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3 Million Student Loan Borrowers Receive Another Payment and Interest Pause – Here’s How to Sign Up

Learn how to qualify for the new payment and interest pause amidst ongoing SAVE lawsuits.

Written By: Michael P. Lux, Esq.

Last Updated:

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This week began with two significant setbacks for the Biden Administration regarding the SAVE lawsuits in Kansas and Missouri. Plans to cut payments in half for borrowers with undergraduate debt and to forgive smaller balances early were halted due to a preliminary injunction.

In response, the Department of Education announced plans to pause payments and interest for borrowers impacted by these injunctions. This new pause mirrors the one that lasted over three years during the COVID-19 pandemic. However, not all borrowers will automatically qualify this time around; some will need to take additional steps.

Who Gets the Payment and Interest Pause Right Away

Currently, about 8 million borrowers are on the SAVE plan. Of these, approximately 4.5 million already qualify for $0 per month payments, receiving a monthly subsidy that covers unpaid interest.

The more than 3 million remaining borrowers will now see their payments paused and interest suspended. However, borrowers not currently enrolled in SAVE will need to sign up to benefit.

How to Sign Up if You Are Not Already on SAVE

The Department of Education has temporarily suspended online applications for the SAVE plan for an estimated 4-6 weeks. However, borrowers can still enroll using a paper application.

The quickest way is to fill out the form and upload it to your servicer using the secure upload feature on the servicer’s website.

Sherpa Tip: Some student loans are not eligible for SAVE. If you have FFEL loans, you will need to consolidate your loans to be eligible. Parent PLUS loans are not eligible even if consolidated, but the double-consolidation loophole can allow Parent PLUS borrowers to qualify for SAVE.

How Long Could This Last?

The Department of Education has not specified the duration of this new payment and interest pause.

It is possible that it will last while the SAVE lawsuits are pending. Given that litigation can take years, borrowers might enjoy another year or two without payments and interest.

However, it’s possible the pause is short. The district court could lift the injunction, requiring borrowers to resume payments as planned. Alternatively, the court could expand the injunction to block this latest move.

Risks of Signing Up for SAVE Now

SAVE qualifies for all forgiveness programs, so time on the payment and interest pause should count toward IDR and PSLF loan forgiveness.

However, if you have a higher income, there is a risk of a sudden spike in payments once the pause ends. You can always switch to a different repayment plan later, though there are limitations with PAYE and ICR.

A federal judge may not approve this pause and could force the Biden administration to resume payments. It is also possible, though unlikely, that the judge could retroactively charge borrowers for interest during this new pause.

Ideal Strategy for Borrowers Moving Forward

If you prefer a “set it and forget it” approach, taking advantage of this pause might not be for you. Immediate action is required, and ongoing monitoring will be necessary. Higher earners might see a spike in their monthly bills when the pause ends if they are not careful.

For most other federal borrowers, this new pause presents an excellent, albeit temporary, opportunity.

With payments and interest paused, you can place your regular payments in a high-yield savings account. This balance can grow during the pause, giving you funds to either aggressively pay down your debt or pursue another financial goal when the pause ends. In the highly unlikely event of retroactive charges, having the money set aside will protect you.

Stay Up to Date: As we learn more about this new pause, including any details on when it will end, newsletter recipients will get a warning in their inbox.

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.

6 thoughts on “3 Million Student Loan Borrowers Receive Another Payment and Interest Pause – Here’s How to Sign Up”

  1. Hello. I just graduated on 5/11/24 from a University. I have direct loans which are in grace period until November. I don’t have a job yet, so my income is $0. Would it be advisable for me to apply for SAVE program now and start the clock toward forgiveness? With my income, the monthly payments would be $0. I was trying to figure out if I should apply to consolidate my loans before June 30th, and stumbled on your website. I cannot find any advice on either the consolidation or applying for SAVE while in grace period.

    • I’m glad to see that you are on top of your loans already, and it sounds like you’ve done a lot of the necessary homework. I do have a few quick thoughts on your situation.

      First, signing up for SAVE is a fantastic idea, especially if you qualify for $0 per month payments.

      Because you are on your grace period, your SAVE payments wouldn’t begin until after the grace period ends.

      Consolidation would be the one way to cut the grace period short to get into repayment earlier. If you didn’t take a break from school and enter repayment previously, there likely wouldn’t have been any other reason to consolidate before the June 30 deadline.

      • Michael, thank you so much for taking the time to answer me. I did take a three year break from school due to Covid. I should have been more proactive about consolidating by the June 30th deadline. In any case, it sounds like it would be wise for me to apply for consolidation with the SAVE plan even now, after June 30th.

      • If you have loans with different repayment histories, consolidating before June 30th would have been advisable. This article explains pre-June 30 rules and the rules that took effect on July 1.

        The wrinkle that might work to your advantage is that when the courts got involved over the last couple of weeks, there were times before July 1 where the consolidation online application was not available. My hope is that they extend the deadline to benefit from the one-time adjustment by at least a couple of weeks. At the very least, they should give some flexiblity to the people who tried to consonsolidate before the deadline but were unable to do so.

    • I think it is very likely that they do give credit toward IDR and PSLF for this particular pause, though I haven’t gotten confirmation of that.

      Also of note, the Court of Appeals just lifted the injuction on the transition to 5%, so this pause may end up only being for the month of July.


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