Employers can now help borrowers pay off student debt
Student loans have become a $1.8 trillion burden for millions of Americans. A new law signed by President Biden may help borrowers pay off their loans while saving for retirement.
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Did you wake up to an email on Friday stating your student loans are in forbearance? If so, you are one of eight million Americans.
Borrowers enrolled in the SAVE (Saving on a Valuable Education) Plan are currently in forbearance. How long the forbearance goes on remains to be determined.
The student loan relief program, introduced by President Joe Biden’s administration in 2023, is now in court where it is being contested. At the end of July, an administrative stay was granted by the U.S. Court of Appeals for the Eight Circuit in St. Louis at the request of Missouri and six other Republican led states, per The Tennessean. As a result, the plan has been blocked from continuing.
Here’s what to know about the forbearance and the legal battle over SAVE.
What is student loan forbearance?
Student loan forbearance is a temporary postponement or reduction of your student loan payments due to financial difficulty. During this temporary period, you may still make smaller payments toward your loan. Borrowers typically need to apply to receive forbearance. However, the Biden administration has chosen to freeze payments for all SAVE borrowers as the legal battle over the plan continue.
“Borrowers enrolled in the SAVE plan will be placed in an interest-free forbearance while our administration continues to vigorously defend the SAVE plan in court,” Miguel Cardona, the secretary of education, said in a statement in July. “The Department will be providing regular updates to borrowers affected by these rulings in the coming days.”
Fast facts about the SAVE student loan plan
∎ SAVE is an IDR (Income Driven Repayment) Plan that bases your monthly payment on your income and family size. It replaced the Revised Pay As You Earn (REPAYE) Plan. Borrowers who were on the REPAYE plan will automatically get the benefits of the SAVE plan.
∎ The plan lowers payments for almost all borrowers compared to other IDR plans. Payments are based on a smaller portion of your adjusted gross income (AGI).
∎ It has interest benefit: If you make your full monthly payment but it is not enough to cover monthly interest accrued, the government covers the rest of the interest accrued that month. This prevents your balance growing due to unpaid interest.
∎ Borrowers in the plan who originally borrowed $12,000 or less will be granted forgiveness after as few as 10 years.
∎ In the summer of 2024, more elements of SAVE will go into effect, further lowering payments for borrowers with undergraduate loans.
Why is the SAVE plan in court?
When the SAVE plan was first implemented by the Biden administration in 2023, it was met with criticism and pushback from Republicans. Part of the plan was blocked in June by two federal judges in Kansas and Missouri. In July, Missouri Attorney General Andrew Bailey and seven state attorneys requested the 8th Circuit to block the plan in its entirety, according to The Tennessean.
For Bailey, the ruling was a win for the Constitution. On the social media platform X, he said, “Congress never gave Biden the authority to saddle working Americans with half-a-trillion dollars in other people’s debt.”
When will I need to begin paying my student loans?
Currently, there is no set date for when the student loan forbearance will end or when borrowers will resume payment on student loans.
Nina Tran covers trending topics for The Greenville News. Reach her via email at ntran@gannett.com.
