Many borrowers are concerned that the re-election of Donald Trump will limit their financial options for student loans and have financially devastating consequences.
While it is fair to say that the election results were a setback for borrowers, it’s important to note that many borrower protections are in place to ensure the continued availability of these resources.
This article will provide a fact-based, unemotional analysis of what the next four years might hold for borrowers.
The Future of SAVE and the SAVE Lawsuit
At this point, it’s unlikely that the SAVE lawsuit will be resolved before the new administration is sworn in on January 20, 2025.
While this almost certainly means the end of the SAVE repayment plan, how it all plays out remains an open question with significant implications.
The SAVE rules didn’t just create the SAVE plan; they eliminated the REPAYE plan, limited enrollment in ICR and PAYE, and allowed the double-consolidation loophole for Parent PLUS Loans.
The Biden administration had already mentioned plans to reopen PAYE and ICR enrollments later this year to help borrowers impacted by the litigation. If they move quickly, one possibility is to modify the SAVE regulations to bring back PAYE, ICR, and REPAYE.
There is some concern that all the plans created under the ICR statute—ICR, PAYE, REPAYE, and SAVE—could be eliminated as a result of the litigation or the Trump administration taking office. However, significant barriers exist to eliminating these repayment options.
To understand how each repayment plan is impacted, we need to look at them individually.
IBR: The Safest Repayment Plan
The Income-Based Repayment (IBR) plan is the safest of all federal income-driven repayment plans. This safety applies to both the original IBR and the more generous IBR for New Borrowers.
Two key protections are in place for IBR:
- Statutory Protection: IBR is guaranteed by statute. To change the IBR rules, Republicans would likely need a majority in the House and a supermajority in the Senate. Because the Democrats hold over 40 seats in the Senate, they can likely filibuster to block changes to the IBR statute. Even in scenarios where Republicans overcome a filibuster, existing borrowers would likely be grandfathered into IBR eligibility.
- Master Promissory Note (MPN): The MPN is the contract between the federal government and the borrower. If Congress attempted to eliminate IBR for current borrowers, a lawsuit would almost certainly follow to assert borrowers’ contractual rights.
This combination of protections should provide borrowers with confidence in the continued availability of IBR.
Digging Deeper: If the MPN protects current borrowers from plan elimination, how was Biden able to eliminate REPAYE?
The move from REPAYE wasn’t challenged because the new SAVE plan had either the same or better terms for borrowers compared to REPAYE. Since SAVE only improved REPAYE’s terms, borrowers wouldn’t be eligible for relief in a potential lawsuit.
ICR and PAYE New Availability
The Department of Education has announced plans to expand ICR and PAYE access to help borrowers affected by the litigation. The election results should only add urgency to this plan.
ICR and PAYE were both created via the regulatory rulemaking process. In theory, the next administration could roll back these regulations, but borrowers still have some protections.
Most notably, the MPN includes language for both ICR and PAYE. Additionally, if there were a legal challenge to these plans, similar to the challenge to SAVE, that lawsuit would likely fail due to the six-year rule under the Administrative Procedure Act.
REPAYE: Making a Return?
The status of REPAYE differs from ICR and PAYE because SAVE regulations replaced REPAYE.
However, there is a strong likelihood that REPAYE could return in its original form if SAVE is eliminated.
Here again, the MPN and the six-year rule of the Administrative Procedure Act provide a degree of protection for current borrowers. Notably, during Trump’s first term, REPAYE was available, and the administration never challenged or attempted to eliminate it.
Non-SAVE Repayment Plans Are Unlikely to Change
Some borrowers fear that the Trump administration will make things difficult for borrowers. However, a simple cost-benefit analysis suggests this is unlikely.
While student loan forgiveness remains unpopular with Trump’s base, there aren’t widespread calls to redefine discretionary income or adjust the percentages borrowers pay each month. Changes like these would be legally complex, deeply unpopular with those affected, and unlikely to be seen as a win by his base.
It’s also worth noting that congressional offices—both Republican and Democratic—are filled with recent graduates struggling with student loans and living in an expensive city.
The potential “benefit” of making repayment more punitive compared to the potential downside makes such changes unlikely.
Public Service Loan Forgiveness Is Secure: Why PSLF Shouldn’t Change
When Trump was first elected, many borrowers feared it would mean the end of Public Service Loan Forgiveness (PSLF).
During the first two years of his term, Republicans controlled both houses of Congress, yet no plans to eliminate PSLF were seriously considered.
Because PSLF has been statutory law since 2007, eliminating it would require an act of Congress. Even if Democrats are in the minority, the Senate filibuster provides some protection. PSLF language is also included in the MPN.
Additionally, when proposals to eliminate PSLF have been made, they usually include provisions to grandfather in existing borrowers.
The One-Time Payment Account Adjustment
We’ve been waiting years for payment histories to be adjusted.
It was surprising that this adjustment wasn’t completed before the election. However, complications from the SAVE litigation likely consumed many Department of Education resources.
Finishing the one-time adjustment before January should be a priority. Even if it’s not completed by the time the new administration takes over, the new Trump administration may be legally required to complete it. Hopefully, it won’t reach the point where a lawsuit is necessary to force the Department of Education to provide the promised credit.
This will be worth watching closely over the next few months.
Policy Changes vs. Practical Changes
Thus far, we’ve only discussed potential student loan policy changes over the next four years. However, there are also practical considerations that borrowers should understand.
For example, when the first group of borrowers became eligible for PSLF during Trump’s first term, the initial rejection rate was over 99%. PSLF remained a valid program, but the many hoops borrowers had to jump through disqualified most.
The limited waiver on PSLF was intended to address these issues, as was the one-time account adjustment.
While qualifying for PSLF is now less difficult, the lesson remains: even if a program is in place, poor implementation can cause major problems for borrowers.
Borrowers working toward forgiveness in the coming months and years must pay close attention to every detail to avoid eligibility issues.
The Big Tip Moving Forward: Be Proactive
We don’t know what the future holds, but it’s possible that loan servicers could face less accountability and become less helpful for borrowers. Likewise, qualifying for forgiveness may become more challenging.
In this environment, borrowers need to be proactive. If you’re working toward loan forgiveness, make sure you understand all program requirements and document your progress.
It’s a good idea to download copies of all statements and communications with your servicers. If you make a call, take detailed notes—write down what you asked, what you were told, and when it happened. These notes might never be needed, but they could prove very helpful in the future.
Final Thought: Don’t Ignore Student Loan News
If the election didn’t go your way, it may be tempting to unplug and disengage from politics and news. That might even be the healthiest approach for some.
However, given the challenges borrowers might face, it’s important not to miss major developments.
Stay Up to Date: To help borrowers stay informed, I send out a free monthly newsletter with all the key information you need. The news isn’t always good, but the goal is to help make life with loans as manageable as possible.
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.
Hi Michael,
Thank you for posting all of this information and analysis. All of this uncertainty is extremely distressing. I’m hoping you can confirm something that I think is true.
I have graduate school loans taken out in 1992, 1993 and 1994 (graduated 6/1995). I thought I consolidated all of my loans in 2008 into the ICR program, but apparently I didn’t.
In any case, I was notified last summer that my loans from 1994 (the loans I hadn’t consolidated) were forgiven on the grounds that I had reached 25 years of qualifying periods of payment/forebearance/deferment. If my 1994 loans reached 25 years of qualifying periods, then I think that 1992 and 1993 will qualify as well once the one time adjustment is completed.
I was switched to SAVE but my application is still pending.
I consolidated two perkins loans recently so that they would get credit for the one time adjustment as well.
Am I correct in assuming that my best course of action is to sit tight and see what happens. Do you really think that one way or another the balance of my loans will be forigiven. I have literally paid twice what I borrowed…
It sure sounds like you have a great shot at getting your balances forgiven. It also sounds like you deserve it.
I can’t get more detailed without knowing what loan types you had, what the repayment history timelines look like, and what was consoldited and when.
That said, holding tight until the one-time adjustment happens sounds reasonable. I’m hearing that FSA is telling people it should be done by January.
Great article, but I really wish an attorney with promissory estoppel knowledge would step forward. No knocks against you at all, love your content. It’s just unfathomable that commercial FFEL borrowers were pretty much coerced into consolidating and capitalizing significant interest, losing their forgiveness counts, and carrying a larger balance on their credit, not to mention increased payments in the future and taxes. Older borrowers make up a significant portion of student loans, with forbearance steering this could mean decades of interest and lost counts.
The IDR adjustment is pretty much halted since the injunctions, as the SAVE rulemaking, now under injunction, was the authority they cite for the adjustment. The last documented IDR forgiveness was in 5/2024. The dept of ed prefers to stonewall borrowers and not tell them this and keep a Sept 1, 2024 deadline on their website. To add to the ineptness IBR applications are blocked, it’s still unclear why as IBR has nothing to do with the injunctions. Today, as it stands, there is zero path to forgiveness.
We are the borrowers the Biden admin forgot and abandoned to a fate much worse than we originally had before all of this forgiveness talk. I just hope there are enough of us for a law firm to back us up.
That is a really great point. I think some of the borrowers in that category would have trouble showing detrimental reliance, but I’m certain there are some who can.
I’m not sure what the ideal background is for the right attorney to ask about these questions, because it goes far beyond promissory estoppel, you’d need someone well versed in the Tucker Act and the issues unique to suing the federal government for a breach of contract. I’d love to pick that person’s brain.
Thank you for the reply. I’m no attorney, but it seems like detrimental reliance wouldn’t be that large of a hurdle to cross? The “promise” of having non-repayment months categorized into repayment months and having early forgiveness was given with the only path towards that being to do a direct consolidation.
The harm is clear, accrued interest capitalized, forgiveness counts were reset, not to mention the effect a larger balance has on your credit, larger monthly payments on a higher balance student loan, having a much larger tax bomb, etc.
But again, I’m not attorney and don’t know what would qualify, but if those don’t qualify then there is something seriously wrong with the concept of detrimental reliance.
The tricky part in your analysis is the harm and remedy. For starters, that consolidation did not reset forgiveness counts. The interest capitalization is a factor, but they could do an account adjustment to fix that problem for people… it isn’t a harm that would require keeping SAVE available.
I think the stronger reliance damage claim would be for the people who had consolidated FFEL loans with premium interest rates from their lenders. By not getting SAVE and not being able to go back to where they were, they have a very clear an easy to define injury. Even then, what we really want is specific performance (meaning SAVE stays available), and it is hard to come up with any injury that merits specific performance in my opinion.
Michael I’m replying to your latest comment, there doesn’t seem to be a way to reply to that one. I’m a bit confused, when you consolidate and sign the promissory note it stipulates that you lose your forgiveness counts and capitalize any accrued interest. There is zero mention of any IDR adjustment or crediting of past counts in the promissory note. The IDR adjustment is meant to be enacted after you consolidate (and that’s exactly how the FSA words it), it’s basically just a “promise” from the Biden admin and the dept of ed. Please correct me if I am wrong, but you most definitely lose your forgiveness counts when consolidating.
The harm seems clear, but again I’m not an attorney. The remedy, well you’ve already said part of it as an account adjustment, but that will most likely require some sort of legal action unless you think the Trump administration will retroactively correct those harms, including the forgiveness counts. So what happens, in what seems the most likely case, if the Trump admin refuses to do those account changes?
I don’t think there should be a legal fight to keep SAVE alive, especially as it will most likely be ruled illegal, rather the legal fight should be to correct the wrongs done to borrowers coerced into a consolidation and at best hope for IBR/PAYE to stick around.
That language in the consolidation application dates back to when the old consolidation rule that restarted payment counts when you consolidated. That is no longer the rule, but they haven’t updated the consolidation materials since that time. It really is a problem. The important thing to know is that consolidating does not restart your progress toward forgiveness. I’ve previously written about the changes to the forgiveness clock and how consolidation impacts the timeline.
Trump getting elected was definitely a setback for borrowers, but I don’t think it is safe to assume that he will do everything in his power to make life miserable for borrowers. He may correct issues just to avoid the embarassment of losing lawsuits.
From what I understand the rule you are referencing comes from a provision of the final SAVE rule which is part of the injunction against it and will most likely be struck down by the 8th circuit, which means we revert back to the rules of consolidation found in the Code of Federal Regulations:
“(1) For a Consolidation loan, the repayment period begins on the day of disbursement, with the first payment due within 60 days after the date of disbursement. ”
That’s in addition to the verbiage on the promissory note which the borrower signs:
“J. Any payments I made on the loans I am consolidating (including any
Direct Loans) before the date of consolidation will not count toward:
• The number of years of qualifying repayment required for loan
forgiveness under the REPAVE Plan, the PAYE Plan, the IBR Plan, or the
ICR Plan (see BRR Item 11), or
• The 120 qualifying payments required for Public Service Loan
Forgiveness (see BRR Item 16).”
The injunction is also most likely the reason the IDR adjustment has been unofficially halted as that was also part of the final SAVE rule. The DOA originally attempted to simply apply the IDR adjustment via an announcement, but then had to backtrack and try to enshrine it into rulemaking (most likely because of the Macinac/Cato case which pointed out that the IDR adjustment was not created with the rulemaking process required):
“Credit certain periods of deferment or forbearance toward time needed to receive loan forgiveness; Permit borrowers to receive credit toward forgiveness for payments made prior to consolidating their loans;”
Of which the aforementioned rules have an injunction currently, as the 8th circuit on 7/18/24 notes:
“JUDGE ORDER: Appellants’ emergency motion [5412905-2] for an administrative stay prohibiting the appellees from implementing or acting pursuant to the Final Rule until this Court rules on the appellants’ motion for an injunction pending appeal is granted. Adp July 2024 [5414861] [24-2332, 24-2351] (MTB) [Entered: 07/18/2024 11:12 AM]”
PSLF borrowers were able to be part of an unchallenged Final Rule in 2022 which revised what counts as a monthly payment (in particular allowing periods of certain deferments and forbearances to count as repayment months) and added the buyback provision. This is why PSLF IDR adjustments are still ongoing. No such luck for non-PSLF borrowers who are stuck on the SAVE final rule and legally blocked from the IDR adjustment being applied, most likely no IDR adjustment has been applied since the last batch of forgiveness in May 2024 due to the injunction.
The DOA has not been forthright about this and is letting IDR borrowers stew in a non-counting forbearance, with IBR applications mysteriously frozen (note their is no injunction against IBR or forgiveness via IBR). The 8th circuit isn’t slated to decide on this until well after the Trump administration takes over, and good luck with them continuing the IDR adjustment, or even honoring it retroactively if the 8th circuit strikes the Final SAVE rule as illegal.
You’ve clearly done a lot of investigating into this issue, and I applaud your efforts. However, I don’t agree with your conclusions. I’m going to try to be a clear as possible on this one because I don’t want people to read this discussion and panic about consolidating their loans.
First, the 8th circuit ruling that you are quoting has been superseded by a new injunction, that is far more clear about what is permitted. Rather than bocking the entirety of the SAVE regulations, it specifies the more controversial aspects that are the target of the lawsuit. Notably, the Dept. of Education is not blocked from implementing the rule on consolidation.
Second, all of the 8th circuit rulings that we are talking about are preliminary. In other words, temporary measures until the case is resolved. If you look at the relief sought in the two lawsuits that were filed, neither one is looking to overturn the consolidation rules.
In the highly unlikely event that any adminstration attempted to reset progress back to zero as a result of a consolidation, there would almost certainly be a number of lawsuits filed and these lawsuits would be very likely to be successful. Moreover, I’ve never heard a single argument suggesting that borrowers should have their progress reset after consolidation. It was bad policy and it got fixed. There are plenty of controversial aspects on student loan repayment and potential changes on the horizon, but this specific issue doesn’t appear to be one of them.
Thank you Michael for bringing that to my attention, I had read it but did not read it closely enough to see the specifics. From my understanding the newest injunction is for three items, 1) Any further forgiveness of principal or interest (of ANY ICR plan if I’m reading it correctly in the first few pages), 2) from not charging borrowers accrued interest, and 3) from further implementing SAVE’s payment-threshold provisions.
So according to that the rule that consolidations would not reset forgiveness is intact, do you know if that is retroactive as the rule was published in July 2023 and my consolidation loan was in 2022? And again, thank you for that clarification.
This would also mean that the injunction no longer applies to the IDR adjustment as well, but it’s still baffling why there is such a complete lack of communication from the DOE and the only discharges they have announced since May 2024 have been PSLF ones.
It’s also interesting to note the 8th circuit parroting SCOTUS with the major questions doctrine, which is what it would end up anyway if Harris had won and appealed to SCOTUS.
But my original questions still stand, and they are more rhetorical and not directed at you. What will happen with the accrued interest which was capitalized upon consolidation? Is that addressed in the final SAVE rules? Does the injunction specifically mentioning accrued interest mean we are out of luck, especially because we would not have capitalized that interest if it wasn’t for the IDR adjustment?
What will happen if the IDR adjustment is not completed prior to the new administration comes in? What if they don’t continue it, or honor past adjustments? I suppose if those parts of SAVE survive then they would legally have no choice, and it’s heartening to see that at least the 8th circuit isn’t necessarily looking to completely eradicate the final SAVE rule, so some of it may indeed survive.
Hello Michael:
Thanks for the analysis. Over the summer we began the double consolidation process for our kids’ PLUS loans, with the idea of consolidating the 8 separate loans into 2 consolidated loans, and then into one loan (so far we have consolidated 8 into 2), for purposes of getting into the SAVE repayment plan. We have not yet completed the final consolidation of the 2 loans, and at this point I’m not sure we should follow through with the final step of the double consolidation.
Any thoughts you may have would be appreciated!
Really good question Jim. If we look at it from the perspective of upside vs. downside. I’d say there is plenty to gain my finishing the double consolidation, and I don’t really see much of a benefit to waiting to finish it.
The one quick nugget I’d give you is to apply for the standard repayment plan when you do the last consolidation. You can change it to an IDR plan once the consolidation is finalized, but if you apply to consolidate and enroll in an IDR plan at the same time, it could delay the consolidation process.
Thanks for the advice! One last question: as a state employee, I was also going to apply for PSLF, which I now understand is run by the Dept. of Ed., rather than Mohela, so I was going to do the final consolidation with studentaid.gov – do you recommend online or paper?
Paper is essentail for the first pair of consolidations for the double consolidation, but I’ve seen mixed answers on the second round consolidation. (There isn’t an official department of education policy on this, so I can’t say for sure.)
The one thing I can say for sure is that the Dept. of Ed. is not a federal student loan servicer. You don’t have to pick MOHELA anymore for PSLF, but you do need to pick a servicer different from the two you are currently with.
Hi Michael. Again this is great information, and makes me feel a *little* less anxious. I am seriously considering applying for the PSLF buyback as I was at 109/120 payments when we were thrown into forbearance (I have other months I think I can buy back, not just the most recent). My thinking is that if I have at least started the process, it will be less likely to be thrown out by the next administration. However, everybody keeps saying to wait until the IDR count is done. But that keeps getting delayed, and I’m afraid that when I finally get my count, I won’t be at 300 and then it will also be too late to get the buyback (assuming Trump ends or messes with it). I know you don’t have a crystal ball, but…what do you suggest?
As you noted, I don’t have a crystal ball, but I’ll give you my two cents. Starting the buyback process and finishing the buyback process are two different things. You can start the buyback process, and then if the one-time adjustment happens while you wait for buyback results, great. If it doesn’t, then you have a more difficult decision to make.
Do you think December applications to move from SAVE to PAYE have any chance of being be processed before January 20? If not, what are the odds that the Trump administration will simply put everyone who applies to move from SAVE to PAYE into long term processing forbearance that would not count toward forgiveness? Would this status have the interest in abeyance like the current SAVE forbearance?
It’s possible that your application might get processed quickly, but its far from a certainty.
As for what the Trump adminstration might do, at this point, I don’t even think they know. They are still figuring out who will be in the cabinet. Handling student loan repayment change requests isn’t very high on their to do list.
I think and hope that many borrowers will be surprised at how little changes from a policy standpoint when the new adminstration takes office.
Given, as you point out, that the new admin is absorbed in other priorities, in your mind what are the factors to consider in deciding whether someone stuck in SAVE should apply for PAYE when it opens in December? Many of us will be facing that decision soon. Perhaps the new Education Dept secretary will have a strong interest in getting everyone back in repayment status and is developing a plan to do so. But, in short, which do you think is preferable, SAVE forbearance or PAYE processing forbearance?
That is a really good question. I’ve taken a deep dive to look at some of the considerations that go into deciding between staying on SAVE or applying for something else. Ultimately though, there isn’t a clear answer for everyone. It is one of those situations where you have to make a decision without knowing what will happen and hope for the best. It is awful that borrowers are stick in this position, but it is the reality of the situation.
Good evening Michael,
I have a question which was actually brought up to me by a friend the other day My friend is married and both he and his wife are currently in the SAVE plan. He told me he is looking to go into the IBR plan now as he is in PSLF and wants to continue toward forgiveness. However, his income has decreased since he last filed taxes and he plans on filing married but separately next year due to his high loan balance. He was wondering about two things, first if he could switch to IBR now using alternative proof of income such as paystubs for himself and his wife (rather than the higher prior tax return) and while he would pay more now until the upcoming tax season, he secondly asked if he could then re certify his IBR plan with the updated tax status of married filing separately next year to lower his payments. Personally, I would just wait until tax time to do all this but he had an interesting question I thought I would share for those in similar circumstances. Thank you!
Both strategies could work, but your thought to wait and stay on the SAVE forbearance also makes sense, especially because your friend is working toward PSLF can could benefit from the buyback.
You might also want to check out this article on excluding high income years from IDR calculations.
Thank you Michael and thank you for the article reference, which I found useful for myself too. I did refer him to contact you as well as he had more complicated questions that really need to be answered in a consultation with someone who is a subject expert.
Thank you!
Hey Michael, I’ve been trying to research a list of eligible PSFL employers and I’m having trouble finding it. My employer merged with a government, qualifying agency July 1, 2024 and I was hired July 25, 2024 which clearly places me in a qualifying position. However, because of the merger and my employer NOT being a government employer before the merger and before I was hired would I just have to wait to let until dust settles and give it another look in a month? Do you have a link to help me find this list?
Thanks for any direction you can give me. Have a great day!
That is a really interesting question Natalie. I’ll start with the easy part: there isn’t a definitive list of eligible employers. I’ve previously written about ways to find eligible employers, but in your circumstance, the only way to know for sure is to apply. I’d also add that waiting for the dust to settle on the merger and making sure things are finalized before applying could make a lot of sense.
I just wanted to point out that after re-reading my MPN, it does not state forgiveness but it does note:
REPAYING YOUR LOAN (BRR Item 16)
“You have a choice of several repayment plans, including plans that base your required monthly payment amount on your income.”
As you mentioned, the MPN does protect us and I would hope excerpts such as this help.
Then again it also says:
NOTE: Amendments to the Act (Higher Education Act of 1965 that is) may change the terms of this MPN. Any amendment to the Act that changes the terms of this MPN will be applied to your loans in accordance with the effective date of the amendment. Depending on the effective date of the amendment, amendments to the Act may modify or remove a benefit that existed at the time that you signed this MPN.
This is a really good obeservation and part of the reason I chose the language I used regarding the MPN very carefully. I didn’t say that the MPN guarenteed borrowers would have access to these plans and forgiveness programs, merely that it offered a layer of protection and would likely lead to borrower lawsuits if the rules were changed.
Digging deeper into contract law, just because language is in a contract does not mean it is enforcable. For example, suppose Congress amended the HEA to require 4 years of millitary service if the borrower didn’t repay their loans in 10 years. Would that be enforcable? What if they changed it so that the interest rate on all federal student loans was 40%? We are venturing into an incredibly complicated area of the law, but I think the important takeaway is that the language you have shared here doesn’t allow Congress the ability to do whatever it wants with student loan borrowers.
Hey Sam, out of curiousity, what is the date of your MPN? I’m certain that forgiveness lanaguge is pretty common in versions of the MPN. For example, a recent version of the MPN includes lanaguge on IDR forgiveness, PSLF, and other varieties of forgiveness.
I’d also add that even if your MPN doesn’t include specific plans, for example, if you signed the MPN long before REPAYE became available, the MPN still offers some level of protection. The idea being that having special rules for certain borrowers based upon the version(s) of the MPN they signed is incredibly complicated.
Hi Michael, my most recent MPN was in 2016. At that time, I was working on my doctorate as I know there is a separate MPN for undergraduate, though aside from borrowing differences it appears to read the same regarding repayment. For reference it is form OMB No. 1845-0007, if that’s of any assistance for my most recent MPN. Both my MPNs list the borrowing plans that were available prior to SAVE as options and their forgiveness components, which I should have noted earlier. I greatly appreciate your insight. You provide a balanced perspective that is based on what is happening and could happen rather than the doomsday predictions out there. These are indeed unprecedented times but it seems that should even the worst was to happen there are going to be beneficial legal avenues and protections for borrowers as you provide in your analysis.
Thank you so much for the kind words Sam. Your comment about a “balanced perspective that is based on what is happening and could happen rather than the doomsday predictions” is excatly the vibe I’m going for.
The MPN issue presesnts such a legal gray area that it makes it really hard to make definitive statements, but in my mind there isn’t a question that it provides some layer of protection. The big question is how robust is that protection?
Hi Michael, thank you so much for the article. Would love to get your thoughts on my situation. I was on Old IBR from 2011 through 2024, when I switched to SAVE. So I made payments for 13 years under Old IBR. If I leave SAVE (or it gets killed) and go back to IBR, will I still get credit for those 13 years of payments? This is all so worrying. Thank you!
I get the stress, Chris. It is a scary time and there are a lot of unknowns.
You should look at it like this: there isn’t really a SAVE forgivenss or IBR forgiveness or PAYE forgiveness. It is all IDR forgiveness (IDR is the umbrella category that describes all of the different plans based on your income). IDR forgiveness may take different amounts of time depending on the plan you are on, but they all use the same tally. Updating IDR forgiveness is the primary purpose of the possibly still coming one-time payment account adjustment.
In other words, your IDR “clock” should pick up where you left off when you switch between IDR plans like IBR and SAVE.
Thank you for taking the time to respond, it is so much appreciated. That helps ease my mind a bit. Thanks again for everything you do, it is amazing.
I thought I would add one little item and this is just a doomsday scenario question honestly. From what I understand, and please correct me if wrong, but Congress and the Senate if it goes that far and if so desired, could in budget reconciliation with a simple majority gut plans such as IBR and eliminate items within it such as forgiveness. I think they may have tired this with PSLF, I do not recall. My question would be, could this happen? I know could and would are two different points.
It is conceivable. Budget reconciliation is a way around the filibuster, if the Senate Parliamentarian signs off on it. The rules for this process are quite complicated. They could also potentially eliminate the filibuster, though it is far more popular with Republicans.
I’d note that this process has traditionally been used for high legislative priorities, and while Repbulicans may not like IBR or PSLF, these are not the top items on their to do list.
Thank you Michael. I would imagine and hope also that the Byrd Rule would be used by a Senator to strike such changes.
I appreciate your insight on this frustrating and unnecessarily complicated repayment scheme.
I’m on SAVE forbearance with 114/120 toward PSLF as of recertification in July 2024. My August 2024 payment will count once certified, but I’m trying to figure out whether I should wait until January 2025 and try to apply for buyback of the other 5 of my last 6 months (Sept 2024 – Jan 2025 on SAVE forbearance), or whether I should apply for IBR now (although I’m not even sure I qualify for it, given my income?). I’m not getting a clear answer whether months spent on SAVE forbearance may be bought back. I’m sooo close and just want to get this over with!!
There isn’t an easy answer to that question and it will depend on many different factors.
What I can say for certain is that under the current rules, months on the SAVE forbearance can be bought back. The tricky part is that the buyback process is very new, we have a new adminstration coming in, and it isn’t clear how it will look in 2025.
Thanks for your clear rundown of the current state of affairs.
Question regarding this: “Even if it’s not completed by the time the new administration takes over, the new Trump administration may be legally required to complete it.”
What legal authority would require the admin to do so?
That’s a great question and something I could have been more clear about in the article.
Many borrowers consolidated their loans in order to get eligiblity for the one-time adjustment. If the Department of Education doesn’t perform the one-time adjustment, these borrowers could potentially sue under a legal theory of promissory estoppel. This is an area of law I don’t have any personal experience with, especially when it comes to federal agencies, but I thought it was worth mentioning that this possiblity existed.
Thanks Michael!
I’m a law school grad (non-practicing), and I had the same thought.
There’s a lot of hand-wringing going on over in Reddit forums that the new admin is going to either (a) not complete the recounts or (b) undo them upon Trump taking office.
It sounds to me like your analysis is that people detrimentally relied on the government’s promise to adjust counts (by consolidating and capitalizing interest), and that could form a basis for promissory estoppel claim. Further, the 20/25 forgiveness is safe due to being statutory/in MPNs borrowers signed.
What about the Dept of Ed. unwinding consolidations? Is this a realistic option?
Generally speaking, I think there is a lot of justified — but unhealthy — panic happening with many student loan borrowers.
What we want, and deserve, is fair repayment terms and programs without any uncertainty. That ship has sailed and student loans are now a political football.
However, that doesn’t mean the worst-case scenario is going to happen. As a student loan expert, I am very hesitant to say X or Y definitively won’t happen. To a concerned borrower, that means X or Y could happen.
Frankly, I consider some of the worst-case scenario fears that many are discussing to be highly unlikely. But I also know that scary headlines generate profits, and that borrowers are feeling a lot of nervous energy. I think undoing the recount and/or unwinding consolidations are unlikely outcomes. Most importantly, I think it is extremely risky to assume that the worst is going to happen and make major changes to repayment strategy.
I think borrowers would be best served right now by keeping a close eye on what is happening at the Department of Education, and organizing so that we can move swiftly as a group should any unfavorable ideas get proposed or implemented.
Thanks so much for all your good advice and for just being there for those of us who read the blog. I was in the PAYE plan for 7 years and the PSLF program – loan plus interest is $55,000. When the SAVE plan was created I thought to apply early, not for the reduction but get it out of the way since every plan would be in it eventually – so now I’m in forbearance. At the end of last year, I received a credit card charge-off that added $18,700 to my income on the tax return for 2023 (covering 2022), a poor decision on my part to help a relative in financial trouble years ago. I need to recertify my IDR by November 20. Is there any way I can let it be known that credit charge-off wasn’t income in the formal sense? My income for tax purposes will revert to its lower level when I file again but using the most recent tax return for recertification of the IDR will drive up my payments for the next year, whatever I choose to do. I don’t know whether to sit tight and stay in forbearance, try to get back into PAYE or IBR, restart payments and PSLF or something else. It only seems certain – or is it? – that SAVE will probably go away and that leaves the future uncertain. Thanks again for all you do, Michael!
Whether or not to jump from SAVE at this point is a very tough question and the right answer will vary from borrower to borrower. I’ve discussed with with many borrowers in consultations and I don’t think it boils down to any simple analysis.
The recertification with the charge-off is a little easier to answer. When you recertify, one of the questions they ask you is if your income has decreased sinced you last filed a tax return. From what I understand, your tax return will show an income nearly 20k above what you are currently making. By saying yes, my income has decreased, you can document your income using pay stubs rather than your last tax return. This article breaks down how the process works.
Thanks, Michael – this has been very helpful. Everything around student loans and PFLS changes so rapidly it’s hard to know what direction to take, as you said. There’s new information even from yesterday about reopening some plans. I had hoped to resume payments and resume PSLF but jumping to a more expensive IBR plan isn’t easily do-able. I don’t know if reopening these plans would apply to me – I want to jump back into PAYE where I was for 7 years – I’ll keeping checking in with your articles and see if the Fed website sheds any light on this. Again, thanks so much for all you do for us.
One more general question if I could please. If someone’s tax filing status will be changing for the upcoming tax year and they will be filing taxes married but separately, is it allowed to have your IDR plan recalculated right after doing so, even if you re certified your income say this month and you file taxes at the end of January? I assume someone can re certify at any time for any legitimate reason with their IDR or IBR plan. Thank you!
You can request immediate recertification. There isn’t any commitment to staying on any IDR plan for the entire year.
Thank you for the reply!
How does this work from a league perspective if the 8th circuit rules that all the IDR plans are gone because the ED never had the authority to do it, thus taking all the plans with it. Then Trump can just let that stand no? Wouldn’t it have to take appealing the decision , which he obviously wouldn’t. Are you banking on the 8th circuit coming back less aggressive than they seem to be telegraphing ?
I know there is some concern among borrowers about all of the plans under the ICR statute getting eliminated, but I just don’t see it happening… especially now that we know the SAVE case won’t be going to a verdict.
What do you mean by “wont be going to a verdict”? You dont think the 8th Circuit will have a ruling? Id imagine whatever they decide would stand, because Trump will pull the defense of the plan.
Everything so far that has happened in the SAVE lawsuits has been dealing with the preliminary injunction issue — meaning they were arguing about what should happen with the SAVE plan while the lawsuit is still pending. The current injunctions on SAVE would expire with the resolution of the lawsuit. With Trump expected to pull the defense, the most likely outcome would be that we revert to a pre-SAVE world which would include REPAYE and the other plans created under the ICR statute.
When I say “won’t be going to a verdict” I mean we are a long way away from the trial at the district court level, and even further from an appeal in the 8th circuit. Had Harris been elected, it would have likely taken years before the case would have been resolved. Now, the change in adminstration will likely mean the end of the Department of Education defending the lawsuit.
Thank you for taking my question. I was reading about the possibility of changes to IBR by Congress in your most recent article and one of your responses about the grandfathering of borrowers. To clarify, would the grandfathering only apply to those that are in the IBR plan or would anyone who is currently within an income based repayment plan or any type of repayment qualify? I am currently in SAVE and PSLF but waiting to do taxes and file separately to go back into IBR so I can work towards the last 2 years needed for forgiveness. I would of course go to IBR now if I needed to protect myself from IBR being removed and needed to obtain a grandfathered status. Thank you!
Thats a good question.
Obviously we don’t know all the details of potential changes that might happen, but I’d expect that the grandfathering of most programs woud apply to all borrowers with existing loans.
Thank you! Your insight is appreciated.
Sam
Thank you so much for all you do! I know everything is very much still up in the air but do you foresee payments restarting for people under the Save forbearance as soon as the projected February 2025 date? Given the complications, could people be thrusted back into payments that soon if the Trump administration does away with Save (be it transitioning back to REPAYE or placed on standard plans..etc)?
That is a great question Rachel. As someone in the same boat, I’m currently planning on payments restarting in February. It could certainly take longer, but I think it is time for borrowers to prepare for the SAVE forbearance to end soon.
Thank you! That sounds like a fair assumption. I’ll hope for the best but certainly prepare for the worst!
Thank you for this. I had lost all hope of REPAYE returning. It is the only eligible plan I can do except ICR for pslf. This give me a glimmer of hope I can hold o to my house.
Thanks for posting this. How safe is 20/25 year forgiveness? My husband still has 5 more payments(still no official IDR count, but that’s my count) then would hit 25 years.(11-1-99) he can’t go on IBR as there’s no financial hardship. It’s a 6 digit loan balance. He was moved to SAVE from REPAYE. I hope REPAYE is brought back and he can finish his final payments and get forgiveness, but I’m very worried. He hasn’t certified since 2019….his payments will increase by over $1000 a month. I’m very anxious. We had planned on this being gone before retirement. Any insights into our situation. Do our MPN’s mean anything? What are the odds of us being grandfathered in? Thanks again!
Hi Amy,
As you can probably imagine, I can’t give you definitive answers to the questions you are asking. They are all very fair questions, and frankly, borrowers deserve some certainty when it comes to repayment. However, there is a lot that we won’t know for certain for at least several months.
That said, I think the 20/25 year IDR forgiveness will survive as it is in two different statutes — and as you noted, the MPN.
If there are massive changes to forgiveness, there is a good chance of you being grandfathered in.
Finally, I know you planned on it being gone before retirement, but I’ve worked with a number of borrowers who are either already retired or nearing retirement, and there are many different strategies that you can use to the point where retirment offers major advantages for borrowers still in repayment. My suggestion on this front would be that you shouldn’t assume you need to have your loans eliminated before it is safe to retire.
I appreciate your words very much. Any positivity or light helps right now. Do you think there will be an IDR plan left standing besides IBR? (Since we don’t qualify.) That is my other concern.
I can’t make any promises, but I’d be very surprised if we found ourselves in a situation where the only IDR plan left was IBR. I suppose it is conceivable, but given all of the existing protections that I’ve noted above, I think we will still have many IDR options available in the future.
Hi Michael,
I posted a while ago on what would come of the borrowers that consolidated loans and capitalized all their interest into a new principal. What are your thoughts on how we will proceed here? I only really see the option of returning to IBR with a new principal balance that accrues interest at a much faster rate.
Thank you for the insight.
Mike
Hi Mike,
I can’t say I remember your previous question, and without more details I’m not sure what to tell you.
Jumping over to IBR could certainly make sense in some circumstances, but in others you might be better off waiting out SAVE and then shifting back to REPAYE if/when it becomes available. There are a ton of variables that go into that decision.
Hi Michael,
Sorry I was not specific there. My question is actually about the loan consolidation I did when I switched from IBR to SAVE in April. I now have a new principal balance which is higher that prior to consolidation. The principal balance did not matter under SAVE. But it really effects how quickly my interest accrues in IBR. Honestly the only reason I switched plans was for the interest cap with save. I’m curious if those that consolidated to get into SAVE and now are forced back to their old repayment plan will have any options. Unraveling a consolidation seems impossible.
Thank you!
Mike
I follow you now. Unfortuantely, I still can’t give you a definitive answer.
There is a good chance that if SAVE disappears completely, it gets replaced with REPAYE. REPAYE has an interest subisdy like SAVE, but where SAVE covered 100% of the extra interest each month, REPAYE covered 50%. From the sounds of things, you might be better of on REPAYE than on IBR. That said, this is a question where the answer will vary from one borrower to the next. If your loans are new enought to qualify for IBR for new borrowers, it might not make a big difference.
The big wildcard is what happens with SAVE. We won’t know for several months. There is certainly an argument to be made for standing pat and waiting for more information before acting, especially considering the fact that your interest rate on the SAVE litigation forbearance should be 0%.
You are also right that unraveling a consolidation isn’t really an option under the current rules.
Thanks for this detailed and encouraging analysis.
What do you suppose we do now if we are in SAVE limbo and going for PSLF?
It seems like the buyback option will probably go away and as each month goes by, it doesn’t seem likelier that it will eventually count for PSLF, as other forbearances have (given the new Administration in Jan).
So should we just try to switch to the standard repayment plan? All other plans I don’t qualify for.
If I wait to see how this plays out, each month of waiting would make my standard payment amount higher given it is based off when I went into repayment. Please correct me if I’m wrong.
Thanks!
Hi Derek,
Thanks for the kind words.
I’m with you that it is hard to rely on the buyback program 100%… having a backup plan is a good idea. That said, if it is the most affordable route, it might make sense to stick with that approach until we hear otherwise.
As for the standard repayment plan, payments are amoritized over 10 years, but that payment amount shouldn’t change whether you start it now or in six months. Without knowing exact figures and more details, it is hard to say the best approach.
Perhaps I can provide more details to give you a better picture of my situation.
I graduated in 2015, but never entered repayment. Instead, I did 4 years of mandatory forbearance and then the pandemic hit where I got 3.5 more years of forbearance. During the time of forbearance, I was working for a PSLF-qualifying agency, so when the IDR adjustment went through on my account, I got credit for those years.
When the Covid forbearance ended in 10/2023, that is when I entered repayment status and enrolled in the SAVE plan. I was making payments until 7/2024 when the injunction started.
I’m sitting at ~100/120 qualifying payments.
Since making payments from 10/23-7/24 under SAVE, the balance has barely decreased since most of the payment went to interest.
So, my impression was that if I were to switch to the standard 10 year repayment program now (I never consolidated), that my payment/month would be based on when I entered repayment (10/2023). So if I entered repayment now, I would need to pay off the balance of the loan over 9 years instead of 10. If I wait until next October, I would need to pay it over 8 years, etc. Is this correct or am I missing something?
I hope I was able to clear up my any details to make it easier to understand my situation?
Thanks!
The timing of when you entered repayment doesn’t impact the 10-year repayment caclulation. “Any periods of forbearance, deferment, or time spent in repayment status under another repayment plan are excluded from the repayment period.”
Time spent on a SAVE or the SAVE litigation forbearance wouldn’t impact the 10-year plan monthly cost.
To be clear, I’m not necessarily saying you should stay on SAVE or you should switch to the 10-year plan — that is a much longer discussion. I just want to make sure you understand the rule as you evaulate your choices.