The Biden administration said millions of borrowers stuck in student loan forgiveness and repayment purgatory due to legal challenges involving the SAVE plan may have a long road ahead before any resolution, according to news reports guidelines published by the Ministry of Education.

The SAVE plan, the newest of several income-driven repayment plans, had reduced monthly payments for eight million borrowers when the program took effect last fall. The program has several other benefits, including a subsidy that prevents loan balances from exploding due to uncontrolled accumulation of interest, and possible student loan forgiveness in as little as 10 years for borrowers who have taken out small debts.

But the SAVE plan now finds itself in a legal limbo. A group of Republican-led states sued last spring — after more than eight million borrowers signed up — to end the program. And so far, they succeeded. In August, a federal appeals court issued an injunction blocking the program, forcing any borrower who signed up for or applied for the SAVE plan into forbearance. Borrowers will not have to pay their student loans during the forbearance period and no interest will accrue, but time will not count toward student loan forgiveness. This effectively stops the clock for borrowers seeking debt relief under IDR plans and Public service loan forgivenessor PSLF.

Last week, the Department of Education released new guidance clarifying expectations for the duration of the SAVE plan and offering some guidance on what borrowers might want to consider if they wish to continue seeking forgiveness. their student loan.

SAVE plan forbearance could last another 6 months or more

The SAVE plan’s forbearance has already been in effect for more than two months, halting progress toward student loan forgiveness under IDR and PSLF for more than eight million borrowers. Until now, however, the Ministry of Education had not provided any concrete information on the duration of this forbearance.

That changed last week, when the Department of Education released updated tips inform borrowers that SAVE plan forbearance could last at least six more months – and possibly longer.

“SAVE borrowers and anyone who has applied for SAVE should expect to receive general interest-free forbearance for an additional six months or more, pending further developments from the 8th Circuit Court of Appeals,” said Thursday the department.

But it is possible that abstention could lasts longer than that. While a stop of the 8^th The circuit could be returned at any time in the next two months following a critical hearing that took place last week (coincidentally, the same day the Department of Education released its updated guidelines ), such a decision will almost certainly be appealed to the United States. Supreme Court. The nation’s highest court is not issuing immediate rulings and will likely have to schedule oral arguments. At the earliest, a final decision would be made during the summer of 2025.

Student loan forgiveness remains blocked under SAVE and other IDR plans

The Department of Education also confirmed in its updated guidance that student loan cancellation remains blocked for now under the SAVE plan and other IDR plans that have been established under the same legal authority. This includes the PAYE scheme and ICR, both of which were phased out last summer alongside the rollout of SAVE. The 8^th The Circuit’s sweeping injunction, which the Biden administration has called in legal filings “grossly excessive,” now directly impacts borrowers enrolled in other IDR plans.

Borrowers who are on PAYE and ICR can still make payments and progress toward student loan forgiveness over the 20-25 year terms of IDR, as well as PSLF. But borrowers enrolled in SAVE, PAYE or ICR who meet the IDR loan forgiveness threshold will not receive a discharge while litigation continues. Instead, they would be subject to forbearance, according to the Department of Education. The 8^th Circuit appears poised to rule that student loan forgiveness under these other plans should be reversed, despite more than 30 years of regulation, promissory note provisions, and bipartisan guidance that borrowers would receive a discharge at the end of 20 or 25 years. repayment period of one year.

Student loan forgiveness under the IBR plan remains possible, however, because Congress established IBR through a separate legal authority that is currently unchallenged in court.

Potential New Workarounds to Get IDR Student Loan Forgiveness

In its updated guidance, the department suggested that new workarounds could be offered that could allow borrowers to continue to apply for IDR student relief, despite the SAVE plan’s ongoing injunction and forbearance .

First, the ministry indicated that authorities would launch a regulatory process this fall to restore access to PAYE and ICR plans. These programs were largely phased out in conjunction with the implementation of the SAVE plan (with the exception of borrowers already enrolled in these plans and Consolidated Parent PLUS who are still allowed to access ICR). Eligible borrowers may be able to transition to these plans relatively quickly, although no timeline was provided.

Additionally, the new guidance indicates that the Department of Education is developing an “IDR buyback” program. Although few details have been included in the new guidance, the option will likely be modeled after PSLF Buyback Programwhich allows borrowers to “buy back” time spent during an ineligible forbearance period (such as SAVE plan forbearance) so that the period can be counted toward student loan forgiveness. Payments would likely be based on what the borrower’s IDR payments would have been if it had been officially repaid under an IDR plan at that time. However, IDR redemption is not expected to be available until the end of 2025. The department plans to provide more information on this further developed option in the coming weeks.

IBR remains available to request student loan forgiveness

Meanwhile, the IBR plan – which is not blocked by the 8^th Circuit Injunction – remains available. And the Department of Education confirmed in its updated guidance that IDR processing, including for IBR plan change requests, would resume soon.

Switching to the IBR plan would allow borrowers to begin progressing toward student loan forgiveness again over a 20- or 25-year IDR term, and payments made under other IDR plans would count toward student loan forgiveness. IBR loan. Additionally, IBR is also an eligible repayment plan for PSLF.

However, borrowers should be aware some potential drawbacks. Payments under IBR may be higher than they were under the SAVE plan, particularly if a borrower’s income has increased since their last income recertification. Additionally, IBR does not have the interest benefits associated with the SAVE plan, so some borrowers may experience balance growth while in IBR, or interest capitalization if they switch plan later.