July 10, 2024

The SAVE Plan Implementation and PSLF Processing Pause: What We Know and How AccessLex Can Help

By:
Nancy Conneely, Managing Director, Policy, and Derek Brainard, Director, Financial Education
|
Financial Education
Policy and Advocacy

SAVE Plan: What We Know

Student Loan Forgiveness

Last year, the Biden-Harris Administration created the Saving on a Valuable Education (SAVE) plan, an income-driven repayment (IDR) plan aimed at lowering monthly payments and overall loan balances for most student loan borrowers. The SAVE plan was implemented in stages, with some elements, such as increasing the amount of protected income, going into effect last July and the rest, such as lowering monthly payments, going into effect July 1, 2024.

However, this spring, two groups of states sued the administration in separate lawsuits to block the SAVE plan, arguing that it does not have the authority to alter student loan repayment plans.

  • In the lawsuit led by the Missouri attorney general, the judge granted a preliminary injunction blocking the U.S. Department of Education (ED) from authorizing any further loan forgiveness under the SAVE plan until the case is resolved. ED appealed the injunction but was denied.
  • In the Kansas-led case, the judge granted a preliminary injunction preventing ED from implementing parts of the SAVE plan that were slated to go into effect on July 1, such as lowering monthly payments to five percent of discretionary income for those with only undergraduate loans and to between five and 10% for borrowers with both undergraduate and graduate loans. In response, ED placed about three million SAVE borrowers into forbearance, freezing their payments and interest. In the meantime, ED appealed the injunction and was granted a stay, which allows the lower payments to go into effect. At the time of this writing, it is not known if ED will proceed with keeping borrowers in forbearance.

PSLF Processing Pause: What We Know

The Public Service Loan Forgiveness (PSLF) program, which allows Direct Loan borrowers to have their loans forgiven if they work for certain public service employers for 10 years, has always been managed by one servicer – first by Pennsylvania Higher Education Assistance Agency (PHEAA), but more recently by Missouri Higher Education Loan Authority (MOHELA). However, ED recently began transitioning public-facing loan servicing from individual servicer websites to ED (via studentaid.gov). The goal is for borrowers to manage their loans and benefits, including PSLF, via a single platform without having to change servicers. As part of this transition, ED paused the processing of all PSLF forms and applications beginning on May 1. The pause recently ended in early July.

During the pause, borrowers were not able to see any updates to their PSLF payment counts or submitted forms, they did not receive any loan forgiveness, and they were not able to get questions answered about their PSLF status.

What Can Borrowers Focus On?

With so much of the loan repayment landscape in flux, it’s easy for borrowers to be overwhelmed. Borrowers can take this time to focus on things they can control, like:

  • Logging into all loan portals and verifying accurate contact information.
  • Taking screenshots of loan balances and loan details and saving them in a file for reference as needed.
  • Documenting conversations with loan servicers and any other account representatives.
  • Learning more about existing repayment options and options to pivot should the need arise.
  • Working with financial aid offices to ensure proper and accurate aid benefits and distributions for current programs.
  • Checking back with official sources of information, like StudentAid.gov and ED.gov, for updates.
  • Reaching out to AccessLex Institute for help when needed.

How Can AccessLex Institute Help?

AccessConnex by AccessLex is a free, unlimited financial coaching service connecting callers with our team of Accredited Financial Counselors (AFC®). Through AccessConnex, you can schedule 30-minute sessions to discuss your overall student loan repayment strategy, current options based on prevailing changes to the system, and any other money questions you may have.

To prepare for your call, gather any important information that may be relevant to your questions (e.g., student loan types, balances, interest rates, current repayment plan, etc.). Your coach will call you at the scheduled time and will ask questions to learn more about your situation and discuss options you may want to consider.

Coaching with an objective, friendly AFC® can provide you with a greater sense of control and clarity about potential next steps.

Schedule a free AccessConnex call now.

Information received through AccessConnex is not intended as tax, legal, or investment advice. You should consider whether it is appropriate for your needs, and where applicable, seek advice from a professional counselor.