I trust you’ve all enjoyed a safe and Happy 4th of July extended weekend.
Today’s student loan update must be prefaced with the obvious question: How can anyone keep up with student loans? The stream of news and changes just never ends!
Case in point: this past Friday, the Supreme Court denied the Biden-Harris $10,000/$20,000 Debt Relief Plan and shared important announcements regarding the updated REPAYE program, also known as the SAVE program. So I’ve listed 13 facts below, to address the most common questions + concerns I’ve received about this over the weekend.
Read on to get the facts in plain English or click here to schedule a call with me, so we can talk them through.
13 Facts about the Supreme Court’s Decision + SAVE Program
1) The Supreme Court’s rejection of the Biden-Harris $10,000/$20,000 Debt Relief Plan on Friday, June 30th, 2023 did NOT affect the PSLF Forgiveness Program, PSLF Waiver, IDR forgiveness, IDR Waiver or any other of the old rules/new adjustments implemented during the pandemic.
2) The SAVE program is NOT the replacement of the denied Biden-Harris $10,000/$20,000 Debt Relief Plan.
3) The SAVE program is also NOT being challenged in court, as of today’s date.
4) The direct replacement Biden plans to make under the Higher Education Act will attempt to implement the unilateral forgiveness of $10,000/$20,000 with the original forgiveness plan that was rejected. This plan is not yet formulated and will likely require countless legal challenges before it is finalized, if at all.
5) The SAVE program is nothing new, but rather, a rebranding or renaming of the new REPAYE plan. The SAVE program will go into effect, immediately, after the COVID payment pause is over. It will also allow borrowers to go delinquent, or past due, without penalty (which I do not recommend in most circumstances), for the first 12 months of payments after the payment pause.
6) The SAVE program is designed to ease the impact of the payment pause ending, while the new forgiveness plan is established.
7) If you are in REPAYE now, you will automatically be transitioned to SAVE (new REPAYE). This is a good thing. There is no action required.
8) The SAVE program allows the same spousal income exclusion as PAYE and IBR for separate tax filers (as opposed to the old REPAYE plan).
9) If you are in PAYE now and pursuing PSLF Forgiveness, please schedule a call with me and I’ll assess whether you should switch to SAVE.
10) The SAVE program has the potential to lower your payment by $100 to $200 per month in comparison to the old REPAYE or PAYE for grad debt and it will more than cut in half the monthly payment for undergrad debt.
11) If you are in any IDR Program other than REPAYE (SAVE) and you are not pursuing PSLF, I also recommend you schedule a call with me so I can reevaluate whether you should switch programs. SAVE is great, but for grad borrowers not in PSLF, it may lengthen your program maturity from 20 to 25 years and many Parent Plus borrowers will not qualify for SAVE.
12) The SAVE program is a 25-year program for borrowers with grad debt.
13) Only Direct federal student loans qualify for SAVE.
Bottom line: If you’ve spoken with me this year, I’ve already incorporated the relevant benefits of the SAVE program in my recommendations. There is no action required.
Bonus Info: Here’s An Example
Here is a general example where PAYE would be preferable to SAVE.
Single Filing Federal Student Loan Borrower ○ Family Size 2 ○ $125,000 income ○ For Profit employer ○ In repayment for 13 years ○ $150,000 in federal student loan debt ○ 7% rate for grad school only ○ PAYE payment: $800 ○ SAVE payment: $675
This borrower can potentially qualify for forgiveness in 7 years under PAYE (even if they haven’t been enrolled in PAYE the whole time). Whereas, in SAVE, their payment is lower but they’ll have to wait at least 12 years for the loan to be forgiven.
In this scenario, the borrower could pay (worst case scenario) $2,000 more in taxes after the loan is forgiven by PAYE in comparison to SAVE, but they would save at least $30,000 in cumulative payments (more if income growth is accounted for) and get the loans forgiven in 7 years instead of 12.
In summary, the SAVE program is going to help a majority of borrowers, but for borrowers with high grad debt, PAYE will many times be the best choice of plans.
💡That’s all for today. If you need extra help navigating the most recent updates from the Supreme Court, the SAVE program and how this all applies to you, please click here to set up a private consultation.