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SAVE Lawsuits: Current Status, Next Steps, and Tips for Borrowers Navigating the Chaos

Uncover the details of the SAVE litigation, from court rulings to potential scenarios, and get essential advice for managing your student loans.

Written By: Michael P. Lux, Esq.

Last Updated:

Affiliate Disclosure and Integrity Pledge

An order from the Eighth Circuit Court of Appeals is temporarily blocking all aspects of the SAVE repayment plan. Borrowers enrolled in SAVE will be given an interest-free forbearance.

Unfortunately, the Department of Education says the SAVE pause during the litigation will not count toward IDR or PSLF forgiveness. This puts borrowers in a difficult situation, as explained below.

This page will be updated as the SAVE cases progress through the court system and more information becomes available.

Key Events in the SAVE Litigation Timeline

Two cases have been filed seeking to block the SAVE repayment plan. One case was filed in Missouri and the other in Kansas.

Sherpa Tip: This timeline only includes the SAVE litigation cases. Forgiveness 2.0 and any related litigation will be on a saparate page.

Current Status: A Long Wait Before We Get a Resolution

Now that the Supreme Court has declined to rule on the Eighth Circuit’s preliminary injunciton ruling it means that SAVE will be temporarily blocked until the case is finally resolved.

This means that borrowers are likely in for a wait of several months or even potentially years before there is a final ruling in the case.

For now, borrowers enrolled in SAVE will not be charged interest and they won’t have to make any payments.

Possible Outcomes and Their Odds (Odds Updated 8/28)

The section that follows is an educated guess. Litigation is unpredictable, and when you factor in the political components of these cases, it makes guessing a final result even harder.

That said, lots of you have emailed me asking about my opinions on various aspects as well as what the worst outcomes look like. I’m doing my best to give you my thoughts on this situation and to give you a range of what might happen.

I will update the odds as new information becomes available.

The Best Case Scenario: The Courts determine that the SAVE plan is within the authority of the Department of Education and the SAVE takes effect as planned. Congress granted the President the authority to create an income-driven plan and chose not to define exactly how it would work. Now that the Chevron case has been overturned, it appears as though the courts will take a bigger role in determining the specifics of the authority granted by Congress. As a result, the best case scenario, while very possible, isn’t the most likely outcome. Odds: 20%

The Most Likely Scenario: Parts of SAVE are eliminated and parts of SAVE survive. The parts of SAVE that are in the most jeopardy are the 5% calculation for undergraduate borrowers and the early forgiveness provision for borrowers with smaller balances. These parts are in the greatest jeopardy because experienced district court judges, appointed by Obama, felt that issuing a preliminary injunction to block these features was necessary. Generally speaking, judges only grant a preliminary injunction if they feel the party requesting the injunction is reasonably likely to succeed. Odds: 50%

The Bad Outcome: The entire SAVE regulations are blocked. In the event that the courts decide the President and Department of Education acted beyond their Congressional approval, they could block the SAVE plan completely. This would erase the favorable discretionary income calculation and the generous SAVE subsidy among other features. Borrowers currently on SAVE would likely revert back to REPAYE. Odds: 30%

The Worst Case Scenario: The court determines that only the plans explicitly created by Congress are valid. This would mean that both SAVE and REPAYE are eliminated. Many borrowers would be stuck with the IBR repayment plan in that situation. Fortunately, this outcome is highly unlikely. The courts are much more likely to prevent a new plan from being created than they are to wind back a plan that is already in use. Additionally, millions of borrowers have signed contracts with the government where REPAYE and all the other non-SAVE repayment plans are a term of the contract. Odds: <1%

Evaluating Your Next Move: Key Factors for Borrowers

While the interest-free forbearance is a positive, the uncertainty around its duration and the implications for IDR or PSLF forgiveness complicates matters. In most cases, borrowers should avoid making unnecessary extra payments.

Here are some key factors to consider when evaluating your next move:

Time Until IDR Forgiveness: If you are nearing IDR forgiveness, moving out of SAVE might be a smart move. Under the current rules, loans forgiven under IDR will be taxed starting in 2026. If you think you might be right on that border, swift action could be necessary. The tricky part about making this move is that processing times are currently very slow for IDR applications.

PSLF Job Stability: For borrowers working toward PSLF, moving out of SAVE probably doesn’t have the same urgency. The buyback program protects borrowers in this situation. There are some hoops to jump through, and borrowers will want to set aside some money to prepare for the cost of the buyback, but changing repayment plans is probably more o of a hinderance than a help at this time.

Repayment Strategy: Borrowers who are unlikely to reach forgiveness under PSLF or IDR should stay on SAVE. The pause gives them the opportunity to put some extra money aside and knock out their debt more efficiently.

Repayment Plan Switching Headaches: If you’ve tried to do anything with your loans over the past year, you know federal servicers are overwhelmed. Processing times are often delayed, and switching out of SAVE and then switching back in at the conclusion of the litigation could be challenging.

What Happens if I Change Plans? Even though electronic applications are not available on studentaid.gov, borrowers can still submit a paper application.

When the application is initially submitted, borrowers will be placed on a processing forbearance and that time will count toward IDR and PSLF forgiveness, but interest will also accrue.

Once 60 days have elapsed on the processing forbearance, borrowers will be placed in a general forbearance where interest will no longer accure, but the time will not count toward PSLF or IDR forgiveness.

Interest Capitalization: In the past, changing repayment plans led to interest capitalization. New rules now only capitalize interest when statutorily required. Notably, if a borrower switches from IBR to SAVE (or any other repayment plan) interest capitalizes. This shouldn’t be much of an issue because borrowers on SAVE won’t have any interest to capitalize due to the subsidy. However, if you qualify for low monthly payments on IBR and the interest charges are greater than your monthly bill, you may have a larger balance if you return to SAVE at the end of the litigation pause.

Final Tip: Stay Informed

Stay informed as this is a fast-moving situation. Follow updates closely, and be prepared to adjust your repayment strategy as needed.

At this time, there are not upcoming deadlines or urgent actions that may need to be taken. However, that all could change quickly. Monitoring these cases is important. It’s early August, and there could be many changes coming before the month is over.

Stay Up to Date: Student loan rules are constantly changing, and temporary programs create deadlines that can’t be missed. To help manage this issue, I’ve created a monthly newsletter to keep borrowers up to date on the latest changes and upcoming deadlines.

Click here to sign up. You’ll receive at most one email per month, and I’ll do my best to make sure you don’t overlook any critical developments.

About the Author

Student loan expert Michael Lux is a licensed attorney and the founder of The Student Loan Sherpa. He has helped borrowers navigate life with student debt since 2013.

Insight from Michael has been featured in US News & World Report, Forbes, The Wall Street Journal, and numerous other online and print publications.

Michael is available for speaking engagements and to respond to press inquiries.

68 thoughts on “SAVE Lawsuits: Current Status, Next Steps, and Tips for Borrowers Navigating the Chaos”

  1. Hi Michael,
    Found your site, and this article, while late night googling in a rather terrified state. My spouse has two consolidated direct loans (subsidized and unsubsidized) with a total balance of $411,839 (from $286,716 initially borrowed). He entered repayment in 2011, and has worked at a qualifying PSLF employer since 2016. We were on REPAYE and then forced into SAVE. With the future of SAVE uncertain, and with PAYE and ICR applications reopening soon, we are surveying our options. We do not qualify for PAYE due to how old our loans are. Further, we would fall under the old IBR (15%) and our number would not meet the partial hardship requirement (about $300 short). Since our loans are consolidated, that also eliminates standard repayment as a PSLF option. That only leaves ICR, which would be financially painful for us, yet still better than falling out of PSLF. However, I have the following questions: 1) would we even be eligible for ICR if we are not PPL borrowers? 2) If the only plan left standing is IBR, what becomes of folks who don’t meet the hardship requirement, yet also have a ton of negatively amortized interest that isn’t factored into the standard repayment calculation, and have consolidated? Is there a legal scenario where someone in repayment for 15-ish years could really fall out of PSLF and be forced to repay a negatively amortized balance that has ballooned on a non qualifying standard plan, graduated, etc? This is my fear. Would challenging it in court on the basis of the legitimate expectation doctrine (or some other legal argument) possibly stand a chance? Thanks.

    Reply
    • These are great questions, and while I understand why it would be the subject of terrifying late night googling, there are a number of different ways this could play out.

      Before I jump into specifics, I just want to point out that I can’t offer certainty. There are so many unknowns right now, but there are many different ways it could work out so that you don’t get stuck in the nightmare scenario you are describing.

      As a first thought, I think there is a good chance that REPAYE comes back in some form. I don’t have a read if the “doom” headlines for IBR borrowers are just to generate clicks or if I’m truly in the minority on that opinion, but I will be the first to tell you that my thoughts are not necessarily the general consensus of the expert community.

      To answer your first question, up until this year, anyone could sign up for ICR. They limited it to Parent PLUS borrowers once SAVE became available, but they are in the process of removing that rule now that SAVE is likely gone.

      Additionally, even in the worst-case situation where the only plan left standing is IBR, there are ways around the partial hardship requirement, especially if you are reasonably close. The best strategy is very situational specific, but the important thing to realize is that you only have to clear that hurdle once. After that, if your income goes up, IBR works in your favor because it caps monthy payments at the 10-year standard repayment level.

      I don’t think it will get to the point where you have to litigate this particular issue, but I do think there would be a number of strong legal arguments to make in a potential lawsuit… which is part of the reason I don’t think it will ever get to that point.

      Reply
  2. I have a question that I don’t see many people talking about. I just entered repayment recently so any chance of forgiveness is a long way out for me. However, I am more interested in the part of save that forgives the interest not covered by you monthly payment. I know the balance won’t go down, but honestly I just want to keep it from going up. If the court decided with the scenario you listed as 50% possible, will the Interest forgiveness part survive? Please feel free to correct me if I’m getting anything wrong, as I am very confused about the whole situation.

    Reply
    • That is a fantastic question. In the senario I described where parts of SAVE survive, the interest subsidy could very well survive. At this point its really just speculation. If SAVE is completely eliminated, then the insterst subsidy would go away.

      However, even in that scenario, SAVE likely reverts back to REPAYE, and the REPAYE plan had a subsidy that covered 50% of the excess interest. Not as good as SAVE, but also better than nothing.

      Reply
  3. Hi there,
    What are your thoughts on this info from a recent Forbes article? “The 8th Circuit suggested in its August order that it’s not just student loan forgiveness under the SAVE plan that’s blocked for now — it’s student loan forgiveness for any borrower enrolled in the SAVE plan, potentially including loan forgiveness under other programs that are not being challenged, such as PSLF. The Biden administration asked the court to clarify its position, but the court declined, and the Supreme Court opted not to intervene at this juncture.”

    My question is, if you were in SAVE and reached 120 payments prior to the July 18 ruling but had not had your loans forgiven yet, will Ed still process your forgiveness? Or are they putting all PSLF forgiveness on hold right now for anyone in SAVE?

    In my case, I would have hit 116 payments on July 16 (but was in the SAVE recalculation forbearance for June and July). I also have 4 months of forebearances from 2017 that I intended to request a buyback for in July once I hit that 116th payment. If by some miracle the buyback process works I would technically have been eligible for forgiveness as of July 16, prior to the injunction. So would they process that forgiveness or will I be on hold solely because I’m in the SAVE program?

    Reply
    • You are definitely right about the ambiguity of the order from the 8th Circuit. However, I read it a little differently than the person who wrote the article you are referencing. The confusion centers around people who are on the ICR plan or the PAYE plan who reach the 20 or 25 years required for forgiveness. Under the order from the court, this sort of forgiveness arguably isn’t permitted, but that isn’t what the case is about at all.

      PSLF forgiveness is an entirely different variety of forgiveness and I’m not sure how the order from the 8th circuit could be read to suggest that it wouldn’t count.

      The issue for PSLF people is that those enrolled in SAVE are on a litigation forbearance that doesn’t count toward PSLF. In other words, you are not getting a monthly bill, so you can’t move any closer to 120. This is where the buyback enters the equation.

      The buyback is a newer process and there are typically issues with any new federal student loan process, but if it works as planned, the SAVE litigation shouldn’t prevent you from getting PSLF.

      Reply
  4. I have question about the SAVE problem.

    I had a 20 year old loan being paid with an IDR plan.
    It was suggested that I apply for SAVE. First I had to consolidate my loans. That was approved. Then I was caught in this mess.

    What are my possible options. Will I have to pay the full payment, or will I have options to go back to. If it fails, I should be able to go back to what I had ????

    I had something. Why should I be forced into this, I wasn’t my fault.
    Of course , they will say it is because I’m trying to get something for nothing. This case is a little involved than just this.

    Thank you for any educated insight.

    Reply
    • Hi Bernard!

      There are a lot of great questions here. First, I will say that I don’t think you need to worry about starting from scratch. You are right that the decision to consolidate and sign up for SAVE wasn’t your fault at all, you just followed the guidance of the Department of Education and their servicers. Likewise, I wouldn’t put too much thought into what “they” might say about it. Student loans have become a political football and it wouldn’t be wise to let the political rhetoric of others impact your decision-making.

      As for your options, it isn’t immediately clear at this point. I’ve previously written about how the litigation and SAVE regulations could impact other repayment plans. I’d suggest you start there. I’d guess the most likely outcome is that either SAVE wins in court or you end up on the REPAYE plan with credit for your previous payments.

      Obviously, there are a number of other factors, some unique to you, that will impact exactly how this plays out, but hopefully that gives you some idea of where this all might be headed.

      Reply
  5. Hi Mike, My daughter just graduated from Med school in May. We applied for consolidation, PSLF and SAVE. Our loan was consolidated and sent to Mohela but consolidation and SAVE on FSA site still shows processing. Meanwhile, Mohela is asking m daughter to make full payments($850 per month on $155K loan). She cant afford this payment on her resident doctor salary and living in Boston. She called Mohela and they put her on forbearance until 10/6 but interest on her loan keeps getting accumulated and added to her loan balance. Meanwhile, people whose SAVE application was processed or were already on SAVE plan are benefitting from interest free forbearance. We did everything right and applied as soon as she graduated in May but now getting punished.
    Please let us know what should be the action now to tackle this situation? While current SAVE application still under process, would it make our situation worse if we try to switch to other payment plan? Just frustrated and tired. We dont care about PSLF just trying to get through her residency and fellowship years(coming six years) and then she wont mind paying the full loan on her decent attending salary. Please advise

    Reply
    • First, let me say I’m hesitant to give specific suggestions without having a longer conversation to make sure nothing gets missed or overlooked.

      That said, generally speaking, I think the move to a processing forbearance is a good idea. This week the Department of Education gave an update on the processing times and procedure at present.

      The pertinent detail for your daughter is that borrowers who apply for SAVE get put on a 60 day processing forbearance. During that time, interest is charged, but it also counts toward IDR and PLSF forgiveness. Once those 60 days pass, if the application still hasn’t been processed, the borrower goes on a general forbearance where interest isn’t charged, but the time no longer counts toward IDR and PSLF forgiveness (unless you use the buyback provision).

      As a final thought, I wouldn’t be so quick to dismiss PSLF. Six years of residency and fellowships puts her only 4 years away from forgiveness. Obviously, there is a real possiblity that repayment in full ends up being the most efficient approach, but it could be a mistake to assume that it is definitively the path forward.

      Reply
      • Thanks Mike! We will wait until 10/6 and see how things turn out. Hopefully her application is processes by then and Mohela put her on general forbearance – at least interest would stop accumulating.

  6. Hi Michael,

    Do you have any guidance on what to do for the following situation. I’m in the Save plan (have been since Sept ’23 when I was transitioned there from Repaye). With the Save ruling/lawsuits, I am supposed to be in the 0% interest free forbearance period. My loan servicer Mohela has not corrected my interest rate to be 0% for any of my loans, and my balance now continues to grow/gain interest every day. I have submitted complaints on Mohela’s website twice. The FSA has a “submit a complaint” website and each time I try to submit a complaint to report Mohela and get FSA assistance, at the end of the submission an error message results saying “this page is currently unavailable. We’re unable to take your feedback right now…” Thus I can’t submit the complaint to them. I sent a complaint through the Consumer financial protection bureau (CFPB) who has currently sent my complaint to Mohela. Are there any other avenues I should take to go about getting the wrongfully accrued interest removed and to get my interest correctly changed to the 0%? Thank you!

    Reply
    • It really sounds like you are making the right moves on this situation. The one step that seems to be missing is a call to MOHELA. In many cases making a call is both challenging and frustrating because of the limited training that representatives receive. In this case, it should be very clear that your interest rate should be set to 0%. If it isn’t, the person on the phone should be able to help or, at the very least, escalate your issue and send you to someone who can help. It isn’t unusual to have to make 2 or 3 calls to get a basic request addressed because some reps are better than others, but the phone support apporach seems to me to be the quickest way to get it fixed.

      If that approach doesn’t work, the one other strategy that commonly works that I don’t see mentioned in your email is to call one of your representatives in Congress. Some members of Congress are more helpful than others, but if someone from a Congressional office reaches out to the Department of Education, these sort of issues get resolved very quickly. You’d be suprised at how often I’ve seen this approach work for people.

      Reply
      • Thank you so much for all of these suggestions and prompt reply. This is so helpful to know, and I appreciate your guidance. With regard to the representatives, that would be one of the House of Representatives for my state that you’re referencing? My knowledge in that area is unfortunately limited, so I apologize for the novice question. Thanks again 🙂

      • Hi Marissa,

        No need for apologies. A house member would be a correct person to reach out to. You can also consider reaching out to either of the Senators in your state. Just make sure that you are reaching out people elected to Congress and not state reps who work in your state’s captial.

        As an aside, your last comment got me thinking about how helpful this strategy can be, and I’ve been working on an article this morning about the best approach to use when reaching out for help. I will probably publish it later today or tomorrow, and hopefully making contact will be a little bit easier and more effective with a guide.

  7. Hi Michael,

    Do you have any insight about if the automated annual IDR recertification process should still occur as expected, if the online IDR application (which is also used for annual recertifications) is still greyed out on the Federal Student Aid website by the time that my recertification deadline rolls around? Obviously, I wouldn’t be able to submit an online annual recertification myself, if it’s still greyed out, but do you think it being greyed out would also prevent FSA from automatically generating my annual recertification application?

    I provided consent for the IRS info/automated recertification process via the settings section of my Federal Student Aid account, and my account now says, “consent on file”, so I am anticipating that my IDR should be automatically recertified, without me having to do anything by my recertification deadline.

    My deadline to recertify is currently listed (MOHELA erroneously changed my IDR anniversary date & recertification deadline, as well as my payment amount, during the servicing platform transition but that’s another issue altogether — I submitted an Ombudsman complaint, we’ll see if it is resolved) as October 13, 2024. I was told by Federal Student Aid that they process automatic recertifications approximately 2 months before your recertification anniversary date (since mine is currently listed as November 17, 2024, that would mean FSA would generate my automatic recertification around September 17th, which is fine, as it’s before that October 13th deadline).

    Since Sept. 17th is approaching, and I haven’t heard anything about the online IDR applications coming back anytime soon, and everything is saying that paper IDR applications (for new plans at least, but again — the same application is used for annual recertifications) are not being processed yet or taking 90+ days to process, I’m starting to worry about whether my auto-recertification will happen, or if not, how early in advance I’ll have to try and submit a paper application instead, in order to get my annual recertification processed so that they don’t claim I missed my deadline and try to charge me a suddenly much higher payment.

    I imagine the answer may be that there’s no way to know and we’ll just have to wait and watch and hope for the best, but figured I would reach out just in case you had an opinion you were able to share.

    Thank you for taking the time to reply, if you’re able to, and for your great website — it is one of the most informative and reassuring resources I’ve been able to utilize during this stressful process of navigating my IDR plan over the years and the path to PSLF.

    Shannon

    Reply
    • Hi Shannon,

      Let me start by thanking you for the kind words. I really appreciate it.

      As for income certification deadlines, I do have a couple of thoughts. First, I would be shocked if the Department of Education didn’t extend the certification deadline for the borrowers who can’t recertify electronically. Second, I think you’ve done a great job of pointing out one of the many issues with the current litigation uncertainty. At this point I don’t think even the Department of Education knows how they are going to handle this circumstance. Right now, it appears they are hoping for some clarity from the Supreme Court on the preliminary injunction.

      Updating the online system to process applications is a big endeavor for them and they can’t really start that until they know what they can or can’t do. I’d expect that within the next couple of weeks we get some clarity on this situation.

      Reply
      • Thanks Michael! All makes sense, and I hope you’re right about extending the deadlines, that would be helpful. Will keep an eye out for news in the weeks to come, and hope for the best!

  8. I’m at 120/120…on the SAVE program. Made my last payment June 2024 and submitted final paperwork that’s still “in review”.

    I was planning to quit my job and be a stay-at-home-mom as soon as loans were forgiven. Now I’m stuck at 120 and my workplace for the foreseeable future. I’m devastated to say the least. I’m wondering whether to stay in SAVE and hope for a favorable outcome or submit paper application for IBR or plain Standard Repayment (I think the second counts for PSLF) and hope for faster (even if still slow) processing and forgiveness than waiting for SAVE litigation.

    Reply
  9. I am at 93/120 payments toward PSLF (91 for grad loans). I hope you will allow me the indulgence to rant for a moment before i get to my question. I cannot express enough how deeply tired I am of being jerked around and used as a political pawn during this game in the court system. There have been loads of bailouts and financial assistance for businesses and banks over the years and congress has no problem throwing money their way, yet when I, a librarian, who is already getting paid a pittance, am set to receive a little relief through lower monthly payments, it is almost immediately blocked. I get a measly 3% raise every year (and that only after a massive fight with our employer after unionizing), but all of my bills have gone up 5-10% every year. Once again, rich old people in positions of power who haven’t been in school for years and don’t know what it’s like to be crushed under all of this debt, and who also happen to hold the majority of the assets in the world are making decisions for us young folks as we struggle to make ends meet. I feel absolutely powerless in all of this.

    Now for the question:
    I put myself on SAVE as recommended by the Dept. of Ed. It’s now in forbearance. I understand I will be able to buy back these forbearance periods once I reach 120 qualifying payment periods (my rough estimate is September-November 2026), but how do i calculate what to save in a savings account during the forbearance period if don’t even know what my monthly payments are anymore? At one time they were 180, which i assume will change. Should I just assume 5% for undergrad is out and plan for 10% of discretionary and just save that until they can get things figured out legally?

    Reply
    • First, let me say you’ve done an excellent job articulating the frustration that so many of us are feeling. The only thing I will add is one thought: vote.

      As for your question, there are a few different potential costs of the buyback, and it is very much dependent on how the litigation goes. I’d suggest being a bit conservative with your approach and setting aside 10% (you can use the amount you were paying on REPAYE as your guide). If 10% would be a hardship, you could do 5% and hope the lawsuit goes well, and if it doesn’t, maybe you only buyback half of the months and then continue working and making PSLF for the extra months needed.

      One other item that might be of interest. Last week, I took a look at the chances that borrowers might get credit for the pause wihtout having to pay extra.

      Reply
  10. Hi! Thanks for the article! Our situation is that we just graduated and were on the 6 month grace period. We then consolidated the loans (knocking out the grace period) and applied for SAVE so that we could start making qualified payments for PSLF 6 months earlier. The court hold went into effect shortly thereafter BEFORE the SAVE application was approved. So now we are on the standard plan (payments which come out to ~50% of our income) and cannot apply for the standard IDR. Do you think we can also get on the interest free forbearance, even though we had no yet been approved for SAVE. The application is “in review.” Or can we get on the standard IDR some other way?

    Reply
    • Hi Pete,

      First, let’s clarify something: there isn’t a “standard IDR” plan. Instead, IDR refers to a group of plans where payments are based on your income instead of your loan balance.

      At this time, there is a ton of confusion on IDR plan avaialability and enrollment. Borrowers can submit paper IDR applications to their servicers, but they are telling people that it could be three months before the request is processed. It sounds to me like you have a SAVE application pending, and once that is processed, it should put you on the interest free forbearance while the litigation is pending. Given all of the confusion at the servicers right now, not making any sudden movements is probably the prudent course.

      I don’t see any advantage to making a payment on the standard repayment plan if they mail you a bill on the standard plan, so you might ask for a forbearance while they process your application.

      Reply
      • Thanks for the reply and the advice! I meant IBR, my mistake. Sticking with the SAVE application and hoping to get on the interest free forbearance seems like a reasonable plan.

  11. I consolidated from FFELP Stafford subsidized and FFELP Stafford unsubsidized (both privately held) to privately held FFELP Consolidation sub and unsub respectively in 2004 taking advantage of the 2004 historically low rates. I then consolidated to a federally held direct consolidation sub and unsub 10/2022 for forgiveness eligibility.

    I currently am 293/300 enrolled in SAVE (having made 12 months of SAVE payments) and am now on mandatory forbearance starting 7/2024. What are my best next steps? I want to ensure I receive forgiveness before it becomes federally taxed again in 2026.

    Reply
    • Unfortunately, there isn’t an easy answer here. Today’s ruling from the Eighth Circuit probably complicates things even more.

      I’d say there is a good chnace that the SAVE forbearance lasts well into 2025. For you, that is a major problem. I’m hopeful that the time might eventually count toward forgiveness, but that is by no means a certainty.

      Based on today’s ruling, I’d say the safest bet toward forgiveness before 2026 for you might be to enroll in the IBR plan (not SAVE, REPAYE, PAYE, or ICR). However, I’d wait to do that until the Department of Education has a chance to respond to today’s decision. Next week, the Department of Education might announce something that completely changes things.

      I’d also note that what I’m saying here is a best guess based on the information currently available. There are a number of other factors that could go into the decision, so it is really hard to say with any level of certainty based on a few sentences of information.

      Reply
  12. Hi there, thank you so much for your detailed breakdown! It’s much appreciated. I’m one of the borrowers who consolidated their loans in order to benefit from the one-time payment count. I was previously on SAVE and then re-applied for SAVE at the time of my consolidation (late April). I was told by my servicer in late June that they were still processing my SAVE app, and they put me on a processing forbearance, which does let interest accrue. Now that the courts have blocked SAVE for the time being, I’m not sure where I stand. I’ve tried speaking with the Federal Student Aid customer service and they don’t have any specifics to offer. Do you think it’s likely or even possible the Dept of Ed could move those of us in these SAVE processing limbos into an administrative forbearance as well? It’s really difficult to be in this position knowing that my interest could balloon while the SAVE plan gets worked out in the courts, and I haven’t seen any guidance or even speculation yet on this particular scenario. Thank you for all you’re doing to help loan borrowers navigate these murky times!

    Reply
    • I’ve heard reports as long as 90 days for processing times of repayment plan applications, but its always a good idea to keep a close watch on these things. How long has your loan consolidaiton been finalized?

      My first thought is that the forbearance with zero interest is practically the same as being on SAVE because you would also be on a forbearance with zero interest. The Department of Education has said that the SAVE forbearance won’t count toward forgiveness, but an adminstrative forbearance may count when they do the one-time adjustment, so this could work out in your favor.

      I think the thing to watch at this time is interest charges. If they start adding interest to your balance, something is wrong.

      You are certainly right that these are murky times, and I don’t see an obvious problem in your description that needs fixed at this time, but that could change in the coming weeks as we get more clarity on these cases and how the Department of Education is handling things for SAVE borrowers.

      Reply
  13. Thank you for this well written article. It was very succinct. My biggest concern would be for anyone like myself that consolidated loans to get into the Save program. I switched from IBR to SAVE. My principal and interest obviously capitalized and created a new principal. If I were to need to switch back to IBR after the dust settles, my balance will now grow at a faster rate. Any thoughts on how this might be handled should SAVE be eliminated?

    Reply
    • Thanks for the great question and the kind words, Mike.

      You are the second person today today ask about what becomes of the borrowers who consolidated to get into SAVE. Without question, if SAVE was struck down, there would be thousands of borrowers worse off because they tried to sign up for SAVE. Undoing a consolidation is difficult, if not impossible, in this situation. Many borrowers had FFEL loans held by a third-party. Those third-parties got repaid in full when the consolidated loan was funded. Even if they wanted to, I don’t see how the Department of Education could unwind that consolidation. That said, it would seem to me that something would need to be done to make borrowers whole. Adjusting your balances to undo the damange of the capitalized interest would seem to be a reasonable solution. It would also be complicated. Hopefully, we don’t have to go down that road.

      Reply
  14. In this post you mention that IDR plan forgiveness will start to be taxed in 2025, however when I click on the hyperlink it looks like 2026. Can you please clarify?

    Reply
    • Thank you so much for posting this question. The text of this article should have said 2026 instead of 2025. I missed that typo and it makes a huge difference! The article has been updated to correct the mistake.

      Thanks again!

      Reply
  15. Thank you for this post. I am on SAVE and (was) 3 months away from PSLF. I guess I wonder – who gets to decide if a month of forbearance counts or doesn’t? And do you see a possibility that the month(s) ahead could be counted after all?

    Reply
    • The decision to not count this time toward PSLF and IDR forgiveness was made by the Department of Education.

      I suppose it is possible that they revisit the decision and count this time toward forgiveness, but the most likely outcome is that they stick with the current decision. That said, I don’t agree with this decision and I’m sure I’m not alone in that opinion. Hopefully, they will change their mind.

      Also, after you submitted your question, I added some information about the PSLF buyback process which could apply in your situation. I’d encourage you to check that out as well.

      Reply
      • My understanding is that they said it won’t count because it is one of the provisions of the plan or new regulations, though I’m not a lawyer so I have limited understanding of all of this information. I heard from a loan advisor that if the ED wins the case then most likely this forebearance will count. I can’t understand why they wouldn’t make it count unless they thought they couldn’t get away with it. Any thoughts on that? Thank you for your time. Thank you for your article. I owe $473k and I’m at 117 months for PSLF on SAVE and I’m trying to figure out if I should hang tight or apply to another plan. Advice I got was to avoid paper applications and wait up to a month to see if online application button becomes reactivated. Still others said to wait no matter what as it takes so long to process repayment plan application that you might as well just stick it out. Those others think that the ED will eventually revert save plan participants back to repaye within a couple months of their own volition without waiting for the courts to decide and I would hope they do that. Though I wonder what are the chances.

      • There is a long list of potential reasons for the Department of Education’s decision to not count this forbearance toward IDR forgiveness or PSLF. One thing I will say is that I think it would be easier for them to say it counts toward forgiveness after the forbearance ends than it would be for them to say it counts when we have no idea how long it will last. That said, I don’t think it is safe to assume that it will eventually count. I’d say it is probably more likely that it doesn’t count, but what they ultimately decide will depend on a number of different circumstances.

  16. I just wanted to say thank you so much for sharing your professional insight on the ongoing litigation! I can say for myself – it has put my mind at ease over the subject, even if nothing is guaranteed.

    Reply
    • The one-time adjustment is a different program independent of the SAVE regulations.

      I suspect the recent challenges to the SAVE plan have complicated things at the Department of Education, but I still think they will get the one-time adjustment process completed by early fall. My reasoning is that the plan is likely to help many borrowers earn forgiveness, and that is the type of thing they will want to finish before the election.

      Reply
  17. I’m curious about how the APA 6 year statute of limitations may impact your worst case scenario. REPAYE has existed since 2015. Could REPAYE and the older ICR plans be challenged or altered through the courts at this point or can that only happen through Congress? Could a ruling on the SAVE lawsuit affect regulations beyond the final SAVE rules?

    Reply
    • That is a pair of fascinating questions.

      First, it’s important to note that what you are asking is an adminstrative law question. This is an entirely different area from my focus for the last decade. I’m not an expert in this field, but I will share my thoughts as someone who is an interested party.

      It looks like recent rulings on the APA regarding the six-year statute of limitations give plaintiffs some extra flexibility when it comes to starting that clock. That said, the plaintiffs in these cases are states, so they would have a hard time showing a new injury from an old plan.

      As for the implications of the SAVE lawsuit, in the worst-case scenario the language in Supreme Court ruling on the SAVE plan might open the door for new challenges to other plans. I think such an outcome is highly unlikely, as noted in the article, but if you asking if something could happen, I suppose it isn’t impossible.

      Reply
  18. I am 117/120 for PSLF and in the SAVE Plan. Should I just switch to IBR so that I do not have to deal with Buyback hoops?

    Reply
    • That is a great question and I don’t know what the best route is at this time.

      Part of me thinks you should stand pat for a couple of weeks to see how the Department of Education handles all of this. A new option may become available that is better than switching to IBR.

      However, it looks like SAVE may not be available for a while and the sooner you switch to IBR, the sooner you can get going on your final three payments. It is also worth noting that IBR will be more expensive for most borrowers, so you may also want to factor that into your decision-making.

      I wish I could give you more clarity on this situation, but this is truly uncharted territory.

      Reply
      • Agree on all of this. I just want to be done. Even if it costs me a little more it’s worth it at this point I think. As I’m guessing the buyback paperwork will take forever.

    • Me too. 117/120 on SAVE. Same issue. I’m waiting to see if they bring back REPAYE. Repayment plan applications taking more than 90 days to process is wild. If they bring back another option like REPAYE they may be able to reinstall it on our accounts a little quicker? I don’t know. I’ve decided to stay put for another month.

      Reply
  19. What are your thoughts on these months being allowed to be bought back thru the pslf buyback option? Most seem to think this a viable option down the road, which would then not lengthen the pslf 10 year time frame since you’d apply for the buyback at 120 payments. I’m on save and 7 years in and want to meet forgiveness as quickly as possible before my income continues to rise and lead to higher payments.
    Also, if the buyback is an option wouldn’t it be similar to just continuing to pay our monthly save bill despite it being in forbearance, any thoughts if they’d count such payments if we just keep paying them now?

    Reply
    • Using the PSLF buyback option is an excellent potential solution for people impacted by the pause. I wouldn’t say that it is a guarantee that it will work, but it is an excellent strategy for borrowers impacted by the pause.

      That said, making payments even though you are not getting a bill probably isn’t the answer. When you are on a forbearance, you are not technically recieving a bill, so you cannot make a payment. There is no mechanism in place to get previous “extra” payments to count toward PSLF. I’d say setting that money aside in a bank account for a future buyback is probably a better route.

      Lastly, I’d note that there are some extra steps necessary to use the buyback option. It is a good strategy, but it requires jumping through some extra hoops, including going through the PSLF reconsideration process.

      Reply
      • Thank you so much for your explanation and advice! The buyback option is definitely something I’m keeping hope in 🙂 One other thing I have been reading is some have been directed to ask for the forbearance to be removed from their account. Does this seem like a possible good direction? I’m not sure that makes sense to do, as the save plan is blocked, so even if we got it removed and kept making payments it seems like they wouldn’t count towards pslf.

      • With the SAVE plan currently blocked, requesting the forberance being removed would be essentially requesting to be put on a repayment plan that the Department of Education is prohibited from making avaialble. I don’t see that route working.

        However, I would like to see the Department of Education make REPAYE available to borrowers once again. That could resolve this issue for many.

  20. I am nearing my 120 months payments for PSLF. (July and August are my last two)

    Husband and I are trying to buy a house and this was our way to that. What do you suggest to get my last two months?

    Reply
    • Are you currently on SAVE? If so, it looks like your July and August payments won’t happen and the forbearance time won’t count. I’m hopeful that the Department of Education eventually revises this policy to give borrowers credit for time that they deserve, but they’ve announced that it doesn’t count.

      This is an issue for you in two ways. First, it would delay reaching the 120 payments needed for PSLF. Second, and I don’t know how the forbearance is being reported to credit agencies yet, but if they report a $0 forbearance on your loans, it will potentially cause issues during mortgage underwriting.

      I’m hesitant to advise jumping away from SAVE becuase there is so much uncertainty and we may get clarity from the Department of Education and serivcers over the next couple of weeks. For example, I’d love to see them bring back the now retired REPAYE plan. That said, at this moment, it appears as though you are someone who might really benefit from switching to another repayment plan.

      Reply
  21. What are the odds they will roll back actual forgiveness? Mine were fully discharged for length of payment a month before the recent decision and I’m freaking out.

    Reply
    • I would be very surprised if the undid the forgiveness. Once the debt has been formally discharged, they will have a very hard time bringing it back.

      Out of curiosity, was this IDR forgiveness after 20 or 25 years, or was this the early forgiveness under SAVE?

      Reply
      • The review letter said that I was eligible for forgiveness under the IDR. I never got a formal letter of discharge so that is part of my anxiety. About a month after I got the letter saying my account was eligible for discharge and was being reviewed, I called to put the loans into forbearance and after being put on hold forever, was told that I showed no balance and that the loans showed paid in full by discharge or write off. Supposedly a letter was forthcoming but I never got anything. Every single day I check both my servicer and Dept of Ed to make sure it still shows zero balance. So far it has but I’m wondering why I never got a letter and am just hoping that it is really forever real.

      • It sure sounds like your loans have been forgiven and you are done. However, I definitely understand the desire to get that letter saying it is paid in full.

        If you log into your servicer account, is there a link to look at past statements/letters/documents? If the letter got lost in the mail, you might be able to find a copy in the servicer account.

        If there is no letter to be found, I don’t blame you for pressing the issue with your servicer. They should provide one that says your debt is paid in full. If they don’t, you might want to consider filing a complaint with the CFPB.

  22. My biggest concern at this point is getting the past few months of administrative forbearances to count toward PSLF. I was put on admin forbearance for March, April, June, and July for various different reasons and was told explicitly by MOHELA these would count for PSLF. However, since the admin forbearance being considered an eligible payment is part of the SAVE regulation does this mean these past forbearances won’t count either? I’m supposed to be only 4 months away from forgiveness but now if those 4 months don’t count, I’d be 8 months away. This is problematic for me because I work for the Biden admin so if he loses in November, I lose my qualifying job. I’m also concerned that the buyback program isn’t even possible now either, which is what I would do if these 4 months don’t count. Any insight would be appreciated.

    Reply
    • That is a really tricky situation. Are you on SAVE now? If so, it might be time to look into switching repayment plans so that your progress can count.

      The previous admin forbearances may still count, that is something worth watching when they do the one-time payment adjustment. However, because we are told the new forbearance won’t count, getting those last four months done in time will be tricky.

      One other item to keep in mind is the fact that you still need to be employed by an eligible employer when your loans are discharged. For many borrowers this ends up being ten years plus a couple extra months.

      Reply
      • I was told by MOHELA I only needed to be employed by my current employer when I apply for the forgiveness, not until the loans are discharged. Is that not the case?

      • This is a really good question. I won’t say that what MOHELA told you was wrong, but I won’t say it is right either. This requires a bit of explanation.

        The Code of Federal Regulations, which is what the MOHELA rep was likely trained on, says that you need to be employed at an eligible employer at the time you apply. Thus, they are technically right.

        However, I advise people to stay in their job until the loans are forgiven for two reasons.

        First, you might lean that you are a month or two short. If you have left your job by the time you learn that information, getting another PSLF job could be a major issue. It is safest just to stay until things are finalized.

        Second, and less important, is that if you look at the text of the original 2007 law, it says that borrowers must be “employed in a public service job at the time of such forgiveness.” I’m not sure how that language changed to “at the time of application” when the Department of Education promulgated the regulations. Here again in the interest of playing it safe, I suggest that borrowers stick around until the debt is actually forgiven.

  23. Thanks for your post. The Ed is saying the forbearance DOES NOT count for PSLF or IDR forgiveness

    https://www.ed.gov/Save

    What do you suggest people do in this circumstance if we are in the PSLF program and now we can’t even make payments for it to count? MOHELA can’t take us off of admin forbearance because it was mandated by Ed

    Reply
    • First, thank you for the update and the relevant link.

      As for suggested steps, it is really hard to say. I’ve added a new section to the article that covers the many different factors that might apply in your situation.

      There won’t be an easy answer for most borrowers. Interest free is excellent, but not qualifying for forgiveness is really bad.

      Reply
      • Thanks so much for updating your article given the new information, and for all your great work.

        Couple of follow up questions if that’s okay?

        I’ve been on SAVE since its inception last year and have about 8 months worth of payments before the injunction. I’m currently on track for PSLF with 100/120 payments. If these lawsuits are successful for the plaintiffs, does this jeopardize all the payments I’ve made for the last 8 months counting for PSLF? If they don’t count, doesn’t this harm borrowers? What recourse do we have for delaying forgiveness?

        Finally, an adjacent question. There’s a lot of talk on the PSLF Reddit forum regarding whether the PSLF program would be in jeopardy if a new Administration takes over in 2025. I don’t want to get political, but loan forgiveness has become so political. But in your opinion, should we be concerned about the uncertainty of the PSLF program if a new Administration takes over in 2025? I’ve heard things along the lines of “it’s written in the master promissory note” and “PSLF was passed by congress,” but should we really be concerned about the program going away?

        Thank you!

      • You ask two very reasonable questions. Before answering, I think it is important that I first mention the answer to both is nobody knows for sure. The parties litigating may have strong feelings, the Department of Education may think they know, but nothing is set in stone. The best I can do is to give you my perspective on both, but I can’t provide any sort of guarantee which is what I suspect you would like, and what you deserve. Nobody should have to plan repaying massive amounts of student debt amid such uncertainty, but here we are…

        I’d be very surprised if the prior payments on SAVE that you made didn’t count. For starters, SAVE didn’t technically start until July 1. The Department of Education and servicers called them SAVE payments to help borrowers with the transition, but it was arguably a REPAYE payment during those months. More importantly, there is a big difference between preventing something from happening in the future and undoing something that happened in the past. Its highly unlikely that the final verdict will undo anything that has already been done.

        As for PSLF, I think there are plenty of guardrails in place to ensure its ongoing existance. You mentioned two of them already. I’d also note that PSLF being passed by Congress means that ending it would likewise require an act of Congress. That would require 60 votes in the Senate, which seems highly unlikely. I’d say the biggest concern for PSLF in a new adminstration would be slower processing times and procedural hurdles. They couldn’t eliminate it, but they could make it a pain to qualify.

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