SAVE Plan Paused: What It Means for Your Student Loans

Summary

In this insightful video, student loan lawyer Stanley Tate addresses the current uncertainty surrounding the SAVE plan, which is temporarily on hold due to court challenges. He explains that while no payments are required and no interest is accruing during this pause, this time does not count towards Public Service Loan Forgiveness (PSLF) or Income-Driven Repayment (IDR) forgiveness for most borrowers. Tate advises on the pros and cons of making voluntary payments, discusses various repayment plan options, and highlights the PSLF buyback credit for eligible borrowers. He emphasizes proactive financial planning to navigate these challenges effectively.

Takeaways

• 😀 The SAVE plan is currently on hold due to court challenges, leaving many borrowers in uncertainty regarding their loans.
• 📉 During this pause, no payments are required, and no interest is accruing on loans, but this time won't count toward PSLF or IDR forgiveness unless in a processing forbearance.
• 💡 Some borrowers consider making voluntary payments to reduce their loan balances, but it may not be the best option if aiming for forgiveness.
• 🔄 Borrowers can explore different repayment plans like SAVE and IBR, but enrollment in IDR applications is temporarily paused due to legal issues.
• 📝 If nearing PSLF forgiveness, borrowers can use the PSLF buyback credit option to count additional months of eligible employment toward forgiveness.
• 💰 If considering switching to a different IDR plan, weigh the potential increase in monthly payments and loss of benefits like interest waivers.
• ⚖️ The decision to switch repayment plans depends on individual circumstances, such as proximity to retirement or ability to afford higher payments.
• 🚨 Borrowers should keep in touch with their loan servicers and monitor communications to prepare for when payments resume.
• 📊 Establishing a budget that factors in future payments and setting aside money now can help avoid payment shock later.
• 🔗 Seeking expert guidance and signing up for newsletters can help borrowers stay informed and make better financial decisions during this uncertain time.

Q & A

What is the current status of the SAVE plan?

The SAVE plan has been temporarily blocked by the courts, preventing the education department from offering it to borrowers.

Are payments required during the SAVE pause?

No payments are required during the SAVE pause, and no interest is accruing on loans during this period.

Will the time spent in the SAVE pause count toward PSLF or IDR forgiveness?

No, the time spent in general forbearance during the SAVE pause does not count toward PSLF or IDR forgiveness, unless you are in processing forbearance, which lasts up to 60 days.

Is it advisable for borrowers to make voluntary payments during the SAVE pause?

While borrowers can make voluntary payments to reduce their loan balance, it might be more beneficial to focus on building an emergency fund or saving for retirement instead, especially if they are working towards loan forgiveness.

What repayment plans are currently available to borrowers?

Both the SAVE plan and the Income-Based Repayment (IBR) plan are open for enrollment, but other plans like Pay As You Earn (PAYE) and Income-Contingent Repayment (ICR) are generally closed for new enrollments, with a few exceptions.

What should borrowers do if they are concerned about processing delays?

Borrowers should stay in contact with their loan servicer to track any updates and manage their expectations regarding the delays.

What is the PSLF buyback credit option?

The PSLF buyback credit option allows borrowers who have 120 months of eligible employment and an outstanding loan balance to count additional months of eligible employment toward forgiveness, by submitting a buyback request and making additional payments for the months they want to buy back.

How can borrowers protect their financial future during the SAVE pause?

Borrowers can take several steps, including setting up email filters to monitor communications from their loan servicer, creating a budget for potential future payments, exploring loan consolidation options, and adjusting their financial goals to account for their student loan payments.

What factors should borrowers consider before switching repayment plans?

Borrowers should consider their financial stability, how soon they plan to reach forgiveness, and whether they can afford any potential increase in monthly payments before deciding to switch plans.

What resources are available for borrowers seeking guidance?

Borrowers can book a one-on-one call with student loan experts for personalized help or sign up for newsletters that provide regular updates and actionable advice.