Understanding the recent changes to student loan repayment plans
The 8th Circuit Court of Appeals has blocked the Saving on a Valuable Education (SAVE) plan stating that the Department of Education (DofED) did not have the authority to implement the new loan repayment program.
The SAVE program was introduced to reduce or eliminate student debt for millions of borrowers by allowing payments as low as 5% of monthly income and loan forgiveness in as few as ten years, for qualifying loans.
Following the ruling, the DofED paused the implementation of the SAVE program, removed online applications for all income-driven repayment (IDR) plans from its website, and paused the processing of loan forgiveness applications.
What the ruling means
Although the SAVE program has been paused, many believe it may ultimately be removed as a repayment option. However, this decision does not eliminate access to affordable, income-based repayment options. Borrowers currently enrolled in other IDR plans can keep making their monthly payments.
The ruling primarily challenges the aspect of SAVE allowing loan forgiveness in as little as ten years, holding that the DofED is limited to creating plans centered on repayment, not forgiveness.
On the positive side, income-based repayment (IBR) plans—which were created by Congress—are unaffected, as is the Public Service Loan Forgiveness (PSLF) program. While we are not attorneys and can’t predict final outcomes, we believe there will continue to be options for borrowers who qualify for affordable repayment plans.
What this means for you
Legal proceedings can take time, and the final outcome is not yet certain. Here’s what the ruling means right now, depending on your specific repayment plan:
- If you’re enrolled in SAVE: No action is required. Your loans remain in an interest-free forbearance (a temporary pause in payments), so you are not obligated to make payments and won’t accrue interest during the pause.
- If you’re enrolled in an income-based repayment (IBR) plan: Your plan is not impacted by the ruling. Your monthly payments and any applicable loan forgiveness will continue to be processed as usual.
- If you’re enrolled in another IDR plan (e.g., PAYE, ICR): Your payments continue as normal, and no immediate action is necessary. However, loan forgiveness under these plans has been paused until further legal proceedings conclude.
- If you were considering enrolling in an IDR plan: Online applications are currently unavailable. Paper applications can still be submitted for all IDR plans, though processing times may be slow (see our FAQs section for more).
Recommended actions based on your repayment plan
- For borrowers in the SAVE plan: We recommend staying enrolled and continuing in forbearance. You could switch to IBR or a standard (fixed) repayment plan, but making any major changes right now is generally discouraged until we have more clarity from the courts.
- For borrowers in other IDR plans (including PAYE, ICR): Like those in SAVE, we advise against significant changes at this stage. Wait for more information on the final legal rulings before deciding on a new repayment plan.
- For borrowers enrolled in fixed repayment plans: There’s no impact from the ruling on your plan. Continue making your scheduled monthly payments.
Our overarching recommendation is to stay the course in your current student loan repayment strategy until there’s more definitive legal guidance. Once the status of the SAVE program and IDR loan forgiveness becomes clearer, you can make more informed decisions.
FAQs
Do I need to recertify my loan? There is conflicting information online about whether servicers can process recertifications. If your recertification period is approaching, contact your loan servicer to confirm next steps. Proactively managing your timeline can help you avoid missed deadlines.
Can I make payments toward my loans if I’m enrolled in SAVE? Yes, but any payment will only apply after the forbearance period ends. Because there’s no accruing interest while in forbearance, some borrowers may opt to hold onto that money until the courts issue a final decision.
What if I qualify for loan forgiveness under an IDR plan? The Department of Education cannot currently process forgiveness under IDR. Qualified borrowers will be placed in interest-free forbearance. Note that PSLF itself is not impacted, but the department has paused processing PSLF applications in tandem with other forgiveness programs.
Can I still enroll in IDR plans? While there are sites that indicate you can still enroll, the online applications have been suspended and the paper application has been removed from DofED’s website. Your best bet is to contact your loan servicer to see if they are accepting enrollment requests.
Why are IDR plans impacted but not IBR? IBR was established through legislation by Congress and isn’t part of this legal dispute. Other IDR plans were introduced by the Department of Education, and the court found the department lacked authority to forgive student loans under those programs.
Making the right decision
Managing student loans can feel overwhelming, especially when guidelines change quickly. If you’re feeling stuck, you’re not alone—many borrowers are also weighing their best next steps.
Now is the time to take a proactive approach to your entire financial plan—not just your student loans. A CFP® professional can provide clarity and guidance as the legal landscape evolves.
At Facet, you’ll get expert support on student loans and a personalized financial roadmap—all included in a simple, flat-fee membership.
Keep an eye on official updates from the Department of Education and your loan servicer. Patience is key while the courts finalize the rules governing student loan repayment, forgiveness, and other programs.
