Federal Student Loan Borrowers Can Once Again Apply for Income-Driven Repayment Plans
After a brief pause, the Department of Education has reopened online applications for income-driven repayment (IDR) plans, including the Saving on a Valuable Education (SAVE) plan. However, the SAVE plan remains blocked due to ongoing legal battles.
What This Means for Borrowers
Borrowers who enroll in the SAVE plan will not be required to make payments while the court cases are being resolved. Their accounts will be placed in an interest-free forbearance period, which is expected to last at least six months.
A Simplified Application Process
The reopened IDR application will be a simplified version that will be sent directly to borrowers’ servicers after completion. However, this version will not allow borrowers to automatically input their federal tax information or provide personalized recommendations around plan eligibility.
Processing of Previously Submitted Applications
The Department of Education has instructed servicers to resume processing some previously submitted IDR applications. Borrowers whose applications are being processed will be placed in forbearance for up to 60 days, during which time interest will accrue. However, this period will count toward their Public Service Loan Forgiveness or IDR forgiveness timelines.
Uncertainty Surrounding the SAVE Plan
The future of the SAVE plan remains uncertain due to ongoing legal challenges. Oral arguments are scheduled for October 24, and a decision is expected to take several months. In the meantime, borrowers who are already enrolled in the SAVE plan will continue to be in an interest-free forbearance period.
Other Debt Relief Plans Also Blocked
Another Biden administration debt relief plan is also currently blocked by federal courts. The plan was expected to shrink or clear balances for 25 million borrowers but is now on hold due to a Republican state-led lawsuit.
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