There’s a good chance that the SAVE income-driven repayment plan will cease to exist in 2025, either through court order or changing legislation.
When the Saving On a Valuable Education (SAVE) income-driven repayment plan was first announced by the Biden administration in August of 2023, borrowers with federal student loans were excited for several reasons. Not only did the plan lower monthly payments for most borrowers and pave the way to $0 monthly payments for millions more, it also aimed to stop interest from capitalizing on federal student loans.
The SAVE plan would have also helped borrowers who originally borrowed $12,000 or less for school have their loans forgiven in as little as 10 years. And similar to other income-driven repayment plans, participants could have whatever student loan debt remained after 20 to 25 years (20 years for undergraduate, 25 years for graduate loans) forgiven.
But, the SAVE income-driven repayment plan faced a range of challenges from the start, mostly due to questions over whether the administration had the legal authority to extend this kind of student loan forgiveness.
Ultimately, this led to the plan being blocked by a federal court in 2024 and loans on the plan being put in an administrative forbearance in the process. This means borrowers don’t owe payments right now and are not accruing interest, but that the future of the SAVE plan is entirely up in the air (at least for now).
Will The SAVE Repayment Plan Be Struck Down?
What will actually happen when a court finally rules on the future of the SAVE plan? While nobody knows for sure, some experts in the student loan space have strong opinions on how the SAVE plan’s legal challenges will pan out.
Financial advisor and certified student loan professional John Foote of Modoo Strategy says he believes the SAVE plan will be struck down in the courts due to the conservative majority in the Eighth Circuit court that is deciding the case. And with Trump in office and a Republican majority in Congress, it’s unlikely any ruling would be appealed.
“The SAVE program is probably headed for the chopping block,” he says.
Foote notes that, in addition to leanings of the court, this outcome is likely because the SAVE program lacks some of the protections built into other-income driven repayment plans that were enacted by Congress. An example is the income-based repayment (IBR) plan, which was passed by Congress in 2007 as part of the College Cost Reduction and Access Act of 2007.
Other experts aren’t so sure about the future of the SAVE plan. Financial advisor Brian Seymour II of Prosperitage Wealth told us he has been constantly surprised at twists and turns in the student loan forgiveness space and wouldn’t be shocked at either outcome.
“Fortunately, the Department of Education recently provided some guidance on what borrowers on the SAVE plan can expect and will be making updates as additional developments unfold,” he said.
As an example of that, the U.S. Dept. of Education updated its website on January 17th with notification that eligible borrowers can now enroll in the Pay As You Earn (PAYE) and Income Contingent Repayment (ICR) income-driven plans. This is good news for borrowers since these plans have been closed to new enrollment since June of 2024.
There’s also a general feeling the SAVE plan won’t survive in the future regardless of court rulings. While specific plans for student loan repayment haven’t been announced by the new administration quite yet, it’s possible we’ll see new repayment and student loans options altogether in the coming years.
In that vein, college consultant Tom O’Hare of Get College Going told us he believes the new administration’s climate and new Secretary of Education will not pursue the benefits of the SAVE plan since potential costs associated with canceling loan obligations and introducing new repayment strategies for borrowers are not in line with the new administration’s views on student debt.
While his comments don’t specifically say how the court ruling on the SAVE plan will pan out, they underscore the administration’s likely stance that the SAVE plan will be eliminated in one way or another. Of course, we’ll have to wait and see exactly what happens and which repayment plans are left a few years from now.
What Should Borrowers Do Right Now?
Borrowers currently enrolled in the SAVE plan may be left to wonder what comes next, but there are some benefits in place while they wait things out. Payments aren’t due for these borrowers while the current forbearance period continues, and interest isn’t accruing on loan balances, either.
But, that doesn’t mean SAVE plan participants should just sit on their hands, and there are some reasons to make a move.
For example, those trying to have their loans forgiven through Public Service Loan Forgiveness (PSLF) aren’t having payments counted toward their progress while this problem drags on.
For borrowers who are working toward Public Service Loan Forgiveness (PSLF) and are close to meeting the requirements, Foote says it might make sense to explore income-based repayment (IBR) since it is not currently in jeopardy. And, as we mentioned already, both the Pay As You Earn (PAYE) and Income Contingent Repayment (ICR) income-driven plans are once again open for applicants as of mid-January 2025.
Attorney Jonathan Feniak says borrowers can also consider building an emergency loan repayment fund, especially if they are worried about having higher monthly payments when they resume. For example, consumers could take the monthly amount they were going to pay on the SAVE plan and move that money into a high-yield savings account each month instead.
“The more you can cushion your savings, the better prepared you’ll be if you need to ramp up payments,” he says.
He adds that borrowers can look for ways to increase their income to make it even easier to manage monthly student loan payments in the future as well. And if you worry you won’t be able to afford them, don’t be afraid to reach out for help.
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