The likelihood of the SAVE Plan remaining in effect is slim. As we've observed the ongoing legal back-and-forth, a definitive ruling on the plan has yet to be reached. If the courts do not support the Biden administration's initiative, it is improbable that efforts to sustain the plan will persist under a Trump administration.
What Happens If the SAVE Plan Fails?
Should the SAVE Plan fail, several factors must be considered. Firstly, several income-driven repayment plans have been phased out in recent months. The only remaining options are income-based repayment and, in certain circumstances, income-contingent repayment. There is a possibility that the current administration may reinstate previous plans like REPAYE, but only time will reveal their decision. If the plan falters during the Trump administration, they will face the challenge of transitioning 8 million borrowers back into repayment and determining the appropriate repayment plans for them.
What happened to the SAVE Plan?
The SAVE Plan was developed based on existing laws, although it is not explicitly outlined in them, which makes it more vulnerable to challenges. This ambitious initiative not only offers the lowest monthly payments but also provides a generous pathway to forgiveness.
The plan was intended to be rolled out in two phases. The first phase began when pandemic relief allowed millions of borrowers to resume repayment. However, the second phase was not fully prepared and faced legal challenges in two separate court cases before its complete launch. Both cases remain unresolved, placing the plan on hold.
In response, the Biden administration has placed all borrowers enrolled in the SAVE Plan under a zero percent interest administrative forbearance, meaning no payments have been required since July 2024. Borrowers can still enroll in the plan, and as their applications are processed, they are similarly placed in this administrative forbearance.
What Will Happen to Repayment
Various repayment plans are available, including income-driven options and those with longer terms that may help reduce a borrower's monthly payments. However, within the federal student loan program, there is no way to lower your interest rate. While some plans may provide interest subsidies and you could receive a deduction for enrolling in autopay, a true adjustment to the interest rate is not possible. If you choose to lower your monthly payment without an interest subsidy, you might end up paying more over time, as extending your repayment term also lengthens the duration for which interest accrues on your debt.
Stay Informed
There are still a few months left to outline the next steps for the Biden administration. Once the Trump administration assumes power, it will need to establish a strategy for managing student loan repayment for borrowers.
In the meantime, it's encouraged that you take proactive steps in managing your student loans. This includes reviewing current repayment options, and staying updated on any changes in policies that might affect your situation. Anticipating potential shifts in policy will also enable you to quickly adapt to any changes in the student loan landscape, ensuring you remain on a path to financial stability.