Millions of borrowers are in suspense as the courts decide whether an income-oriented repayment plan can be applied. The Department of Education recently shed light on the fate of over 8 million borrowers enrolled in the Saving on a Valuable Education (SAVE) plan. This plan aims to lighten the debt burden by reducing payments and simplifying debt forgiveness. However, it is currently embroiled in legal battles.
Two groups of Republican-led states contend that President Joe Biden's administration lacks the authority to initiate such a plan. As a result, the ongoing court cases have left borrowers in an uncertain situation.
The Department of Education has revealed its plan for forbearance in this situation. Forbearance involves the temporary suspension of loan repayments. For SAVE plan participants, this means they won't need to make payments and won't accumulate interest on their loans until further notice.
Following a Federal appeals court's decision to prevent the plan's implementation, the Department of Education moved all SAVE plan participants into forbearance. Even if borrowers received a bill for August, they will not have to pay it, the Department clarified.
During forbearance, borrowers can still make payments to their loan service provider. These payments will be allocated to future bills once the forbearance period is over. However, any payments made during the forbearance will not qualify for loan forgiveness, including Public Service Loan Forgiveness. This stipulation has raised concerns for some borrowers who were on the verge of having their debts forgiven.