What to Know About Paused Payments For SAVE Plan Borrowers

Federal student loan borrowers have been experiencing whiplash as legal challenges to the SAVE plan move throughout the courts. In late June, district court judges in Missouri and Kansas paused parts of the SAVE plan, but an appeals court ruled that parts of it could continue. On July 18th, another appeals court ruling of the Missouri case blocked implementation of the SAVE plan entirely until that case is resolved.

How does this affect borrowers on the SAVE plan?

Borrowers currently enrolled in the SAVE plan will be put into administrative forbearance. During this time, no payments will be required and interest will not accrue. This basically leaves borrowers on the SAVE plan in limbo until the case is resolved. Unlike the COVID forbearance, time spent in administrative forbearance will not count toward Public Service Loan Forgiveness (PSLF) or forgiveness through income-driven repayment (IDR). 

The administration has not communicated any information about payments due for July, which means if you have a payment due in July, you may still need to pay it. As of August, no payments will be due for borrowers on the SAVE plan, even if a bill has already been issued.

When will I need to make payments again?

As of now, it’s likely that no payments will be due at least until the Missouri case is decided. The forbearance could last even longer if one or both of these cases make it to the Supreme Court. 

Should I make payments during the forbearance?

For most people, making payments during this forbearance is not the optimal financial choice. If you have other financial priorities like paying down credit card debt or saving for an emergency fund, take advantage of the payment pause to focus on those. The most important thing you can do is avoid absorbing that student loan payment back into your budget. Instead, automate savings or extra debt repayment in that amount. The benefits of this are two-fold: you can get ahead in another area of your financial life and it won’t be as painful to rearrange your budget when payments are due again.

Even if paying off your federal student loans is your top financial priority, consider saving that payment into a separate high yield savings account during the pause. That way, you can earn interest in the meantime and have the option to make a lump sum payment on your loans at the end of the forbearance.

I’m close to receiving forgiveness through PSLF or IDR. What should I do?

If you’re close to receiving forgiveness through PSLF or IDR and are on the SAVE plan, the forbearance may be frustrating, rather than a relief. You are probably eager to make your final payments and be free of your loans, but it’s currently unclear whether payments made during this forbearance would count toward forgiveness. To avoid paying more than you need to, wait until there is a definitive answer to that question.

My SAVE application is being processed. What does this mean for me?

Unfortunately, we don’t currently know what will happen to SAVE applications. Keep an eye out for any communication from your student loan servicer. 

Can I apply for a different income-driven repayment plan?

As of July 23, 2023, the Federal Student Aid website StudentAid.gov was not accepting applications for any income-driven repayment plans while the Department of Education assesses the ruling. Check back on the website and look out for information from your student loan servicer in the coming weeks.

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