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McDonald’s MonopolyMillions of student loan borrowers on the SAVE repayment plan are facing uncertainty as lawsuits have blocked the plan, leaving them without payments but with accruing interest starting August 1. The Education Department has provided guidance for these borrowers, stating that they are not earning forgiveness credit during this period.
The SAVE forbearance, which had been interest-free, will now start accruing interest, although it will not capitalize once the forbearance ends. Borrowers may not owe payments until the lawsuits are resolved, and the income recertification deadline has been extended to early 2026.
Recent developments have allowed some borrowers to switch to other income-driven repayment plans, enabling them to restart payments and earn forgiveness credit. However, forgiveness under other plans remains suspended for now.
Experts believe that the SAVE plan may not have a future under the current administration, and the duration of the forbearance remains uncertain. Borrowers have four main options to consider during this period of ambiguity.
The first option is to switch to a different repayment plan, such as IBR, ICR, or PAYE, to continue earning forgiveness credit. However, processing delays may occur, impacting nearly two million applications in backlog as of April 30.
Another option is the PSLF buyback, where eligible borrowers can purchase months of forgiveness credit for the time spent in forbearance, provided they meet specific criteria.
Alternatively, borrowers can make optional lump-sum or interest-only payments to prevent their debt from increasing during the forbearance period. Interest will start accruing, but it will not capitalize after the forbearance ends.
Lastly, borrowers can choose to do nothing and wait for further guidance. While this option may lack immediate resolution, it allows borrowers to focus on other financial goals while staying informed of updates and changes.
The current uncertainty in the federal student loan system highlights the importance of staying informed, assessing individual circumstances, and making decisions based on the available options. Borrowers are advised to keep their information updated, seek guidance from servicers, and consider the implications of each choice on their financial future.
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