Biden’s SAVE Plan: Is It Still Saving Grads Money?

Student loan borrowers are currently navigating a chaotic environment. While the Biden administration launched the SAVE (Saving on a Valuable Education) Plan to lower monthly payments and curb interest growth, federal courts have effectively hit the pause button. If you are wondering why your application is stalled or why you have been placed in forbearance, you are not alone. Here is the specific, current status of the SAVE plan and what it means for your wallet.

The Current Status: Blocked by the Courts

As of late 2024 and heading into 2025, the SAVE Plan is currently blocked by a preliminary injunction issued by the 8th U.S. Circuit Court of Appeals. This legal battle was initiated by a coalition of Republican-led states, spearheaded by Missouri Attorney General Andrew Bailey. They argue that the Department of Education overstepped its authority by creating such a generous repayment plan without specific congressional approval.

Because of this injunction, the Department of Education has been forced to halt specific parts of the program.

What Is Happening Right Now?

If you are currently enrolled in the SAVE Plan, here is the concrete reality of your situation:

  • Interest-Free Forbearance: Borrowers already enrolled in SAVE have been placed in an interest-free general forbearance. You do not have to make payments, and interest will not accumulate on your balance during this time.
  • Online Applications Disabled: The online IDR (Income-Driven Repayment) application tool on StudentAid.gov is currently disabled. You cannot apply for SAVE online.
  • Processing Paused: Loan servicers like MOHELA, Nelnet, and EdFinancial have paused processing for paper applications regarding the SAVE plan until the court makes a final ruling.

The Financial Impact on Borrowers

The legal freeze stops the most attractive features of the SAVE Plan from functioning. Originally, the plan was designed to cut monthly payments for undergraduate loans from 10% of discretionary income down to 5%. It also raised the income exemption to 225% of the federal poverty guideline (about $32,800 for a single person).

However, because of the court order, the Department of Education cannot implement that 5% rate reduction. Borrowers who were expecting their payments to be cut in half are now stuck in limbo.

The Problem with PSLF and IDR Forgiveness

This is the most critical detail for public servants. Typically, months spent in administrative forbearance count toward Public Service Loan Forgiveness (PSLF) or the 20⁄25-year forgiveness tracks on IDR plans.

This is currently not the case for the SAVE injunction forbearance.

According to the Department of Education, time spent in this specific court-ordered forbearance does not count toward PSLF or IDR forgiveness. If you are chasing PSLF, every month this lawsuit drags on is a month that does not get you closer to your 120 required payments.

Alternative Repayment Options

With SAVE blocked, borrowers are looking for alternatives. However, the legal chaos has affected other Income-Driven Repayment plans as well.

1. Income-Based Repayment (IBR)

The IBR plan is generally considered the “safest” option legally because it was explicitly created by Congress, making it harder to challenge in court.

  • Cost: Generally 10% or 15% of your discretionary income.
  • Availability: You can switch to this, but you must submit a paper application or call your servicer. Be warned that processing times are currently exceedingly long due to the backlog.

2. Standard Repayment Plan

If you do not take action or if you exit an IDR plan, you generally default to the Standard Repayment Plan. This spreads your balance over 10 years. While this results in the lowest total interest paid over the life of the loan, it usually results in the highest monthly payment.

What Should You Do Now?

The situation is fluid, but paralysis is dangerous for your financial health. Here are three specific steps to take immediately.

Log Into Your Servicer’s Portal

Do not rely on email updates alone. Log into your account with MOHELA, Aidvantage, EdFinancial, or Nelnet. Verify your status. If it says “Forbearance,” check the interest rate. It should be 0%. If you see interest accruing while you are supposed to be in the SAVE forbearance, you need to contact them immediately.

Save Your “Payments”

Since you are not required to make payments during this forbearance, do not spend that money. Place the amount you would typically pay into a High-Yield Savings Account (currently paying between 4.00% and 5.00% APY at banks like Ally or Marcus).

  • If the SAVE plan survives the courts, you have a lump sum to pay down your principal.
  • If the SAVE plan is struck down and you have to switch to a more expensive plan, you have a safety net.

Monitor the “Buyback” Program

For PSLF candidates, the Department of Education has a “buyback” process. This allows borrowers to retroactively pay for months spent in certain types of forbearance to get PSLF credit. While details are still being finalized for this specific legal event, you should prepare to potentially pay for these months later if you want them to count toward forgiveness.

The Future of Student Loan Relief

The Biden administration has appealed the 8th Circuit’s decision to the U.S. Supreme Court. As of late 2024, the Supreme Court declined to lift the injunction immediately, meaning the block remains in place while the lower courts deliberate.

It is likely this case will return to the Supreme Court for a final ruling in 2025. Until then, the Department of Education is strictly bound by the injunction, meaning no new relief under SAVE can be distributed.

Frequently Asked Questions

Is interest growing on my loans while the court decides? If you are enrolled in the SAVE plan and placed in the specific administrative forbearance resulting from the court order, interest is set to 0%. It should not be growing.

Can I switch from SAVE to a different plan right now? Technically, yes. However, the online switching tools are down. You must submit a paper application to your servicer. Servicers are reporting massive backlogs, so it may take months to process the switch.

Does this forbearance count toward Public Service Loan Forgiveness (PSLF)? No. The Department of Education has stated that time spent in this specific injunction-related forbearance does not count toward PSLF or IDR forgiveness tracks.

What happens if the SAVE plan is permanently cancelled? If the courts permanently strike down the rule, borrowers will likely be moved to a different IDR plan, such as the revised REPAYE or IBR plans. The Department of Education would provide a timeline for when payments would restart.