In response to a lawsuit filed by several states, federal judges have blocked the Department of Education from advancing all aspects of the SAVE repayment plan.
To help borrowers navigate this uncertainty, the Department of Education has placed all borrowers who signed up for SAVE in interest-free forbearance for the duration of the litigation. Unfortunately, the Department has stated that this time will not count toward Income-Driven Repayment (IDR) forgiveness or Public Service Loan Forgiveness (PSLF).
Despite the Department’s clear stance, many borrowers suspect that this period could eventually count toward loan forgiveness. They might be onto something.
The Case for Counting the Time Toward Forgiveness
In this situation, borrowers have done everything right. They signed up for a repayment plan offered by the Department of Education, followed all the necessary steps to make progress toward loan forgiveness, and now they’re being told that this time won’t count.
There is certainly precedent for awarding borrowers credit toward forgiveness after the fact. For example, the Limited Waiver on PSLF was created to help borrowers who were given inaccurate information by loan servicers and relied on it. Similarly, the one-time IDR account adjustment was necessary because servicers often steered borrowers toward deferments or forbearances when they would have been better off enrolling in an IDR plan.
In this case, borrowers followed the clear instructions of the Department of Education, and once again, they are not receiving the outcome they were promised.
Awarding Forgiveness Progress Retroactively Makes Sense
It’s also possible that the Department of Education has a strategic reason for its current stance. They may eventually plan to grant borrowers credit toward IDR and PSLF forgiveness once the litigation concludes.
Why wait until the end of the litigation?
If the Department had initially announced that the time would count toward forgiveness, the judges in the SAVE cases might have blocked this move, viewing it as an unlawful workaround to their preliminary injunction.
Moreover, the states could have raised this issue in court and bundled it with the broader SAVE lawsuit. By waiting, the Department reduces the likelihood of such a challenge.
If the Department decides to award forgiveness progress after the fact, opponents would need to file a brand new lawsuit to challenge it. Unlike SAVE, which is a new repayment plan with fresh forgiveness provisions, retroactively granting credit for a few months is relatively minor. A state attorney general might decide that challenging such a small program isn’t worth the effort.
Another Path Toward Loan Forgiveness
PSLF borrowers can also use the buyback program. Under this initiative, a borrower who has documented 120 months of PSLF-eligible work can “buy back” certain periods of deferment and forbearance. The Department of Education has encouraged PSLF borrowers affected by the SAVE litigation to use this program.
A similar program for IDR borrowers, allowing them to buy back certain forbearances and deferments, would be logical and fair. Although such a program does not currently exist, creating one would allow borrowers to make the progress toward forgiveness they’ve earned.
The Potential Impact of the 2024 Election
The outcome of the 2024 election could significantly influence the fate of the SAVE litigation and whether borrowers receive retroactive credit toward forgiveness. If the litigation extends into 2025 and the Republican Party takes control of the White House, the likelihood of retroactive credit being granted diminishes.
A new administration may not prioritize extending forgiveness programs or offering relief that benefits borrowers.
Borrowers should be aware of the political landscape and consider the potential impact of the 2024 election on their repayment strategy. Preparing for less favorable outcomes, such as the possibility that time during the SAVE pause will not count toward forgiveness, might be prudent in the event of a change in administration.
Borrower Planning and Strategy
Even though it’s possible that time spent in the SAVE litigation pause will eventually count toward forgiveness, borrowers shouldn’t assume this will happen. The election, the outcome of the lawsuit, and numerous other factors are unknown and could impact how things proceed.
Borrowers need to have a backup plan in place.
PSLF borrowers should consider setting aside money for a potential buyback in the future.
All borrowers should plan as if this time won’t count and adjust their strategies accordingly. Those who are close to IDR forgiveness, especially before it becomes taxable again in 2026, should consider switching to another IDR plan.
Additionally, borrowers should closely monitor the lawsuit and any actions taken by the Department of Education. Being prepared to respond quickly to future changes could lead to earlier forgiveness.
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Thank you for this article. This has been my biggest stressor. My main question revolves around what can we do as collective borrowers to advocate for this solution if retroactive PSLF credits are not given? Is there any legal backing to support the borrowers in a case like this? Other times of administrative forbearance have counted towards these counts, so why are some being counted and others not? I have written the Department of Education, The Consumer Financial Protection Bureau and my senators/representatives with no real answer. I will await a ruling, and I will vote, but I would like to know what my chances are of holding the Department of Education responsible for these changes/decisions?
I’m not aware of any pending class action lawsuit about this issue. In many ways we are at the mercy of the federal government on this one.
That said, I think mention of voting is the right one. Ultimately, it is our federal government and if we don’t like what they are doing, we need to vote someone else into office. I’ve been suprised at how little student loans have been mentioned this election cycle, but if we all show up to vote, we will get more attention.