10
Loading video...
By Suzanne Blake
Reporter
0
Share
Newsweek is a Trust Project member
See more of our trusted coverage when you search.Prefer Newsweek on Googleto see more of our trusted coverage when you search.
Up to 5.5 million student loan borrowers who have been waiting to leave the Biden-era Saving on a Valuable Education (SAVE) repayment plan still do not know when the Trump administration will move them to an alternative.
On Monday, an updated legal filing from law firm Public Goods Practice pressed the U.S. Department of Education for answers after some borrowers reportedly reached both their initial 90-day deadline and an additional 30-day extension without being transferred off SAVE.
The uncertainty came as the Trump administration continued to dismantle SAVE and overhaul the larger federal student loan repayment system. About 7.5 million borrowers were enrolled in SAVE when the Education Department announced its transition plans earlier this year. On October 27, the department reportedly said nearly 2 million borrowers had chosen a new plan. Newsweek contacted the department by email on Tuesday morning asking how many borrowers remained on SAVE.
Read More on Education
Why It Matters
For borrowers, the unresolved timeline has caused further uncertainty over what their monthly payments will amount to once they are off SAVE as well as their eligibility for loan forgiveness.
The Education Department initially said federal loan servicers would begin notifying SAVE borrowers on July 1, giving each borrower 90 days to choose another repayment option.
However, after some borrowers reached that deadline, they received an additional 30-day "final notice." Some of these extensions have reportedly expired without borrowers being transferred from SAVE or receiving information about their new payments.
...
What Is the SAVE Plan?
SAVE is an income-driven repayment plan developed under former President Joe Biden that linked federal student loan payments to borrowers' incomes and family sizes.
It lowered required payments for many borrowers compared with earlier income-driven repayment options and provided a faster route to forgiveness for some borrowers with relatively small original balances.
However, the program was subsequently challenged in court by Republican-led states, setting off litigation that ultimately prevented key parts of the plan from moving forward.
In March, the Education Department announced that SAVE would end following court approval of a settlement involving the department and the state of Missouri.
“(The) guidance, which every borrower enrolled in the defunct SAVE plan will receive over the next week, puts the Biden Administration’s illegal student loan bailout agenda to rest once and for all,” said Under Secretary of Education Nicholas Kent in a prior statement.
“For years, borrowers have been caught in a confusing cycle of uncertainty, but the Trump Administration’s policy is simple: If you take out a loan, you must pay it back.
“Borrowers currently enrolled in the illegal SAVE Plan will be given at least 90 days to enter a legal repayment plan of their choice, including the new Repayment Assistance Plan (RAP), which will launch on July 1.”
When Was SAVE First Proposed?
The Biden administration first unveiled what would become SAVE in January 2023, when the Education Department proposed changes to the federal income-driven repayment system.
Later that year, the administration finalized the regulations and renamed the revised REPAYE program the Saving on a Valuable Education Plan.
The plan was rolled out in stages, and SAVE also became increasingly important after the U.S. Supreme Court rejected Biden's separate attempt to cancel up to $10,000 or $20,000 in federal student debt for qualifying borrowers in June 2023.
“As of right now, there is little clarity on when the transition will take place, leaving many borrowers in limbo,” Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek.
“What we do know is that borrowers who fail to select another repayment plan will be moved into a fixed payment plan, which will likely mean higher monthly payments for many.”
What Is the Existing Lawsuit?
The newest filing is part of litigation brought by Public Goods Practice over the government's handling of borrowers enrolled in SAVE.
In July, the firm filed a motion seeking to prevent the Education Department from involuntarily transferring SAVE borrowers to other repayment plans. The department opposed that effort and encouraged borrowers to move into what it described as a "lawful repayment option."
It came after the department said servicers would begin issuing notices July 1 instructing SAVE borrowers to select another plan within 90 days. Those who did not act would be automatically placed on a Standard or Tiered Standard repayment plan.
However, after those 90 days were up, borrowers received an additional 30-day period. This deadline has reportedly passed for some borrowers and it is still unclear when their plans will be transferred.
“The filing is basically asking the Education Department to explain when it's actually going to do what it told millions of borrowers it would do,” Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, told Newsweek. “Deadlines have come and gone, and borrowers are still waiting.”
How Could Borrowers Be Impacted?
Borrowers are likely to see changes to their monthly bills once they are moved off SAVE.
Under the administration's announced process, borrowers can proactively select an eligible alternative repayment plan rather than waiting to be automatically transferred.
For many, the major alternative is the new RAP. It became available July 1.
Other borrowers may qualify for options such as Income-Based Repayment, while those who do not choose another plan could eventually be placed into a Standard or Tiered Standard plan.
“What bothers me is how expensive this uncertainty can become. A borrower sees a $0 payment due and thinks they're getting some breathing room,” Ryan said. “Meanwhile, interest may be piling up, and those months generally aren't moving them closer to forgiveness. A $0 bill doesn't necessarily mean it's costing you nothing.”
What Happens Next
The Trump administration has been clear that SAVE ended in March and that affected borrowers will eventually have to move to another repayment plan. Despite this, the timeline appears to be still up in the air for some.
“How do you budget for a payment you don't even know yet?” Ryan said.
“Someone planning to buy a home, start a family, or increase retirement contributions needs to know what their monthly obligations will be.”
Contact Newsweek editors on this story: Samantha Beech and Oliver Pritchard.
View 0 Comments
Submit Correction
View Editorial & AI Guidelines