The Biden administration’s Student Loan Relief Plan, known as the SAVE plan, is currently facing a potential year-long pause due to legal challenges and controversy surrounding its implementation. Since its introduction in the summer of 2023, the SAVE plan has been touted as the most affordable student loan plan ever, offering lower monthly payments and faster debt erasure for borrowers with small balances.
Legal Challenges and Controversy
Republican-led states have filed lawsuits against the U.S. Department of Education, claiming that the agency exceeded its authority with the SAVE plan. These states argue that the Education Department is attempting to forgive student debt through a backdoor method after the Supreme Court blocked its initial sweeping plan in June 2023. Despite the legal challenges, the Education Department has already forgiven $5.5 billion in student debt for 414,000 borrowers through the SAVE plan.
Impact of the Pause on Borrowers
While those who have already received relief through the SAVE plan are not affected by the pause, borrowers currently enrolled in the program will not be making payments during this period. However, unlike previous payment pauses on student loans, the months during this forbearance will not count toward borrowers’ timeline to loan forgiveness. This means that borrowers hoping to have their debt cleared under the income-driven repayment plan’s terms or Public Service Loan Forgiveness will not receive credit for the period in which they are not making payments.
Options for Borrowers
Despite the pause in payments, borrowers pursuing student loan forgiveness still have options available to them. The Education Department offers a buyback option for borrowers working toward Public Service Loan Forgiveness, allowing them to retroactively make payments and receive credit for previous months. Additionally, borrowers who do not want to lose credit for the months spent in forbearance may consider switching to another income-driven repayment plan. However, transitioning between repayment plans can take several months, with some borrowers reporting that it could take up to 90 days.
Benefits of the Pause
Although SAVE enrollees may not be moving closer toward debt forgiveness during the pause, they are still benefiting from a $0 monthly payment. Mark Kantrowitz, a student loan expert, points out that borrowers do not lose anything because of the pause, aside from time. It is important for borrowers to consider their options and weigh the benefits of remaining in the SAVE plan versus switching to another repayment plan during this period.
Conclusion
In conclusion, the Biden administration’s Student Loan Relief Plan, the SAVE plan, is facing a potential year-long pause due to legal challenges and controversy. While this pause may impact borrowers’ timelines for loan forgiveness, there are still options available to those pursuing student loan forgiveness. It is essential for borrowers to explore their options and make informed decisions regarding their repayment plans during this period.
