As the legal fate of the Saving On A Valuable Education (SAVE) income-driven repayment plan for student loans remains uncertain in the court system, federal student loan borrowers find themselves navigating a complex decision-making landscape. Currently, those enrolled in the SAVE plan are in forbearance, meaning they aren’t required to make payments, and interest is not accruing during this time. This forbearance could provide some financial relief for borrowers who are struggling; however, it presents significant downsides especially for those pursuing Public Service Loan Forgiveness (PSLF), as time spent in forbearance does not count toward their eligibility. The situation leaves many borrowers questioning whether they should continue with the SAVE plan or switch to an alternative repayment program while waiting for a resolution from the courts.
Despite the ongoing legal challenges to the SAVE plan, financial experts generally advise borrowers to stay on course for the time being. Financial advisor Jason Dall’Acqua suggests that the current pause may benefit borrowers as they can utilize the funds they would normally allocate toward their loans to address pressing living expenses or pay down higher-interest debts. For borrowers who may not be experiencing financial hardship, Abby Wernicki, Ph.D., recommends setting aside their expected loan payments in a separate savings account. This strategy prepares them for any impending payment obligations once the legal situation is resolved, facilitating a smoother transition back into repayment regardless of whether they decide to stick with SAVE or switch to another plan.
For those near the threshold of PSLF, there is a silver lining in this period of forbearance. Borrowers can “buy back” PSLF credits for any months they might miss during this time, provided they meet certain criteria, such as having outstanding loan balances and proving their qualifying employment during the forbearance. This process allows them to potentially stay on track toward their forgiveness goals without losing the progress they’ve already made, highlighting the importance of assessing each individual’s situation when determining whether to remain in SAVE or opt for a different repayment plan.
On the other hand, some arguments exist for those considering an immediate switch from the SAVE plan. The U.S. Department of Education has reinstated applications for other income-driven repayment plans, such as Pay As You Earn (PAYE) and Income-Based Repayment (IBR). However, the current complexities and delays—stemming from ongoing legal disputes regarding the SAVE plan and complications with FAFSA processing—may make transitioning to other plans a daunting task. Borrowers should be prepared for potential wait times, and any decision to switch should factor in their financial situation and objectives. Higher monthly payments may result from changing plans, complicating cash flow for some borrowers.
While the possibility of future changes to the SAVE plan looms large, existing uncertainties hinder a clear path for borrowers seeking to gauge the legal outcome. Specialists predict the courts may resolve these issues within months, while others project a lengthy timeline that could extend for over a year. Borrowers must weigh the possibility of switching repayment plans against the unpredictability of the SAVE plan’s future. The ramifications of their choices depend on their long-term goals and eligibility for PSLF, reinforcing the need for a personalized approach to decision-making.
Ultimately, the choice between remaining on the SAVE plan or switching to another repayment plan is highly individualized. Many experts lean toward a cautious approach, suggesting that staying put may be the most prudent choice, particularly for those not actively pursuing PSLF. Borrowers should seize the current opportunity to address other aspects of their financial health—whether by reducing existing debts, building emergency savings, or laying aside funds for future obligations. Those interested in PSLF should consider setting aside anticipated payments in a dedicated savings account to buy back credits once they become eligible. By navigating this uncertain terrain with strategic financial planning, borrowers can better position themselves for success, regardless of how the legal challenges unfold.
