The good news for borrowers is that the SAVE plan is alive and well, winning in a recent Senate vote. The bad news is that it was a 49-50 vote, and there is strong opposition to the newest federal repayment plan.
As a borrower on the SAVE plan, I’m counting on its availability in the future. I know many of you are in the same boat.
Once again, borrowers are in a situation where they need to make long-term planning decisions about a program with an uncertain future.
To help navigate this challenge, we will take a look at the long-term outlook of the SAVE repayment plan. Because this assessment will require some legal analysis and political analysis, I’ll explain how I reached my conclusion for those who are interested.
The Long-Term and Short-Term Outlook for the SAVE Repayment Plan
Though scary for some borrowers, the vote in the Senate was doubtful to impact borrowers.
For Congress to end SAVE, a veto-proof majority was required. They couldn’t get a majority in the Senate, and the House never even took up the issue.
Thus, in the short term, SAVE is extremely secure.
As we look further into the future, it is hard to proclaim that SAVE is safe with the same level of certainty. That said, the longer SAVE exists as a repayment option, the more likely it is to survive indefinitely.
Legal Protections Coming to SAVE
The Department of Education created SAVE as part of the executive branch’s authority over student loans. Congress passing a law could eliminate SAVE, and the executive branch could choose to eliminate SAVE.
However, in the coming months, SAVE will soon become more secure.
Once the Master Promissory Note (MPN) adds language about the SAVE program, borrowers will have a contract with the federal government requiring SAVE. We don’t know what the new MPN will look like, and not all borrowers will sign it. However, the mere existence of a contract requiring the government to offer SAVE will make it much more difficult to cancel the plan.
To see this concept in action, take a look at the new rules regarding SAVE. Notice how every borrower is either better off on the new plan OR can keep their old one. Otherwise, the Department of Education faces potential lawsuits from borrowers who are angered that the department violated the terms of the MPN.
That said, beyond the fact that we don’t know what the new MPN will say, this is also a highly complex area of law. Government contracts are especially complicated because of sovereign immunity.
In short, a new MPN will make it more challenging, but not impossible, to eliminate the SAVE program.
The Political Realities of SAVE
Many government programs are controversial when first created, but the more time that passes, the safer they become.
For a historical perspective, look at Social Security. When the program was first created, there was enormous opposition. Today, when politicians argue about Social Security, they debate about the best ways to keep it viable long-term.
For a more recent example, take a look at the Affordable Care Act, also known as Obamacare. This legislation was highly controversial when it was first passed, and many Republicans promised to get rid of it. After the 2016 elections, Republicans had the White House and full control of Congress. However, they couldn’t generate enough political support to get rid of the program, with key Republicans voting against eliminating it.
The longer borrowers are on SAVE, the harder it will be for politicians to remove the program. Raising student loan bills is a hard way to get votes. This is why the opposition to SAVE moved quickly to stop the program. They know that the same vote in two years will be tough.
That said, the political winds shift occasionally, and SAVE won’t ever be as popular as Social Security or Obamacare. Thus, we can’t say for certain that surviving the first couple of years will guarantee long-term survival.
The Biggest Threats to SAVE
Now that we have covered the factors likely to keep SAVE in place, it’s worth looking at a couple of worst-case scenarios so that borrowers can make informed decisions in their student loan planning.
A New President Opposed to SAVE – This is probably the most significant risk to SAVE borrowers. At some point, a President who isn’t as friendly to student loan borrowers will likely get elected. Given the legal and political realities previously discussed, the sooner this happens, the bigger the threat.
A Super-Majority Opposed to SAVE – A dramatic change in the makeup of Congress would also threaten SAVE. However, the odds of such a super-majority happening in 2024 are extremely thin.
Notably, a lawsuit to end SAVE, though not impossible, probably isn’t a threat. Unlike the plan to forgive $10,000 for every student loan borrower, creating a new repayment plan is squarely within the Department of Education’s authority. Thus far, there haven’t been any noteworthy lawsuits filed to end the SAVE program.
Sherpa Tip: Participate in your democracy. Show up and vote for candidates who take positions you support. Call your elected officials and share your opinion on the issue.
This participation makes a difference and it is the best way to prevent any threats to SAVE before they happen.
Don’t Let Uncertainty Induce Panic
SAVE is likely to be here for the long haul.
If you are 15 years from reaching student loan forgiveness, it is reasonable to plan to use SAVE to get there. That is the purpose of the repayment plan.
Even though we can’t definitively say that SAVE will survive, we have high confidence. What we can say for certain is that not using SAVE is an expensive decision for many borrowers. SAVE doesn’t just lower monthly payments. For many borrowers, it provides a generous interest subsidy to keep balances manageable.
Don’t unnecessarily spend extra money you don’t have because you fear the worst-case scenario. We’ve all got bigger things to worry about.
