Federal Judges Pause Parts Of SAVE Student Loan Forgiveness Program

A Note From Patricia:

Hello and welcome to Forbes Advisor’s Weekly Brief, where each week we dive into the realities of consumer finance and empower you with knowledge to help make your financial journey easier.

Student loan forgiveness for millions of Americans is in jeopardy as the future of a signature plan from the Biden administration is uncertain. 

Federal judges have temporarily blocked student loan forgiveness under the Saving on a Valuable Education (SAVE) program, which grants forgiveness after as few as 10 years of payments, depending on the amount borrowed. The program also caps monthly payments at lower percentages of discretionary income while eliminating accrued monthly interest for low- and middle-income borrowers. 

In this week’s brief, we’ll explain what the lawsuits mean and how consumers struggling with student loan debt can find additional relief.

Sincerely, 

Patricia Louis

Editor, Forbes Advisor

Federal Judges Pause Parts Of SAVE Student Loan Forgiveness Program

If you’re one of the 8 million Americans currently enrolled in the SAVE plan, there’s no need to panic—you’ll still benefit from lower monthly payments. But loan forgiveness under the program is on pause until further notice.

Lawsuits filed in Kansas by 11 Republican-led states allege that the Biden administration overstepped its boundaries by dramatically lowering student loan payments without congressional authority, and argues the SAVE plan will cause states to lose out on a substantial amount of revenue from servicing federal student loans. 

The stakes for consumers are big. SAVE corrected some of the biggest flaws of IDR plans, which can burden borrowers with larger monthly payments than their budgets could handle, and the plan eliminates accruing interest. It also brings borrowers to loan forgiveness faster than other IDR plans.

Though one lawsuit sought to scrap lowering the cap of monthly payments for undergraduate loans to 5% of income instead of the previous 10%, an emergency order granted on Sunday evening allows the provision to move forward. Millions of borrowers will still see their payments lowered as soon as this month.

About 360,000 borrowers have already received $4.8 billion in student loan forgiveness under the SAVE plan. The White House plans to appeal the lawsuits to further increase that debt relief. It’s unclear how long it will take for the courts to reach a final decision.

If you’re suffering under the weight of student loans but don’t qualify for SAVE, there are a few ways to reduce the burden, such as: 

Finding an employer that will help: Some employers will match your student loan contributions up to a certain amount. When interviewing for a new job, be sure to ask if they offer this as a benefit, as about 34% of employers offered student loan repayment in 2023 according to a report by the Employee Benefit Research Institute. Alternatively, some employers will match your loan payments with contributions to your retirement plan. This is also an excellent way to kickstart your retirement savings without compromising on paying your loans. 

Contacting your loan servicer: If you’ve missed a payment or are having trouble making them, contact your loan servicer to see if you qualify for any deferment, forbearance or payment plan options. If you don’t know who your loan servicer is, call the Federal Student Aid Information Center. 

Researching other forgiveness options: For example, you may qualify for the Public Service Loan Forgiveness (PSLF) plan if you work for a government or not-for-profit organization. This program forgives your balance after 120 qualifying payments while working for an eligible employer. You can search to see if your employer qualifies for the program. 

For more information on what’s going to happen to SAVE, read more here. 

Related Stories: 

• How Do Student Loans Work?
• How To Pay Off Student Loan Debt
• Biden Student Loan Forgiveness FAQs: The Details, Explained

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