Key takeaways
- The Department of Education has paused student loan payments for millions of SAVE borrowers.
- Due to conflicting appeals decisions by federal courts, the future of the SAVE repayment plan is unclear.
- Borrowers don’t need to do anything to take advantage of the temporary forbearance measure.
If you have federal student loans, your monthly payments may be on hold. Payments were paused for millions of borrowers enrolled in the Biden-Harris led Saving On A Valuable Education student loan relief plan, while it awaits a final ruling from federal courts. If you're enrolled in SAVE, like me, you've probably received an email from your servicer that looks something like this:
What does that mean? It means your student loans won't accrue interest while the courts work out the legality of SAVE.
In July, the Biden administration planned to roll out new changes for the SAVE plan, specifically with how it calculates income-driven repayment.
However, Republican-led initiatives in Kansas and Missouri resulted in two federal court judges filing injunctions, arguing that the Biden administration doesn’t have the legal authority to roll out parts of the second phase of the SAVE repayment plan.
On June 30, a federal appeals court ruled that the already calculated reduced payments could proceed while the Department of Education pursues an appeal. However, the SAVE plan was permanently blocked by another US appeals court on Aug. 9. This move may prompt the Justice Department to file an emergency appeal at the Supreme Court.
For right now, the Biden administration is unable to cancel any more federal student debt underthe SAVE plan and is also prevented from adding any more provisions to the plan until the lawsuits are resolved.
So I don’t have to pay my student loans in August?
If you’re a SAVE borrower and received a communication from the US Department of Education or your federal loan holder alerting you to the change and the forbearance, then no, you won’t owe a payment while the courts figure out what to do with SAVE.
“Borrowers enrolled in the SAVE Plan will be placed in an interest-free forbearance while our Administration continues to vigorously defend the SAVE Plan in court," said Miguel Cardona, the Secretary of Education in a July statement.
If SAVE is ultimately approved by the courts, you can expect your payments to drop to 10% of your discretionary income. But if SAVE is shot down, you may be transferred to another income-driven repayment plan.
