IDR Access Limited by SAVE Lawsuits

Lawsuits against the SAVE Repayment Plan grabbed headlines throughout July and August. Meanwhile, the impact on all income-driven repayment (IDR) plans has been underreported. Losing access to SAVE limits borrower’s options. Eliminating all IDR plans would be a seismic change.

SAVE (Saving on a Valuable Education) is one of several IDR plans offered by the Department of Education (ED). On Aug. 9, 2024, the 8th District Court of Appeals issued an injunction to freeze SAVE until the cases against it are settled. Unfortunately, the court’s language was so broad it could be interpreted as blocking the path to forgiveness built into all IDR plans.

To comply with the court’s order, ED has paused the SAVE Plan and altered the IDR application process. The department’s actions affect three distinct types of borrowers in different ways.

• Current SAVE Plan enrollees have had their payments and interest paused
• IDR applicants with unprocessed applications are in limbo
• Borrowers who want lower payments have fewer options

If you fall into one of these categories, skip to the appropriate section below. We offer specific advice for each group on how to navigate the time between now and a final ruling on SAVE and IDR.

If You’re on the SAVE Plan

If you’re enrolled in the SAVE Plan (meaning your application was approved before July 1, 2024), your payments should be paused. Your account should also be in an interest-free forbearance. You will be in this forbearance until the legal situation changes.

This article provides more detail, contains our most recent update on SAVE, and outlines what steps you should take now

If You’ve Applied for SAVE, PAYE or ICR

Loan servicers are not processing IDR applications. This is a temporary measure taken in response to the ongoing cases against SAVE.

If you applied for an IDR plan, but it wasn’t fully processed, your loan’s status may be unclear. Use your servicer’s website to answer the following questions:

• Are you in repayment or forbearance? Forbearance pauses your payments. Some servicers may apply forbearance automatically, others may require you to formally request one from them.
• Is your forbearance interest free? Your monthly payments may be paused, but your debt could still be growing. This means you’ll exit forbearance owing more than you did at the start. Learn more about the price of forbearance, interest capitalization, and how it affects your debt during forbearance.

Call your loan servicer directly if you can’t find answers on their website. Check out our tips for contacting your servicer and how to deal with long hold times.

Don’t assume your payments are paused. The student repayment on-ramp is about to end. At that point, late and missed payments will incur fines and be reported to credit bureaus. They may also lead to more serious consequences.

If You Need Lower Monthly Payments

Obtaining lower monthly payments through an IDR plan is more challenging than it was a few months ago. Before you apply, be aware of the following changes:

• You must file using a PDF form. The online application form is not available. All IDR applications must be made using a PDF submitted directly to your loan servicer.
• Your IDR options are limited. At this time, borrowers can only apply for SAVE or Income-Based Repayment (IBR). PAYE and ICR are no longer available.
• Loan servicers are not processing IDR applications. Your servicer will accept your application but will not process it. You’ll remain in your current repayment plan until they’re allowed to resume processing. That could take months. In the meantime, you’ll be required to make your current monthly payment. If you can’t make those payments, ask your loan servicer if you can temporarily pause them.

IDR plans aren’t your only option. Both the Graduated and Extended plans can lower your monthly payments. Their terms aren’t as generous as an IDR plan, but neither is affected by the current court cases.

Borrowers with multiple loans should also consider loan consolidation. Consolidation combines your existing loans into one mega-loan. The process often results in a lower monthly payment, but that’s not always the case. This article is a good place to start your research.

Need Help?

If you have questions or need help managing your loans, call Student Connections. Our Borrower Advocates will listen to your needs and do their best to help. This service is paid for by schools across the country and is free to you. Call us today at (866) 311-9450.