Should You Leave the SAVE Plan? A Guide for Student Loan Borrowers

The recent injunction against the Saving on a Valuable Education (SAVE) plan has left millions of federal student loan borrowers uncertain about their repayment strategies. This article aims to guide those enrolled in the SAVE plan through their current options, focusing on loan forgiveness, repayment options, interest accrual, and the decision between remaining on forbearance and making payments.

What is the SAVE Plan?

The Saving on a Valuable Education (SAVE) plan is an income-driven repayment (IDR) plan for federal student loans, designed to make payments more affordable and provide an expedited path to loan forgiveness. It replaced the Revised Pay As You Earn (REPAYE) plan and introduced several borrower-friendly changes, including lower monthly payments, protection from excess interest accrual, and faster forgiveness for some borrowers.

Key features of SAVE include:

• Payments capped at 5% of discretionary income for undergraduate loans (down from 10% under REPAYE).
• Interest subsidies ensuring that unpaid interest doesn’t accumulate if payments don’t fully cover it.
• Forgiveness in as little as 10 years for borrowers with original balances of $12,000 or less.
• Spousal income exclusion for married borrowers filing separately.

The plan was implemented in phases, with full benefits scheduled for 2024. However, a recent court injunction has put SAVE on hold, leading to uncertainty for borrowers currently enrolled.

Understanding the Ongoing SAVE Plan lawsuit

In August 2024, the 8th U.S. Circuit Court of Appeals issued an injunction blocking the implementation of the SAVE plan, citing concerns over executive overreach by the Biden Administration. This month, that ruling was upheld and sent back to the lower courts to decide on the legality of SAVE. This legal action has effectively halted the plan, leaving approximately 8 million borrowers in a state of uncertainty regarding their repayment terms and potential benefits.

Implications for Borrowers Enrolled in the SAVE Plan

Following the court’s decision, the Department of Education placed borrowers enrolled in the SAVE plan into a special forbearance, known as the “SAVE forbearance.” During this period, payments are paused, and interest does not accrue on the outstanding loan balances. While this provides temporary relief, it also suspends progress toward loan forgiveness, as months spent in forbearance typically do not count toward the required repayment period for forgiveness programs.

I’m enrolled in the SAVE Plan. What Are My Options?

Borrowers enrolled in the SAVE Plan have two options: remain enrolled in SAVE or choose a new repayment plan. Given the current landscape, borrowers should carefully assess their options.

1. Stay on the SAVE Plan
   • Pros: No immediate payments are required, and interest is not accruing, preventing loan balances from increasing during this period. If the DoE allows grandfathering of those already enrolled in SAVE, those who remain on the plan will be allowed to stay.
   • Cons: Time spent in forbearance does not count toward income-driven repayment (IDR) forgiveness timelines or Public Service Loan Forgiveness (PSLF). This could extend the total time before loans are forgiven.
   • Consider If: You are experiencing temporary financial hardship and need short-term relief from payments, or you are okay with waiting things out until the litigation is resolved.
2. Switch to a different repayment plan
   • Pros: Resuming payments allows you to continue making progress toward loan forgiveness. Depending on your financial situation, certain plans may offer manageable payment structures.
   • Cons: Payments will resume, and interest will accrue, increasing the total amount paid over time. Payments on SAVE are typically lower than those on alternative plans, so your payment will likely increase by switching.
   • Consider If: You aim to maintain eligibility for forgiveness programs and can afford the monthly payments, or if you want the peace of mind that comes with being enrolled in a more stable plan.

Considerations Regarding Loan Forgiveness

For borrowers pursuing PSLF or IDR forgiveness, it’s crucial to understand how different repayment plans and forbearance periods impact your progress:

• Public Service Loan Forgiveness (PSLF): Requires 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer. Periods of forbearance generally do not count toward these 120 payments.
• Income-Driven Repayment (IDR) Forgiveness: Forgives the remaining balance after 20 or 25 years of qualifying payments, depending on the plan. Under SAVE, IDR forgiveness can kick in as soon as 10 years for borrowers with low balances. Similar to PSLF, forbearance periods typically do not count toward the required repayment period.

Can I Still Get Credit Toward Public Service Loan Forgiveness (PSLF) Right Now?

If you’re enrolled in the SAVE plan and wondering whether you can still make progress toward Public Service Loan Forgiveness (PSLF) during this uncertain time, the answer is: yes—but with some caveats. The general forbearance put in place due to the court injunction does not count toward PSLF. However, there are two ways you might still earn PSLF credit.

1. Buy Back Credit: If you’ve been working in public service but missed out on PSLF credit due to being in forbearance, you might be able to “buy back” those months. This means making a payment for past months that weren’t originally counted as qualifying payments. Here’s how it works:
   • You must still have an outstanding loan balance.
   • You need approved qualifying employment for those same months.
   • Buying back months must bring you to 120 qualifying PSLF payments.
2. Enroll in a Different PSLF-Eligible Plan: Another option is to switch to a different income-driven repayment (IDR) plan that qualifies for PSLF. Some plans might have higher payments than SAVE, and leaving certain IDR plans later could result in interest capitalization (where unpaid interest is added to your principal balance). However, every payment made under a PSLF-eligible IDR plan will count toward forgiveness.

Stay Informed & Take Action on Your Student Loans

With a new administration getting started, student loan policy is expected to evolve, and staying up to date is key to making the best decisions for your financial future. Whether you’re considering switching repayment plans, wanting to ride the lawsuit out, or just figuring out your next steps, knowledge is power!

👉 Visit StudentAid.gov to explore income-driven repayment (IDR) plans and submit your application today.

👉 Need expert guidance? At Docupop, we specialize in helping borrowers navigate the complexities of student loan repayment—so you don’t have to do it alone. Contact us today to get personalized support and ensure you’re on the right path to managing your student debt.

Don’t wait—take control of your student loans now!