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If you’re a student loan borrower currently on the Saving on a Valuable Education repayment plan, which is still blocked by a court injunction, you may be considering switching to a different income-driven repayment plan.
After a two-month hiatus, the online application for IDR plans is back, but options remain limited. For most SAVE borrowers, it’s wise to stay put and see what happens rather than make a change. However, there are a few scenarios where it could be beneficial to move your student loans from the SAVE repayment plan.
We talked to three student loan experts to find out when it backs sense to stick with SAVE and when it doesn’t.
What’s going on with the SAVE student loan plan?
The Biden-Harris administration launched the SAVE plan in the summer of 2023 to offer borrowers lower monthly repayment terms and a path toward student loan forgiveness. A replacement for the REPAYE plan, SAVE aimed to cut payments in half for undergraduate borrowers and offered loan forgiveness in as little as 10 years rather than the usual 20 or 25.
Earlier this year, two separate groups of Republican-led states sued to block the SAVE plan. One case successfully obtained an injunction from a federal court, which put SAVE on hold. Due to this injunction, loan servicers can’t bill SAVE borrowers at the required amount and have instead put all SAVE loans into a general forbearance.
“Borrowers in the SAVE repayment plan are currently in an interest-free forbearance,” said financial aid expert Mark Kantrowitz. “This means that they do not lose any money by being in the plan. The only thing they lose is time, since months in forbearance do not count toward forgiveness.”
While the forbearance may offer a welcome financial break for some borrowers, others may not appreciate that they’re not receiving credit toward loan forgiveness through the IDR debt relief path or programs like Public Service Loan Forgiveness.
Read more: Student Loan Forgiveness on Hold Again. Experts Explain What’s Next for Debt Relief
Most SAVE borrowers should stay put
The future of the SAVE repayment plan is up in the air, but jumping ship to an alternative plan may not be worth it, experts say. For one, changing plans could increase your borrowing costs.
“Changing plans may result in an increase in the borrower’s monthly payment, as well as additional interest accrual,” said student loan lawyer Adam Minsky.
Megan Walter, senior policy analyst at the National Association of Financial Aid Administrators, also warned against changing plans if you’ve already met the qualifying payment requirement for IDR loan forgiveness. If SAVE is approved, you’ll be able to see debt relief faster if you stay on this plan.
Currently, your options for other income-driven repayment plans are also limited. Even though the online application is available again, most borrowers can only access the Income-Based Repayment plan.
Loan servicers are not processing new enrollments for the PAYE plan, and only borrowers with a consolidation loan that repaid a parent PLUS loan can get on Income-Contingent Repayment.
There are also significant processing delays, and borrowers who try to make a change could end up in a 60-day processing forbearance, during which interest charges will accrue.
“The court cases will eventually be resolved,” said Kantrowitz. Although there’s no telling how long it will take, Kantrowitz predicts that it should take less than a year for the courts to reach a conclusion.
Read more: Student Loan Payment Pause Extended for 6 More Months for SAVE Borrowers
Understanding the PSLF Buy-Back program
Although borrowers caught up in the SAVE plan’s general forbearance are not making progress toward Public Service Loan Forgiveness, they now have the option of “buying back” PSLF credits.
As the “buy back” name suggests, you’ll be able to make a lump-sum payment for any months you missed during the forbearance. For example, if your monthly payments are usually $150 and are on hold for nine months, making a payment of $1,350 once the pause is lifted will bring you nine months closer to forgiveness.
In particular, you can buy back your credits if you:
- Spent time in an eligible forbearance or deferment status while maintaining PSLF-eligible employment
- Have outstanding balances on your loans
- Have reached the point where buying back those months will complete your 120-payment requirement for PSLF
💰 Pro tip: While the pause is in effect, transfer what you would have paid in student loan repayments each month into a high-yield savings account. When the pause lifts, you’ll have the money readily available to apply to your account, plus you’ll have earned a little bit of interest.
When you should consider leaving the SAVE repayment plan
There are a couple of scenarios where leaving the SAVE plan could make sense:
You’re close to receiving PSLF forgiveness
You might also want to leave SAVE if you’re close to qualifying for Public Service Loan Forgiveness and want to apply for debt relief as soon as you can.
“Borrowers who are just a few months away from qualifying for forgiveness might want to switch into another income-driven repayment plan,” said Kantrowitz.
You’re eligible for forgiveness with another IDR plan
If you meet the requirements for receiving forgiveness through another income-driven repayment plan, you might want to switch to have your balance wiped out sooner. Just make sure you meet the requirements. Typically, IDRs require 20 to 25 years of on-time payments to qualify for debt cancellation.
You’re in the PSLF plan and don’t want to rely on the Buy-Back program
You can only take advantage of the PSLF buy-back program if doing so would put you over the threshold of 120 payments for PSLF. If you’re early in your PSLF journey, you may prefer to get on a different qualifying repayment plan.
“[Borrowers] may not want to wait years to apply for buy-back credits and have to manually add these months to their count as they progress,” said Walter. “They may prefer to stay in a repayment plan that avoids such possibly extensive delays.”
You want to resume payments sooner
Another reason to move away from SAVE would be if you’re eager to resume progress on paying your student loans.
“Borrowers whose priority is to pay off their loans more quickly, particularly those early in their careers when their monthly payments under an IDR plan might be the lowest, may prefer to resume payments sooner rather than later,” said Walter.
If you have a low balance or can afford to pay even more than your monthly payment, you may want to move your loans out of SAVE so you can chip away at your debt faster.
How to change your student loan repayment plan
If you’re interested in changing to a different IDR plan, you can submit an IDR plan request on the Federal Student Aid website. The application should take 10 minutes or less. You’ll need your FSA ID, personal details and financial information.
Here’s how to switch to another income-driven repayment plan:
- Sign into your Federal Student Aid account: You can sign in with your unique username and password, also known as your FSA ID.
- Fill out the IDR Plan Request application: You’ll answer questions about your income, family size and marital status.
- Verify your financial information: You may need to manually upload your income documentation if the IRS import tool is not functioning.
- Select an IDR plan: At this time, your primary option is the IBR plan. Borrowers with a consolidation loan that repaid a parent PLUS loan can also enroll in ICR.
- Sign and submit your application: Your loan servicer will process your application, but your loans may be placed in temporary forbearance during this time.
Make sure to hold on to a copy of your application request and other important records, said Walter. “I recommend keeping detailed records, such as taking screenshots of your loan balances and interest rates, particularly if you have multiple loans or are switching servicers.”
💰 Pro tip: Due to processing delays, switching to a new plan could take time. It might also result in higher monthly payments and increased interest charges. Weigh the pros and cons before making any moves.
Ultimately, the decision on whether to leave the SAVE repayment plan depends on your priorities and repayment situation. With all the processing delays and uncertainty around IDR plans, however, most borrowers will benefit from staying on SAVE and waiting to see what happens next.
