SAVE Forbearance, Income-Based Repayment, and Public Service Loan Forgiveness

The Department of Education has begun processing applications for the Income-Based Repayment (IBR) Plan. This is a major development for those in forbearance who were previously enrolled in the Saving on a Valuable Education (SAVE) Plan or never had the opportunity to enroll in an income-driven repayment plan.

Those in the SAVE forbearance since 7/18/24 have not had a monthly payment on their loans and no interest has been accruing. Unfortunately, these months have not counted towards the 120 payments needed to satisfy Public Service Loan Forgiveness (PSLF). There is no end in sight for this forbearance and it is uncertain whether this plan will be abolished, revert back to Revised Pay As You Earn (REPAYE), or become something new entirely.

What is certain is the strength of the IBR plan compared to SAVE, REPAYE, and Pay as You Earn (PAYE).

IBR is the only plan created by Congress and written into law as a clear path toward PSLF. The Department of Education has since introduced PAYE & REPAYE (which became SAVE). These can be challenged, overturned, or cancelled by executive action, court, or departmental decisions.

At this time, the Department of Education is not processing forgiveness for those who’ve reached 120 payments in the PAYE and SAVE plan. The phrasing they are using is “Temporarily enjoined. Otherwise-eligible loans placed in forbearance.”

• IBR: New applications are being accepted, previously enrollees have continued to make payments with months counting towards PSLF. Interest is accruing, and forgiveness is being processed for those who cross the 120 payment mark.
• PAYE: New applications are being accepted, previously enrollees have continued to make payments with months counting towards PSLF. Interest is accruing, and forgiveness is not being processed for those who cross the 120 payment mark.
• SAVE: New applications are being accepted for anyone enrolled in the SAVE forbearance. Interest is not accruing, and forgiveness is not being processed for those who cross the 120 payment mark.

A significant note is how payments are calculated in IBR:

• For those who have loans that were only disbursed after 7/1/2014, it is a 10% discretionary income calculation which is the same as PAYE.
• For those who have had any loans disbursed before 7/1/2014, regardless of whether they have been consolidated, it is a 15% discretionary income calculation which makes the payment notably higher
  • • Regardless of when loans were disbursed, the Partial Financial Hardship calculation to qualify for IBR is based on 15% discretionary income

Many have been instructed to switch to IBR, but should discuss with an advisor with a Certified Student Loan Professional® designation whether to change now or wait until their income reverification date. For physicians in practice, you also need to determine whether you can still demonstrate a Partial Financial Hardship to qualify for IBR.

For those who apply for IBR, the rules around forbearance flip while the application is being processed. No payments are due, interest is accruing, and up to 60 days will count toward PSLF. This is positive news for interns who consolidated with the goal of breaking their grace period, only to have a nightmarish experience once the SAVE plan was paused. If you applied for IBR in Oct/Nov, you can assume that the two months to end 2024 have been added to the 120 payment count.

Questions regarding your own situation?

To schedule a no-obligation, introductory conversation with our Financial Advisor specializing in Student Loan Guidance, Kyle Flynn, CSLP, use this link here. Kyle provides financial planning services with a focus on your current financial position and debt management.

Source: https://www.ed.gov/higher-education/manage-your-loans/save-plan