The 8th Circuit U.S. Court of Appeals has blocked the Biden administration’s Saving on A Valuable Education (SAVE) plan, one of the most affordable federal student loan repayment options. The court’s ruling on February 18 also ended forgiveness under the Income-Contingent Repayment (ICR) and Pay As You Earn (PAYE) plans. While the case returns to a lower court in Eastern Missouri, this decision could mark the permanent end of the SAVE plan, leaving many borrowers searching for a new repayment strategy.
Student loan application freeze
In response to the court ruling, the U.S. Department of Education (ED) has removed online and paper applications for all income-driven repayment (IDR) plans. Loan servicers have been ordered to stop accepting new applications for at least three months. As a result, borrowers are left with fewer options and may need to transition to other repayment plans.
What this means for borrowers
If you are currently enrolled in a federal student loan repayment plan, it is crucial to stay informed. Reliable sources for updates include your loan servicer, StudentAid.gov, and reputable news outlets. Social media platforms like TikTok have been known to spread misinformation regarding student loan forgiveness.
Currently, borrowers may remain on their existing repayment plans (which could be in administrative forbearance) or switch to Standard, Graduated, or Extended repayment plans. None of these plans offer forgiveness, making it even more important to evaluate your financial situation.
Next steps for SAVE plan borrowers
If you are enrolled in the SAVE plan, your payments are currently paused under administrative forbearance, and interest is not accruing. However, this temporary relief may end soon, forcing borrowers to prepare for higher payments—possibly double their current payment—when they switch plans.
For those seeking loan forgiveness after 20-25 years of payments, the Income-Based Repayment (IBR) plan is still an option. However, applications for IBR are currently unavailable due to the court ruling.
“Payments made in the SAVE repayment plan likely count toward forgiveness under IBR,” explains student loan expert Mark Kantrowitz. “However, there will be no new forgiveness directly under the SAVE repayment plan.”
If you’re on ICR or PAYE
Forgiveness under ICR and PAYE has been halted. Borrowers who reach their 20- or 25-year milestone will now be placed into interest-free forbearance rather than receiving forgiveness.
Since IBR still offers forgiveness, those in ICR or PAYE should consider switching to IBR once applications reopen. Payments made while enrolled in ICR or PAYE will still count toward IBR forgiveness.
IDR recertification issues
Income-driven repayment plans require annual income recertification, but the current application freeze prevents borrowers from recertifying. ED has extended recertification deadlines to no earlier than February 1, 2026, but some borrowers report loan servicers threatening to place them on the Standard plan if they do not recertify.
To avoid issues, borrowers should check their recertification deadline through their loan servicer’s website or StudentAid.gov. If you encounter issues, contact your servicer and remind them about the deadline extension.
Public service loan forgiveness (PSLF) impact
For borrowers pursuing Public Service Loan Forgiveness (PSLF), the SAVE forbearance period does not count toward PSLF qualification. However, you can still qualify for forgiveness after 120 qualifying payments if you switch to IBR when possible. Borrowers in forbearance may also have the option to “buy back” previous payments to count toward PSLF.
What if you can’t afford higher payments?
If your monthly payment increases under IBR or a Standard plan, take action now:
- Adjust your budget to prepare for the higher payment.
- Set aside money during forbearance if possible to build a financial cushion.
- Use a student loan calculator to explore different repayment options.
- Contact your loan servicer to discuss potential hardship solutions.
- Consider refinancing with a private lender for a lower interest rate (but be aware that refinancing eliminates federal loan protections).
Stay updated and prepare for changes
According to Kantrowitz, the application freeze is due to necessary changes in repayment plans. He noted that a similar pause occurred during Biden’s administration. It remains unclear whether the next administration will modify or eliminate these programs.
“It will take some time for the lower court to issue its ruling based on the appeals court decision, then it will take some time for the U.S. Department of Education to implement the decision,” says Kantrowitz.
To safeguard your financial future, take the following steps:
- Stay informed through official sources like StudentAid.gov and your loan servicer.
- Explore alternative repayment options and plan for increased payments.
- Accept that loan forgiveness may no longer be available, and adjust your repayment strategy accordingly.
While the uncertainty surrounding federal student loans is frustrating, you still have the power to take control of your repayment strategy and prepare for future changes.
