While it is fair to say that the election results were a setback for borrowers, it’s important to note that many borrower protections are in place to ensure the continued availability of these resources.

This article will provide a fact-based, unemotional analysis of what the next four years might hold for borrowers.

The Future of SAVE and the SAVE Lawsuit

At this point, it’s unlikely that the SAVE lawsuit will be resolved before the new administration is sworn in on January 20, 2025.

While this almost certainly means the end of the SAVE repayment plan, how it all plays out remains an open question with significant implications.

The SAVE rules didn’t just create the SAVE plan; they eliminated the REPAYE plan, limited enrollment in ICR and PAYE, and allowed the double-consolidation loophole for Parent PLUS Loans.

The Biden administration had already mentioned plans to reopen PAYE and ICR enrollments later this year to help borrowers impacted by the litigation. If they move quickly, one possibility is to modify the SAVE regulations to bring back PAYE, ICR, and REPAYE.

There is some concern that all the plans created under the ICR statute—ICR, PAYE, REPAYE, and SAVE—could be eliminated as a result of the litigation or the Trump administration taking office. However, significant barriers exist to eliminating these repayment options.

To understand how each repayment plan is impacted, we need to look at them individually.

IBR: The Safest Repayment Plan

The Income-Based Repayment (IBR) plan is the safest of all federal income-driven repayment plans. This safety applies to both the original IBR and the more generous IBR for New Borrowers.

Two key protections are in place for IBR:

1. Statutory Protection: IBR is guaranteed by statute. To change the IBR rules, Republicans would likely need a majority in the House and a supermajority in the Senate. Because the Democrats hold over 40 seats in the Senate, they can likely filibuster to block changes to the IBR statute. Even in scenarios where Republicans overcome a filibuster, existing borrowers would likely be grandfathered into IBR eligibility.
2. Master Promissory Note (MPN): The MPN is the contract between the federal government and the borrower. If Congress attempted to eliminate IBR for current borrowers, a lawsuit would almost certainly follow to assert borrowers’ contractual rights.

This combination of protections should provide borrowers with confidence in the continued availability of IBR.

Digging Deeper: If the MPN protects current borrowers from plan elimination, how was Biden able to eliminate REPAYE?

The move from REPAYE wasn’t challenged because the new SAVE plan had either the same or better terms for borrowers compared to REPAYE. Since SAVE only improved REPAYE’s terms, borrowers wouldn’t be eligible for relief in a potential lawsuit.

ICR and PAYE New Availability

The Department of Education has announced plans to expand ICR and PAYE access to help borrowers affected by the litigation. The election results should only add urgency to this plan.

ICR and PAYE were both created via the regulatory rulemaking process. In theory, the next administration could roll back these regulations, but borrowers still have some protections.

Most notably, the MPN includes language for both ICR and PAYE. Additionally, if there were a legal challenge to these plans, similar to the challenge to SAVE, that lawsuit would likely fail due to the six-year rule under the Administrative Procedure Act.

REPAYE: Making a Return?

The status of REPAYE differs from ICR and PAYE because SAVE regulations replaced REPAYE.

However, there is a strong likelihood that REPAYE could return in its original form if SAVE is eliminated.

Here again, the MPN and the six-year rule of the Administrative Procedure Act provide a degree of protection for current borrowers. Notably, during Trump’s first term, REPAYE was available, and the administration never challenged or attempted to eliminate it.

Non-SAVE Repayment Plans Are Unlikely to Change

Some borrowers fear that the Trump administration will make things difficult for borrowers. However, a simple cost-benefit analysis suggests this is unlikely.

While student loan forgiveness remains unpopular with Trump’s base, there aren’t widespread calls to redefine discretionary income or adjust the percentages borrowers pay each month. Changes like these would be legally complex, deeply unpopular with those affected, and unlikely to be seen as a win by his base.

It’s also worth noting that congressional offices—both Republican and Democratic—are filled with recent graduates struggling with student loans and living in an expensive city.

The potential “benefit” of making repayment more punitive compared to the potential downside makes such changes unlikely.

Public Service Loan Forgiveness Is Secure: Why PSLF Shouldn’t Change

When Trump was first elected, many borrowers feared it would mean the end of Public Service Loan Forgiveness (PSLF).

During the first two years of his term, Republicans controlled both houses of Congress, yet no plans to eliminate PSLF were seriously considered.

Because PSLF has been statutory law since 2007, eliminating it would require an act of Congress. Even if Democrats are in the minority, the Senate filibuster provides some protection. PSLF language is also included in the MPN.

Additionally, when proposals to eliminate PSLF have been made, they usually include provisions to grandfather in existing borrowers.

The One-Time Payment Account Adjustment

We’ve been waiting years for payment histories to be adjusted.

It was surprising that this adjustment wasn’t completed before the election. However, complications from the SAVE litigation likely consumed many Department of Education resources.

Finishing the one-time adjustment before January should be a priority. Even if it’s not completed by the time the new administration takes over, the new Trump administration may be legally required to complete it. Hopefully, it won’t reach the point where a lawsuit is necessary to force the Department of Education to provide the promised credit.

This will be worth watching closely over the next few months.

Policy Changes vs. Practical Changes

Thus far, we’ve only discussed potential student loan policy changes over the next four years. However, there are also practical considerations that borrowers should understand.

For example, when the first group of borrowers became eligible for PSLF during Trump’s first term, the initial rejection rate was over 99%. PSLF remained a valid program, but the many hoops borrowers had to jump through disqualified most.

The limited waiver on PSLF was intended to address these issues, as was the one-time account adjustment.

While qualifying for PSLF is now less difficult, the lesson remains: even if a program is in place, poor implementation can cause major problems for borrowers.

Borrowers working toward forgiveness in the coming months and years must pay close attention to every detail to avoid eligibility issues.

The Big Tip Moving Forward: Be Proactive

We don’t know what the future holds, but it’s possible that loan servicers could face less accountability and become less helpful for borrowers. Likewise, qualifying for forgiveness may become more challenging.

In this environment, borrowers need to be proactive. If you’re working toward loan forgiveness, make sure you understand all program requirements and document your progress.

It’s a good idea to download copies of all statements and communications with your servicers. If you make a call, take detailed notes—write down what you asked, what you were told, and when it happened. These notes might never be needed, but they could prove very helpful in the future.

Final Thought: Don’t Ignore Student Loan News

If the election didn’t go your way, it may be tempting to unplug and disengage from politics and news. That might even be the healthiest approach for some.

However, given the challenges borrowers might face, it’s important not to miss major developments.

Stay Up to Date: To help borrowers stay informed, I send out a free monthly newsletter with all the key information you need. The news isn’t always good, but the goal is to help make life with loans as manageable as possible.

Click here to sign up. You’ll receive at most one email per month, and I’ll do my best to make sure you don’t overlook any critical developments.

The post What Trump’s Election Means for Student Loans: SAVE, IBR, PSLF, One-Time Adjustment, and More appeared first on The Student Loan Sherpa.

To help borrowers navigate this uncertainty, the Department of Education has placed all borrowers who signed up for SAVE in interest-free forbearance for the duration of the litigation. Unfortunately, the Department has stated that this time will not count toward Income-Driven Repayment (IDR) forgiveness or Public Service Loan Forgiveness (PSLF).

Despite the Department’s clear stance, many borrowers suspect that this period could eventually count toward loan forgiveness. They might be onto something.

The Case for Counting the Time Toward Forgiveness

In this situation, borrowers have done everything right. They signed up for a repayment plan offered by the Department of Education, followed all the necessary steps to make progress toward loan forgiveness, and now they’re being told that this time won’t count.

There is certainly precedent for awarding borrowers credit toward forgiveness after the fact. For example, the Limited Waiver on PSLF was created to help borrowers who were given inaccurate information by loan servicers and relied on it. Similarly, the one-time IDR account adjustment was necessary because servicers often steered borrowers toward deferments or forbearances when they would have been better off enrolling in an IDR plan.

In this case, borrowers followed the clear instructions of the Department of Education, and once again, they are not receiving the outcome they were promised.

Awarding Forgiveness Progress Retroactively Makes Sense

It’s also possible that the Department of Education has a strategic reason for its current stance. They may eventually plan to grant borrowers credit toward IDR and PSLF forgiveness once the litigation concludes.

Why wait until the end of the litigation?

If the Department had initially announced that the time would count toward forgiveness, the judges in the SAVE cases might have blocked this move, viewing it as an unlawful workaround to their preliminary injunction.

Moreover, the states could have raised this issue in court and bundled it with the broader SAVE lawsuit. By waiting, the Department reduces the likelihood of such a challenge.

If the Department decides to award forgiveness progress after the fact, opponents would need to file a brand new lawsuit to challenge it. Unlike SAVE, which is a new repayment plan with fresh forgiveness provisions, retroactively granting credit for a few months is relatively minor. A state attorney general might decide that challenging such a small program isn’t worth the effort.

Another Path Toward Loan Forgiveness

PSLF borrowers can also use the buyback program. Under this initiative, a borrower who has documented 120 months of PSLF-eligible work can “buy back” certain periods of deferment and forbearance. The Department of Education has encouraged PSLF borrowers affected by the SAVE litigation to use this program.

A similar program for IDR borrowers, allowing them to buy back certain forbearances and deferments, would be logical and fair. Although such a program does not currently exist, creating one would allow borrowers to make the progress toward forgiveness they’ve earned.

The Potential Impact of the 2024 Election

The outcome of the 2024 election could significantly influence the fate of the SAVE litigation and whether borrowers receive retroactive credit toward forgiveness. If the litigation extends into 2025 and the Republican Party takes control of the White House, the likelihood of retroactive credit being granted diminishes.

A new administration may not prioritize extending forgiveness programs or offering relief that benefits borrowers.

Borrowers should be aware of the political landscape and consider the potential impact of the 2024 election on their repayment strategy. Preparing for less favorable outcomes, such as the possibility that time during the SAVE pause will not count toward forgiveness, might be prudent in the event of a change in administration.

Borrower Planning and Strategy

Even though it’s possible that time spent in the SAVE litigation pause will eventually count toward forgiveness, borrowers shouldn’t assume this will happen. The election, the outcome of the lawsuit, and numerous other factors are unknown and could impact how things proceed.

Borrowers need to have a backup plan in place.

PSLF borrowers should consider setting aside money for a potential buyback in the future.

All borrowers should plan as if this time won’t count and adjust their strategies accordingly. Those who are close to IDR forgiveness, especially before it becomes taxable again in 2026, should consider switching to another IDR plan.

Additionally, borrowers should closely monitor the lawsuit and any actions taken by the Department of Education. Being prepared to respond quickly to future changes could lead to earlier forgiveness.

Stay Up to Date: Student loan rules are constantly changing, and temporary programs create deadlines that can’t be missed. To help manage this issue, I’ve created a monthly newsletter to keep borrowers up to date on the latest changes and upcoming deadlines.

Click here to sign up. You’ll receive at most one email per month, and I’ll do my best to make sure you don’t overlook any critical developments.

The post Could the SAVE Lawsuit Pause Eventually Count Toward IDR Forgiveness and PSLF? appeared first on The Student Loan Sherpa.

I usually have a strong dislike for talking about myself. This site is about providing you, the reader, with the best possible information. However, in this case, I think it is critical to review my work for the past year as it contained many predictions. You deserve to have a record of my hits and misses.

Let’s get to it.

Student Loan Forgiveness from Elizabeth Warren

Like most student loan borrowers, I was thrilled by the possibility that Elizabeth Warren might forgive some or all of my student loans.

My predictions were not optimistic.

In my analysis, I discussed the many hurdles that stood in the way of forgiveness and how delaying repayment could be an expensive mistake due to the accumulation of interest.

Verdict: Sound Prediction. I called forgiveness as a result of the 2020 election a long shot, and that prediction looks solid in hindsight.

The one area that could have been better was my analysis of the cost of waiting. At the time of the article, Covid-19 was unknown, and we were still many months away from the interest freeze. However, the 0% interest rate has reduced the cost of waiting and hoping for federal loan forgiveness.

Planning for a Bernie Sanders Presidency

At one point, Bernie Sanders was the favorite to win the Democratic nomination for President.

At the time, I thought it was important to discuss his plan to forgive all student loan debt.

I said, “the odds of student debt elimination are increasing, but it is still a long shot.” I also provided a list of steps for borrowers to follow if they thought Sanders would win and deliver on his loan forgiveness promise. The steps were to: sign federal loans up for the IDR plan with the lowest monthly payment, refinance high-interest private loans, and have a backup plan.

Verdict: Shaky Analysis. I ended the article by advising borrowers to “plan with your head, not your heart.” I should have done the same. While it was accurate analysis to call forgiveness a long shot, it was premature to discuss taking steps plan for forgiveness in a Sanders Presidency. The article published on February 25th, and four days later, Biden’s huge win in the South Carolina primary would shift the momentum of the election.

Additional Note: I removed the original article from the site. From a transparency standpoint, the best practice would be to leave the old article posted for review. However, I try to remove items that are no longer relevant so that borrowers do not make decisions based upon the content that is not up to date. Those interested can read the archived version of the original article on archive.org.

Federal Student Loan Interest Freeze Extensions

When Congress passed the first Covid-19 stimulus bill in March of 2020, they suspended federal student loan payments and interest until that October.

Early in that summer, I predicted that the interest freeze would extend beyond the original expiration date. I made this projection because the relief received bipartisan support, the President could extend it via executive order, and Covid-19 showed no signs of slowing.

I also noted that no politician would stand in the way of the interest freeze one month before a big election.

Verdict: Bullseye. Since that first article, the 0% interest and payment forbearance have been extended twice. It is now scheduled to end on January 31st, 2021. It also appears that it will be extended yet again during the Biden administration.

Tax Relief for Employer Contributions to Student Loan Payments

Many companies now support treating employer student loan assistance like 401(k) contributions.

I said that I thought, “it is highly likely that a tax break for student loan contributions becomes a reality. This could be the next significant change coming to student loans.”

Verdict: Mixed Results. The comprehensive program I expected has not yet become a reality. However, as part of the CARES Act, until the end of 2020, employers can contribute up to $5,250 toward an employee’s student loan balance, and the payment will be free from payroll and income tax.

A Biden Executive Order on Student Loan Cancellation

After Biden’s win in the 2020 election, many Democrats called on him to sign an executive order canceling up to $50,000 in federal student loans.

In my legal analysis, I said that Biden might have the authority to cancel the debt in this manner, but it wasn’t a sure thing. I argued that for practical and political reasons, Biden was unlikely to forgive the debt. Specifically, the potential for chaos and Biden’s desire to be unifier were reasons he wouldn’t push executive power in this manner.

I doubled down on this analysis during an interview with Forbes.

Verdict: Bullseye. Biden recently stated that he is unlikely to cancel student debt with an executive order. Of all my predictions, this was the one that worried me the most because it was not a commonly held point of view at the time. However, it was a topic of significant interest and could impact borrower planning.

The post Student Loan Sherpa 2020 Accountability Report appeared first on The Student Loan Sherpa.