The SAVE plan, which would have reduced or eliminated debt payments for student loan borrowers is put on hold indefinitely.
Another day, another group of Republicans trying to screw over people in higher education.
Apologies, but I’m feeling rather salty on this right now.
The reason for my saltiness is because the Eighth Circuit Court of Appeals has blocked the Biden Administration’s plan to have the Department of Education implement the new rules on the SAVE plan for student loan repayments.
This was going to be a definite benefit to people in repayment, because it would reduce payment amounts, sometimes to nothing, and allow for student loan forgiveness for many more people.
And now, with a single sentence, this plan is in limbo.
Can you see why I’m salty?
Table of Contents
The plan
Long gone are the days when you just took out student loans, and then paid them back at whatever rate the provider wanted.
Now there are all these income-based repayment plans with interesting acronyms (PAYE, REPAYE, etc.)
In 2023, the Biden administration released an update, called Saving on a Valuable Education, or SAVE. The plan sets monthly payments at 5% to 10% of discretionary income (lower than it used to be) and provides forgiveness for loan balances after 20 or 25 years, depending on your situation.
Moreover, many people would end up paying $0 in monthly payments if their income was low.
This was designed in response to being forbidden by the Supreme Court to cancel student loans outright, but still wanting to offset the injurious cost of an education these days.
It was a bandage on a bigger problem, but it was something. And it was appreciated.
The stay
“‘Now I have to create Republicans.'”
– Bill Hicks, impersonating God after realizing that God had left mind-altering substances growing on Earth.
But it couldn’t last.
The Missouri attorney general, and six other Republican-led states sued to block the plan from taking effect.
This went to the Eighth Circuit Court of Appeals, and issued a single sentence, which I quote in full:
“Appellants’ emergency motion for an administrative stay prohibiting the appellees from implementing or acting pursuant to the Final Rule until this Court rules on the appellants’ motion for an injunction pending appeal is granted.”
Basically: “while we figure out how legal this whole thing is, you can’t implement the SAVE plan. Go fish, wokerati.“
The limbo
So, now what?
Well, here’s where it gets interesting. The Department of Education put everyone enrolled in the SAVE plan into automatic forbearance, pending figuring this all out.
This means that everyone on the SAVE plan is getting an unexpected payment holiday.
This isn’t all good news though. While in forbearance, the months counting until your loans are forgiven (assuming they ever will be) will also be paused, so if you were planning on your loans being forgiven by a certain date, you’ll have to throw that date out.
Basically, all borrowers are stuck in limbo.
But to some people, this is a good thing:
“HUGE win for every American who still believes in paying their own way.” That was Missouri attorney general Andrew Bailey.
I should point out, entirely by the way, that a Missouri state-created student loan company is partially behind these lawsuits against reducing student loan debt.
Connection? Who can say?
What to do
I’ve been writing about student loans for years now, tracking the ups and downs of the possibilities for lowering or even eliminating student loan debt.
And when it comes to debt forgiveness, I always come down to the unhappy conclusion that you can’t count on anything that is set to happen years in the future.
Yes, they say that you’ll get your loans forgiven after 10 years in the public sector. But will you? Unfortunately, you can’t count on it.
Yes, they say that you’ll get reduced loan payments each month from now on. But will you? Don’t count on that either.
So if any of this affects you, I would do the following:
- Enjoy the payment holiday. Don’t blow the extra money in your pocket. Do something good with it, or sit on it and use it toward your student loan payments when they resume.
- See if there are any other income-based repayment plans than might work for you. You can use the Loan Simulator for this. The SAVE plan may be going away, but no word on whether others will go too.
- Do not make any long-term financial plans based on your loans being forgiven. We can’t predict what’s going to happen next year, much less in 10-20 years.
- Assume your loans won’t be forgiven. This has been my point from the very beginning. It would be great if we could count on these things, but we can’t. You can still join plans that offer student loan forgiveness, but don’t bank on it. As long as politicians are in the pocket of student loan companies or have a vested interested in not helping people with student loans, you can be sure that someone will lobby hard against any kind of debt relief.
And to everyone affected by this, I’m so sorry. Hopefully, good or bad, we’ll get some more clarity soon.
