Student Loan Repayment Updates & Administrative Forbearance

Those enrolled in the Savings on a Valuable Education (SAVE) Plan have been placed into an Administrative Forbearance, causing many questions about payments due and Public Service Loan Forgiveness (PSLF) eligibility.

This article will outline the impacts of these court decisions on those already enrolled in the SAVE plan. A follow-up post will outline how this impacts interns who haven’t enrolled in a plan, have applied for SAVE, or have consolidated their loans.

Administrative Forbearance was instituted on 7/18/2024 as the SAVE plan was halted by federal courts. This does not only apply to those who switched to SAVE within the past year. Many were automatically transferred into the SAVE plan if you were previously enrolled in the Revised Pay As You Earn (REPAYE) plan as SAVE was introduced by the Biden Administration to be an enhanced version of REPAYE.

What does that mean?

• Those in Administrative or “SAVE” Forbearance have no payments due and no interest accruing.
• For those with no aspirations or PSLF, this is a positive for the budget and your overall loan balance (assuming you are saving the expense and are not blindsided when payments resume).
• For those trying to make 120 qualifying payments while working at an eligible institution such as a teaching hospital in the hopes of pursuing PSLF, this is a bummer because this time starting in July does not count towards the 120 PSLF payments. Saving the monthly payment is great on a PGY salary; losing this time at a lower payment level and adding on time at a practicing salary at the end of the ten years can add thousands onto the amount you pay over time.

What can I do if I want PSLF eligibility as soon as possible?

• There is only one other plan currently eligible for PSLF which is the Income-Based Repayment (IBR) Plan and many are recommending you apply for this plan.
• IBR has a different & higher payment calculation for anyone with loans disbursed before 7/1/2024, so you will want to confirm what your payment will increase to.
• IBR also allows all unpaid interest to accrue. So, picking up disability insurance is vital to protect this plan, and you will need to be aware of this increasing balance if you are making payments on a PGY salary.
• IBR requires a Partial Financial Hardship to qualify for enrollment, so you will need to connect with a professional to determine if you are eligible for this plan based on your financial documentation and situation.

How can I apply for IBR?

• The Department of Education is now accepting online applications, but have yet to begin processing them.
• They are allowing manual uploads of income documentation at this point and have yet to allow the simple linking of a recently filed tax return

So what happens after applying?

Confirm you have been placed into Processing Forbearance. This similarly has no monthly payments, but is different from the Administrative/SAVE Forbearance in two primary ways:

1. Interest is accruing monthly based on a 10-year repayment.
   • • You can use an amortization calculator to confirm you specific details, but someone with a 6% interest rate would have $1,000/month of interest with $200,000 of loans and $1,5000/month of interest with $300,000 of loans.
2. You will receive up to 60 days (aka 2 months) credited towards PSLF while in this forbearance.
   • • If you are in this status for more than 60 days, current rules state that you would stop receiving PSLF credit until your payments resume in an income-driven repayment plan.

This is confusing. Didn’t they use the terms Administrative and Processing Forbearance differently in the past?

• The Department of Education has used these terms with different implications prior to July.
• This is frustrating, but a great example of why early-career physicians should connect with a professional that can provide some guidance as to how many months have counted towards PSLF since SAVE was introduced in 2023.

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.