The 8th Circuit Just Put a Halt to SAVE

I had this ready to go last week, but just noticed it didn’t go out as planned.

Still reviewing the impact of this Order, but it appears to block ED from implementation or action under the 2023 IDR regs that created SAVE and several other improvements to IDR while the appeal is pending.

ED has issued a statement that borrowers presently enrolled in SAVE will be placed in an interest-free forbearance while the appeal is pending.

FSA has implemented a forbearance for anyone enrolled in SAVE.  This time will NOT count towards PSLF or IDR forgiveness.  It’s likely to be several months while the courts work through the pending litigation.

What will come of all this?  No one can know for sure but one possible outcome being discussed the most is a return to the original terms of Repaye.  SAVE was a modification of Repaye to allow for the non-accrual of unpaid interest, with the ability to file a separate tax return to exclude a spouse’s income.  Other IDRs allow for the exclusion of a spouse’s income by simply filing a “married but separate” tax return such as IBR and ICR.  But they don’t have other features to allow for a very low payment that SAVE has such as the 5% for undergrad loans.

For now, anyone who is considering consolidation, be aware that doing so now, may cause the loss of any prior IDR forgiveness credit.  That was what used to happen, and for now, that is what it may go back to.  It would be very risky to consolidate with that uncertainty.  If you don’t have much forgiveness IDR credit, then that should not be a concern.  The goal there is to obtain the lowest possible payment for the shortest period of time.