Borrowers on the SAVE plan will be in forbearance for at least 6 more months—what to know if you're enrolled or want to apply

As of early October, federal student loan borrowers can once again apply online for the Saving on a Valuable Education and other income-driven repayment plans.

President Joe Biden's SAVE plan remains blocked, however, while federal courts weigh in on two multi-state lawsuits claiming the Biden administration does not have the authority to enact the plan. The SAVE plan includes provisions to lower monthly payments and provide another pathway to forgiveness for borrowers.

Borrowers enrolled in the SAVE plan currently do not need to make payments. The Department of Education placed those accounts in an interest-free forbearance while the legal battles play out, and expect that to take at least six months.

After the plan was initially blocked in June, the Department of Education paused all income-driven repayment plan applications while it waited for further guidance from the courts on what the injunctions actually prevented the agency from doing. The previous IDR applications included mentions of the SAVE plan provisions, like the shortened timeline to forgiveness and lower monthly payments, which the courts blocked, leading ED to pause all IDR applications to ensure compliance with the court's ruling.

Though borrowers can apply and enroll in some of those IDR plans again, they may wind up in forbearance if they do. Here's what to know.

Online applications reopen with caveats

The reopened IDR application will be a simplified version that will be sent directly to borrowers' servicers after completion, but won't allow borrowers to automatically input their federal tax information. The simplified version also won't give personalized recommendations around plan eligibility, but ED says it plans to bring those features back "in the future."

When it paused new applications, ED instructed servicers to stop processing submitted IDR applications. Servicers will resume processing some of those applications in the coming weeks, ED says. Specifically, application processing will resume for:

• Income-based repayment plans
• Income-contingent repayment and the Pay As You Earn IDR applications received prior to July 1
• Income-contingent repayment applications from parent borrowers submitted at any time

While their IDR application is being processed, borrowers will be placed in forbearance for up to 60 days. Interest will accrue during that period, but borrowers will be eligible to have that time count toward their Public Service Loan Forgiveness or IDR forgiveness timelines.

Borrowers whose applications are not processed within 60 days will be moved into a general forbearance, which will not count toward forgiveness, but will pause interest accrual. It is unclear if borrowers will be notified if their application is not processed within 60 days.

Borrowers already enrolled in the SAVE plan continue to be in an interest-free forbearance period that does not count toward PSLF or IDR forgiveness. Borrowers can expect to be in forbearance for at least the next six months, an education department spokesperson said on Oct. 21.

Broad student debt forgiveness remains on hold

The injunction on the SAVE plan's enactment prevents the Biden administration from forgiving more debt under the program. Prior to the legal hang-ups, the administration eliminated $1.2 billion in debt for nearly 153,000 borrowers on the SAVE plan in February. 

Oral arguments on the SAVE plan lawsuit with the 8th Circuit Court of Appeals in Missouri are scheduled for Oct. 24, placing the plan in limbo at least until then. The other lawsuit, filed by Alaska, South Carolina and Texas, would be null if the Eighth Circuit rules against ED and blocks the entire SAVE plan from moving forward.

Separately, another Biden administration debt relief plan is also blocked by federal courts following a Republican state-led lawsuit. The administration was preparing to enact its other new loan forgiveness initiative this fall, which was expected to shrink or clear balances for 25 million borrowers.

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