These lawsuits have resulted in a number of conflicting and changing court orders. These court orders have temporarily blocked the Department of Education from implementing or continuing to operate some aspects of the SAVE plan and other IDR rules, which has caused tremendous disruption and confusion for borrowers. We anticipate that as this litigation continues, there may be more orders that create more upheaval.
