🚨 Breaking: Biden CAN Lower SAVE Plan Payments

Hey! So…about SAVE…a lot is happening right now. I don’t want any of you to lose sleep over this mess — especially as you prepare to cut out from work early this week for the Fourth of July weekend.

So with that in mind, here’s everything I know about what’s going on (and some of what I have no clue on how to answer.)

Here’s the TLDR:

Earlier today, an appeals court said the Education Department could lower borrowers monthly payments, effectively removing the roadblock put in place by a federal judge last week. The case is still pending, and nothing is final yet.

And here’s a timeline:

• August 2023: SAVE plan launched

• Late June 2024: Federal judges in Kansas and Missouri issue injunctions against key parts of the SAVE program.

• June 28, 2024: Education Department pauses payments for 3 million borrowers to recalculate payments.

• June 29-30, 2024: Biden administration appeals the Kansas ruling.

• July 1, 2024: 10th Circuit Court of Appeals grants a stay on the Kansas injunction.

And here are some key facts:

1. SAVE plan aims to reduce monthly payments from 10% to 5% of discretionary income for many borrowers.

2. About 8 million borrowers have enrolled in SAVE, out of an estimated 30 million who could benefit.

3. The plan faced legal challenges from Republican-led states.

4. Recent court decision allows payment reductions to potentially proceed, pending implementation by the Education Department.

5. Loan forgiveness after 10 years (instead of 20 or 25) remains blocked by the Missouri ruling.

6. SAVE is an additional income-driven repayment option, not a replacement for existing plans.

Oh, and here’s are July update about Biden’s forgiveness plans.

Here’s a breakdown of what’s going on: 

The Biden administration's Saving on a Valuable Education (SAVE) plan, launched in August 2023 to ease student loan burdens, has faced significant legal challenges. The plan was designed to reduce monthly payments from 10% to 5% of discretionary income for many borrowers starting July 2024, but was temporarily blocked by federal judges in Kansas and Missouri in late June 2024.

The 3 million borrowers whose payments were suspended are those already enrolled in SAVE who (a) have monthly payments and (b) were expecting reductions starting July 2024. 

This group is distinct from the approximately 4.5 million SAVE enrollees who already have $0 monthly payments due to their income levels and are not directly affected by the current payment pause.

In response, the Education Department suspended payments for about 3 million borrowers to recalculate their obligations in compliance with the court orders. This suspension includes a pause on interest accrual but doesn't count towards loan forgiveness programs like Public Service Loan Forgiveness (PSLF).

The Biden administration quickly appealed the Kansas ruling, and on July 1, 2024, the 10th Circuit Court of Appeals granted a stay, potentially allowing the payment reduction aspect of SAVE to move forward. However, the Education Department still needs to implement these changes. The Missouri judge's decision blocking accelerated loan forgiveness (after 10 years instead of 20 or 25) remains in effect.

SAVE calculates payments based on a borrower's income and family size, aiming to move borrowers closer to loan forgiveness faster. While the administration estimates over 30 million borrowers could benefit, about 8 million have enrolled so far. The remaining 22 million may either be unaware of the program, haven't chosen to enroll, or are assessing whether it's the best option for their situation.

Critics, primarily from Republican-led states, argue that the plan oversteps presidential authority and could harm lenders. They accuse the administration of trying to circumvent the Supreme Court's earlier ruling against a broader loan forgiveness program.

The situation remains fluid, with further legal proceedings expected. Borrowers are advised to stay informed about updates from the Department of Education and their loan servicers.

And here are some questions you might have that I can answer:

Q: What does this mean for my current student loan payments?

A: If you're one of the 3 million borrowers in SAVE who were expecting payment reductions in July 2024, your payments are currently paused. This doesn't affect SAVE enrollees with $0 payments or borrowers not enrolled in SAVE. For all borrowers, the situation may change rapidly, so stay in touch with your loan servicer.

Q: Can I still enroll in the SAVE plan?

A: Yes, enrollment in SAVE is still open, although the online application portal may be temporarily down. Paper applications are still being accepted.

Q: Will my payments be reduced under SAVE?

A: Potentially. The recent court decision allows for payment reductions to proceed, but implementation details are still unclear. The Education Department needs to take action to put these changes into effect.

Q: Is loan forgiveness still possible under SAVE?

A: The accelerated forgiveness (after 10 years) is currently blocked, but other aspects of the program may still lead to eventual forgiveness. This is subject to ongoing legal challenges.

Q: How long will this payment pause last?

A: The duration is unclear, but some experts believe it could last into the fall of 2024.

Q: Will the paused payments count towards PSLF or IDR forgiveness?

A: Currently, no. Unlike previous COVID-era pauses, these suspended payments do not count towards forgiveness programs, according to the New York Times.

Q: What should I do if I'm pursuing PSLF?

A: Continue to follow the PSLF requirements. If you're on SAVE, be aware that the current forbearance period may not count as qualifying payments.

Q: How does this affect borrowers with $0 payments under SAVE?

A: The approximately 4-5 million borrowers with $0 payments should remain unaffected for now.

Q: How does SAVE compare to other income-driven repayment plans?

A: SAVE is an additional option, not a replacement for existing plans. It generally offers lower payments and faster forgiveness than other plans, but individual circumstances may vary.

And here are some questions that I’m struggling to answer today:

Should I enroll now or wait until the legal challenges are resolved if I'm not currently enrolled in SAVE?

My gut says you should still enroll. But I can understand why you wouldn’t: Uncertainty.

What happens if I made payments during this period that shouldn't have been collected due to the SAVE plan?

🤷🏽

How does this affect parent PLUS loan borrowers?

You should still be able to use double consolidation to enroll in SAVE since enrollment isn’t blocked. But longer-term questions about the SAVE Plan’s viability persist.

If the courts ultimately rule against SAVE, what happens to borrowers who have been making reduced payments under the plan?

🤷🏽

How does this situation affect borrowers who are close to achieving loan forgiveness under existing programs?

🤷🏽

Are there any actions borrowers should take now to protect their interests given the uncertainty?

I can’t think of any.

How might this affect future student loan policies or programs?

🤷🏽

Thanks for making it this far! I’ll see you on Wednesday.

Can’t wait that long?

Take care,

Tate