Should You Leave The SAVE Repayment Plan Right Now?

With the Saving on a Valuable Education (SAVE) Plan paused due to the ongoing litigation, many borrowers are wondering: should I exit the SAVE plan and start making student loan payments under another repayment plan?

For most borrowers, the answer is no. Borrowers on the SAVE plan should likely just enjoy their administrative forbearance, save their estimated monthly payment in a high yield savings account, and then resume making payments once the dust settles.

However, there are three circumstances where borrowers may benefit from changing out of the SAVE plan and into another repayment plan.

1. You're Close To Receiving Public Service Loan Forgiveness

If you’re nearing the completion of the 120 qualifying payments required for Public Service Loan Forgiveness (PSLF), switching from the SAVE plan to another income-driven repayment (IDR) plan could expedite your path to forgiveness.

What is close? 1-2 payments away to be safe, but maybe up to 6 payments if you want to deal with the risk.

Why one or two payments? Even in a worst case scenario of your lender failing to process your repayment plan request timely, the processing forbearance of 60 days should cover your two months (processing forbearance DOES count for PSLF).

However, switching to a non-blocked plan like the Standard 10-Year plan could also be beneficial, just remember that you will likely have significantly higher payments. We don't recommend this, but we also know there are some people that are willing to do anything to get across the 120 payment finish line.

2. You're Eligible For Another Repayment Plan

Right now, borrowers can only enroll in the Standard plans or the IBR plan (and SAVE, but you're here reading this because you're in SAVE). However, the Department of Education said it does plan to re-activate the PAYE and ICR plans for new enrollment as well, in the coming weeks.

For borrowers who have met the criteria for forgiveness under a different IDR plan, transitioning away from SAVE might allow you to have your remaining balance forgiven sooner. Typically, IDR plans require 20 to 25 years of consistent, on-time payments to qualify for debt cancellation.

It’s important to confirm that you meet all necessary requirements before making the switch. The nuances of each IDR plan can significantly impact your eligibility and the timeline for forgiveness. 

Here's a handy guide from the Department of Education on what's available right now:

3. You're Concerned About PSLF Buy-Back

The PSLF Buy-Back program allows borrowers to receive credit for past periods of repayment that might not have initially qualified toward the 120-payment requirement. However, relying on this program could introduce delays.

For those early in their PSLF journey, opting for a different qualifying repayment plan may provide a more straightforward path without the potential complications associated with the Buy-Back program.

Final Thoughts

Of course, you can always change repayment plans to one of the open plans if you want to pay off your student loans faster - but for over 50% of borrowers, that doesn't make sense. Most borrowers in the SAVE plan should simply stay put during the administrative forbearance, and then take action once the court cases are resolved and more clarity is available.

Taking action right now is risky, so borrowers should simply save and prepare.

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