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    October 30, 2024

    Department of Education Extends Pause on SAVE Program

    The Department of Education announced that it was further extending the SAVE pause for another six months as litigation progresses.

    The Department of Education announced that it was further extending the SAVE pause for another six months as litigation progresses.

    The federal government has implemented several initiatives in the last few years to ease the burden of student debt on millions of borrowers, resulting in more than $175 billion in relief. A program rolled out by the Department of Education (Department) last year is currently the center of litigation over how far Education Secretaries may go in creating new income-driven repayment (IDR) plans based on the authority given them by the Higher Education Act.

    This new program, the “Saving on a Valuable Education” plan or SAVE plan, departs from previous IDRs in a few ways, such as by how much lower monthly payments would be for borrowers. The program’s generous terms, including accelerated debt forgiveness, prompted several state attorneys general to sue successfully to block the implementation of SAVE just days before its terms went live. Now, the federal loans of eight million SAVE borrowers are in legal limbo until the case is resolved.

    Thankfully, the Department has placed borrowers enrolled in the SAVE plan into an interest-free forbearance status, extended once to allow for litigation. On October 21, 2024, the Department again extended the forbearance for at least six more months. The added time will allow the Department to adjust its systems to comply with the injunction and present options to impacted borrowers.

    A challenge for the Department is that some options it wants to present borrowers, such as reopening older IDR options like Income Contingent Repayment (ICR) and Pay as You Earn (PAYE), were created under the same authority as SAVE. Moving borrowers into those programs, as opposed to IDRs created by Congress like Income-Based Repayment, may still carry uncertainty.

    For example, the pending lawsuit challenges whether the HEA ever envisioned that IDR plans created by its authority would include forgiveness. If the court determines it did not and IDR loan forgiveness provisions are repealed, borrowers already struggling in IDR could be in repayment into their 60s and 70s.

    While the fate of SAVE hangs in the balance, on October 25, the Department announced a set of proposed rules that, if finalized, would expand its ability to forgive student loan balances for those experiencing hardship. One controversy over this new plan is that it would go beyond traditional tests to allow a more holistic analysis of a borrower’s situation, including considering a borrower’s age and the cost of other expenses such as childcare or caregiving. While the Department’s proposal is promising for the estimated eight million who might benefit, the Department does not expect to finalize any changes until 2025.

    Follow us on social media @ABAGrassroots to learn about significant developments addressing student debt relief as they develop.