Student loan borrowers can slash their monthly payments — for now. Here’s what to know
SAVE allows borrowers to make monthly payments based on their income, not on the amount they borrowed.
In exchange, most borrowers have to continue paying considerably longer than they would under a standard plan, in which debts are paid off over 10 years.
Under #SAVE, the typical borrower makes payments for 20 years on undergraduate loans and for 25 years on graduate school loans.
Then, any unpaid balance is forgiven.
As of July 1, monthly payments on undergraduate loans for those enrolled in the SAVE plan were scheduled to be cut in half, dropping from 10% of their discretionary income to 5%.
But in early June, the Education Department informed borrowers whose next payments were due in the first half of July that they would be put into forbearance for one month while their monthly bills were recalculated.
Their next payment would be due in August and, for undergraduate loans, based on 5% of their discretionary income.
Last week a federal judge in Kansas issued a temporary injunction, barring the Education Department from cutting the repayment rate to 5%.
The department responded by telling 3 million additional SAVE participants that they, too, would be put into forbearance until August while their monthly payments were re-recalculated.
Unlike the other borrowers in forbearance, though, these borrowers would have their repayment periods extended by a month, according to Natalia Abrams, president and founder of the Student Debt Crisis Center.
Then on Sunday, a divided three-judge panel of the 10th Circuit Court of Appeals put the injunction on hold pending the department’s appeal.
It’s impossible to predict how long the relief will last because even if the department wins on appeal, the case could move on to the U.S. Supreme Court for possible reversal.
https://www.latimes.com/california/story/2024-07-02/student-loan-debt-save-plan-can-slash-payments-legal-rulings