SAVE borrowers don't have to stress about student loan payments right now, but should plan for when payments resume.
If you have federal student loans, your monthly payments may be on hold for even longer. Payments were paused for millions of borrowers enrolled in the Biden administration-led Saving On A Valuable Education student loan relief plan earlier this summer and will remain on hold for at least six more months, according to a spokesperson from the Department of Education.
Student loan payments for SAVE borrowers are paused while the legal challenges threatening the repayment plan are reviewed by federal courts. If you're enrolled in SAVE, like me, you probably received an email from your servicer this summer notifying you of the payment freeze.Â
Here's what's going on with SAVE and what you need to know about your student loans.
Why is SAVE on hold?
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 under the 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 right now?
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.
Your student loans won't accrue interest while the courts work out the legality of SAVE. However, unlike the previous payment pause during the pandemic, each month your loans are on hold won't count toward forgiveness.
What's next for SAVE?
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.
