Student loan borrowers still enrolled in expensive SAVE forgiveness program

Although the SAVE plan has officially been discontinued, millions of student loan borrowers remain enrolled in the program, and this decision could cost them dearly.

After a lengthy legal battle, a federal appeals court earlier this month ordered the end of the Biden administration-era repayment program Savings for Valuable Education (SAVE), which was designed to significantly lower monthly bills for borrowers.

Borrowers enrolled in SAVE have been given a repayment holiday from July 2024 while the legal challenge unfolds, meaning they no longer have to make any payments on their debts. The payments they select are not eligible for loan forgiveness.

For now, the Trump administration is allowing borrowers to continue their payment forbearance period, which is expected to end soon. In August, interest began accruing on the debts of SAVE registrants.

Still, SAVE registrants were slow to complete the program. Approximately 7.2 million people were enrolled in waiver programs as of December, according to recently released data from the U.S. Department of Education. As of December 2024, one year ago, the number of borrowers was approximately 7.9 million.

“They may not have to pay it back today, but their loan debt is quietly increasing and they are not moving toward legal loan forgiveness,” said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers.

Here’s what you need to know about the consequences of keeping your SAVE on hold and your other options.

Nancy Nearman, assistant director of New York’s Education Debt Consumer Assistance Program, said there are several reasons why so many borrowers remain in defunct SAVE plans.

Nearman said some people think they can’t pay with other plans, while others are confused about their SAVE status. Others may be waiting to apply for a new repayment plan pending with the U.S. Department of Education, or their application may have been denied.

Higher education expert Mark Kantrowitz said borrowers who remain in the SAVE suspension period will find themselves in debt with more interest.

By Kantrowitz’s calculations, the typical SAVE registrant has a loan balance of about $57,000 and an interest rate of 6.7%. He calculated that this means their debt has increased by more than $2,500 since interest accrual resumed in August.

SAVE student loan borrowers also have not made any progress toward debt forgiveness under the repayment plans or terms of Public Service Loan Forgiveness.

Kantrowitz said borrowers who wait until they are forced to leave SAVE may have more trouble coming up with a new repayment plan.

“With 7.2 million borrowers applying for income-based repayment plans, it is unlikely that the U.S. Department of Education will be able to process those applications in a timely manner,” he said. “Borrowers who submit their forms now will be at the front of the list.”

As a result, long waiting times and increased interest on debt are likely to be avoided, Kantrowitz added.

It’s understandable that borrowers are concerned about their payments jumping up under other plans.

Most experts say the best aggressive repayment plan right now is an income-based repayment plan. IBR, like SAVE, is an income-driven repayment plan that limits a borrower’s monthly bill to a percentage of their discretionary income, ultimately leading to debt cancellation.

But even if you’re a SAVE borrower, your monthly bill could double if you switch to IBR. This is because SAVE plans calculate payments based on 5% of a borrower’s discretionary income. The IBR percentage is 10%, but for certain borrowers with older loans, that percentage increases to 15%.

Still, according to Kantrowitz’s calculations, very low-income borrowers could end up paying just $13 a month under IBR.

There are tools available online to help you determine what your monthly bill will be based on various repayment plans.

Consumer advocates say borrowers worried about not being able to afford their monthly payments should also check whether they qualify for interest-free payment suspensions, such as unemployment deferrals if they have Direct Subsidized Loans.

If your application for a repayment plan is denied, no matter the reason, experts say you should submit a new plan as soon as possible. There remains a large backlog of repayment plan applications, but the Department of Education has recently been processing applications.