Court Temporarily Blocks SAVE Program:
What Borrowers Need to Know
- On July 18th, 2024, the 8th Circuit Court of Appeals issued a stay order temporarily blocking the SAVE program in its entirety (Jarvis). According to the Department of Education, borrowers will be placed in forbearance until the court issues a further ruling. Although this administrative forbearance will be interest-free, the time in forbearance will not count towards Public Service Loan Forgiveness (PSLF) or Income-Driven Repayment (IDR) forgiveness (“Department of Education Updates on Saving on a Valuable Education (SAVE Plan) | U.S.”).
What Should Borrowers Do?
As with all financial planning, the best course of action depends on your situation and goals. If forgiveness through PSLF or IDR plans is not your goal, remaining in the SAVE program to take advantage of the interest-free period might make sense.
For those seeking forgiveness soon and wanting to avoid forbearance, switching to a different IDR plan, such as the Income-Based Repayment (IBR) plan, may be worth considering. Payments under other IDR plans should count towards PSLF and IDR repayment credit. However, it is crucial to review the details of each IDR plan and understand the consequences of switching plans, such as interest capitalization. We encourage you to consult with a student loan expert to make the best choice for your situation. To complicate matters, the Department of Education has reported that servicers are not processing new IDR applications due to the stay, causing further delays (“Department of Education Updates on Saving on a Valuable Education (SAVE Plan) | U.S.”).
Another option for those wanting credits towards PSLF forgiveness is the “Buy Back” program. This program allows you to buy back months in which you did not qualify due to deferment or forbearance, making your payments non-qualifying. If you were working with a qualifying employer but were in forbearance (such as the current situation with the SAVE program), you could pay back the likely amount you would have paid under the IDR program that would have been in effect during those months to complete your 120 months needed for PSLF forgiveness (“Federal Student Aid”). For more information, visit the Federal Student Aid website.
It is unclear how long this forbearance will continue, but more actions are expected regarding the 8th Circuit Court of Appeals. If you want to discuss your student loan situation, especially during this confusing time, reach out to Modoo Strategy LLC and speak with a Certified Student Loan Professional.
Works Cited
“Department of Education Updates on Saving on a Valuable Education (SAVE Plan) | U.S.” Department of Education, 18 July 2024, https://www.ed.gov/save. Accessed 28 July 2024.
“Federal Student Aid.” Federal Student Aid, https://studentaid.gov/manage-loans/forgiveness-cancellation/public-service/public-service-loan-forgiveness-buyback. Accessed 28 July 2024.
Jarvis, Heather. “8th Circuit Court of Appeals Halts SAVE -.” Certified Student Loan Professional, 20 July 2024, https://cslainstitute.org/8th-circuit-court-of-appeals-halts-save/. Accessed 28 July 2024.
