The Biden administration unveiled updated guidance last month for borrowers in the SAVE plan. Millions of borrowers who had sought lower payments and eventual student loan forgiveness under the program remain stuck due to legal challenges, and the future of SAVE is now in serious doubt.
The SAVE plan is the newest income-driven repayment, or IDR, plan, that was released last year by the Biden administration. The program provides borrowers with lower payments, interest benefits, and several routes to eventual student loan forgiveness. But SAVE remains blocked following a court order issued last August in response to a legal challenge brought by a group of Republican-led states. As a result, more than eight million borrowers were pushed into an involuntary forbearance, where most remain today.
The Education Department issued new guidance for the SAVE plan forbearance in December, updating options that can provide borrowers with alternative paths to resuming their loan forgiveness progress for IDR and PSLF, and clarifying other details for the forbearance period. Here’s the latest.
The SAVE Plan Forbearance Still Does Not Count Toward Student Loan Forgiveness For IDR Or PSLF
One of the most important takeaways from the Education Department’s updated guidance is that nothing has fundamentally changed for the SAVE plan forbearance in terms of student loan forgiveness. The forbearance period will still not count toward loan forgiveness, and that’s true for both IDR and for PSLF.
“The Department has placed borrowers currently enrolled in SAVE (previously known as REPAYE) into a general forbearance because their servicers are not currently able to bill them at the amount required by a recent court order,” says the department in the new guidance. “Time spent in this forbearance does not provide Public Service Loan Forgiveness (PSLF) and Income Driven Repayment (IDR) credit.”
Importantly, student loan forgiveness also remains blocked under the SAVE plan, even for borrowers who reach the 20- or 25-year threshold that would normally qualify them for a discharge. And the block is not just limited to SAVE.
“Borrowers should be aware that forgiveness as a feature of any IDR plan created by the Department – specifically, the SAVE (formerly REPAYE), PAYE, and ICR repayment plans — is currently enjoined,” says the department. But loan forgiveness under Income-Based Repayment, or IBR, remains open because that program was created separately by Congress and is not subject to a legal challenge at this time.
Updated Guidance Clarifies Interest Accrual And SAVE Plan Forbearance Period
Some borrowers have been receiving correspondence from their loan servicers suggesting that interest has started accruing on their loans under the SAVE plan forbearance. But that is likely a communications error.
“Interest will not accrue during this forbearance,” the Education Department reaffirmed in its updated guidance. Borrowers who have received correspondence from their loan servicer suggesting otherwise can contact their loan servicer for clarification, or can monitor their balances via their student loan servicer’s online portal to see if interest is actually accruing.
Similarly, some borrowers have received correspondence from their loan servicer suggesting that the SAVE plan forbearance will end by a specific date in 2025. But that is simply not true; there is no firm end date at this time. The forbearance will continue until there are new legal or policy developments that would allow the forbearance to end, and no one can know at this juncture exactly when that will happen.
The forbearance “will last until servicers are able to send bills to borrowers at the appropriate monthly amount,” says the updated guidance, confirming that there is no concrete end-date. End-dates for the forbearance in loan servicer correspondence or online account screens may simply be a placeholder for the loan servicer’s systems.
Additional Options For SAVE Plan Borrowers To Pursue Student Loan Forgiveness Under IDR And PSLF
Borrowers can change repayment plans to leave the SAVE plan forbearance and get back on track for student loan forgiveness under IDR or PSLF. To do so, borrowers would need to switch to a different IDR plan. The Education Department’s updated guidance reflects that two additional IDR options — the PAYE and ICR plans — have officially been reopened.
“As of December 16, 2024 borrowers may apply for the following IDR plans: Pay As You Earn (PAYE), SAVE (previously known as REPAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR), if borrowers meet any plan specific eligibility requirements,” says the guidance. “For borrowers who would prefer to make payments during this time period — such as borrowers pursuing PSLF or low-income borrowers who would owe no monthly payments — enrolling in PAYE or ICR may be an option to consider.”
However, borrowers should be aware of possible pitfalls and eligibility issues associated with changing to a different IDR plan. For example, PAYE and IBR have “partial financial hardship” requirements that can limit enrollment. PAYE also has disbursement date restrictions that may serve as an additional enrollment barrier. And monthly payments under PAYE, IBR, and ICR may be significantly more expensive than the SAVE plan, with fewer or no interest benefits.
“We encourage borrowers to review the specifics of each IDR plan as borrowers make the best choices for their circumstances,” warns the department. “For example, if a borrower enrolls in IBR and then moves to a different repayment plan, accrued and unpaid interest will capitalize.”
Processing Forbearance Can Count Toward Student Loan Forgiveness For IDR And PSLF
IDR processing had been halted for several months after the SAVE plan was blocked over the summer because the Education Department needed time to update its systems. Now, the department has suggested that IDR application processing is either resuming or should begin to resume soon — but the timing is unclear, and some loan servicers are telling borrowers that they still aren’t processing IDR applications.
“In the coming weeks, the Department expects servicers to begin processing certain IDR applications that were paused following court orders affecting the terms and availability of IDR plans,” says the guidance.
But borrowers should expect significant delays when processing does resume. Those who apply to switch to a different IDR plan may be placed into a “processing forbearance” for up to 60 days, which can count toward student loan forgiveness for both IDR and PSLF.
“In contrast to the general forbearance for borrowers enrolled in SAVE (previously known as REPAYE), interest will accrue while a borrower is in processing forbearance,” explains the department in the updated guidance. “Additionally, time spent in processing forbearance (up to 60 days) is eligible for PSLF and IDR credit. Processing forbearance will last no longer than 60 days, at which point a borrower may be placed into general forbearance under the terms described for that status.”
Officials Are Working On Improving PSLF Buyback As Alternative Student Loan Forgiveness Pathway
Borrowers pursuing student loan forgiveness under PSLF have an additional option (on top of switching to a different IDR plan): a new program called PSLF Buyback, which allows borrowers to “buy back” the time associated with a non-qualifying forbearance period so that it can count toward PSLF.
“Borrowers with 120 months of eligible employment can buy back months that were not originally counted as qualifying payments because the borrower was in an ineligible deferment or forbearance status,” says the department. “Borrowers must submit a buyback request and make an extra payment of at least as much as what borrowers would have owed under an income-driven repayment (IDR) plan during the months they are trying to buy back. Borrowers can buy back these months only if they still have an outstanding balance on their loan(s), and they have approved qualifying employment for these same months, and buying back these months will complete their total of 120 qualifying PSLF payments.”
Some PSLF borrowers who submitted buyback requests have been waiting for months for a decision from the Education Department. This may be because the PSLF Buyback program is so new, and department officials had not yet adequately staffed the division reviewing buyback requests. But due to the SAVE plan forbearance, the department is experiencing a surge in PSLF Buyback applications.
“The Department is continuing to improve operations for the PSLF Buy Back program,” says the updated guidance. This suggests officials are aware of the lengthy processing times for the program and are working to streamline operations. However, the updated guidance provides no specifics and no expected timeline for responses to PSLF buyback requests.
Borrowers interested in requesting student loan forgiveness credit through PSLF Buyback should carefully review the department’s detailed guidance and highly specific instructions before submitting an application.
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