Federal Student Aid has frozen all Income-Driven Repayment (IDR) plan applications following a decision by the 8th Circuit Court of Appeals in February. Federal loan consolidation applications are likewise halted. To add insult to injury, the notice on studentaid.gov offers the tedious but encouraging advice that “Borrowers can still submit a paper loan consolidation application.” This does not, however, mean that paper applications are currently being processed, as no applications are being processed at this time—including those submitted before the 8th Circuit’s decision was issued. While this action was minimally advertised, other than a single banner on the FSA website, it has enormous implications for student loan borrowers, especially those who are currently stuck on the SAVE plan.
The Saving-on-a-Valuable-Education (SAVE) plan was touted as an opportunity for student loan borrowers to save money on their payments, avoid runaway interest, and work toward a reasonable path out of repayment for borrowers with small balances. It was quickly targeted by lawsuits, however, and is currently frozen while it awaits action from an appeals court. The millions of borrowers who applied for SAVE plans, meanwhile, are caught in the political crossfire with their loans in administrative forbearance. Thankfully, while their payments are frozen, interest is also not accruing. Unlike the forbearance they experienced during the Covid-19 pandemic, however, these months are not counted towards IDR Forgiveness or Public Service Loan Forgiveness (PSLF).
If you’re one of the borrowers currently stuck with SAVE, we can only encourage patience. There is no clear path yet, but we expect progress in the next six weeks. Fortunately, in our ten years of experience, we’ve encountered a lot of uncertainty through myriad changes to the student loan system, but resolution has always followed. More news will come, options will emerge, and borrowers will find their paths forward.
In the meantime, give us a call and we can give you the most up-to-date information that we have. We’re here to be your sounding board, help you consider strategies for moving forward, and make sure you’re ready when the path is clear.
