Department of Education Pauses Student Loan Payments for Three Million Borrowers on SAVE Plan

The Department of Education has announced a pause on student loan payments for three million borrowers on the Saving on a Valuable Education repayment plan (SAVE) starting July 1. This forbearance period allows the department to recalculate new monthly payment formulas for these borrowers.

Originally, the plan was to reduce undergraduate loan payments for SAVE borrowers by half after the forbearance period. However, two lawsuits filed by Republican-led groups in Kansas and Missouri challenged the Biden administration’s authority to implement this phase of the plan.

Despite the legal challenges, a US appeals court ruled in favor of the reduced payments, allowing them to proceed while the Department of Education pursues an appeal. This means that millions of borrowers enrolled in SAVE will see their payments drop from 10% to 5% of their discretionary income going forward.

SAVE is an income-driven repayment plan introduced by the Biden administration to make student loan payments more affordable and help borrowers eliminate debt faster. Borrowers can enroll in SAVE and other IDR plans on the Federal Student Aid website, with payments based on income and family size.

If you are a SAVE borrower and have received communication from the Department of Education regarding the forbearance, you do not need to make a payment for at least July. The DOE spokesperson confirmed that no payment is required during the forbearance period, with interest rates set to 0% and credit towards IDR forgiveness and Public Service Loan Forgiveness.

While the legal challenges have temporarily halted further debt cancellation and plan provisions, the reduced payments for SAVE borrowers are set to continue. Stay updated on the latest developments in student loan repayment plans and debt relief programs to make informed financial decisions.