Update on SAVE Litigation

1. The preliminary injunction against the SAVE plan and related regulations issued by the 8^th Circuit Court of Appeals in July remains in place. The Department of Education (ED) is not allowed to enroll new borrowers in SAVE or forgive debt through the SAVE plan.
2. Borrowers enrolled in SAVE have been placed in a non-interest bearing, forbearance that is not eligible for forgiveness until the legal issues are resolved.
3. ED is accepting applications to enroll in the SAVE plan and IBR. They are also accepting applications to enroll in ICR for Direct Consolidation Loans that contain Parent Plus Loans.
4. Visit FSA’s SAVE Court Action Page for updates.

Online Consolidation and IDR Applications:

Borrowers can once again file consolidation and IDR applications online. As of this writing, the IRS Data Retrieval Tool is not working but there are plans to bring that feature back. Make sure you have a copy of your tax return or other proof of income stored in their computer as they will be required to upload it towards the end of the IDR application.

Consolidations are being processed. ED is still not processing any IDR applications but should start processing certain applications in the coming weeks (see below). SAVE applications will not be processed until legal issues are resolved. Expect significant delays for both!

IDR Update:

Federal Student Aid (FSA) issued an update on IDR on October 10, 2024:

• They plan to start processing IDR applications for the IBR plan, PAYE (for those who applied before July 1, 2024) and ICR (for non-Parent Plus borrowers who applied before July 1, 2024, and for all borrowers with Direct Consolidation Loans containing Parent Plus loans) in the coming weeks.
• The update includes more detail about how forbearances will be applied for pending applications.
• To read the entire announcement, click here.

If you wish to switch from the SAVE forbearance into IBR, please keep in mind that there is an income test on IBR. If the payment calculated under the IBR formula (10% or 15% of discretionary income) exceeds the payment in the Standard 10-Year fixed plan, you will not be eligible for the plan and the application will be rejected. Please seek guidance before taking action.

Recertification Dates

An increasing number of people are seeing notifications to recertify their IDR plans on their servicer accounts. Though we had anticipated that ED would push these deadlines back, we have not had official confirmation. We will update you as soon as we get more information. In the meantime:

1. You should recertify PAYE plans or non-Parent Plus loans in ICR, as you may not be able to reenter these plans if they miss the deadline.
2. You can also recertify in the SAVE forbearance. Be sure to indicate that you do not want to go into repayment before the forbearance ends.
3. Filing online will provide a record of the application in FSA in the event there is a dispute.

Note: Most borrowers are not getting letters or emails about recertification deadlines. It simply slows up as an “Alert” in their servicer account. If you think you’re approaching the recertification deadline, log into you servicer account. You might see it on the home page (for an example, click here) or click on “Loan Details” to double check. 

Joint Consolidation Loan (JCL) Separation Applications are Now Available!

The JCL Separation and Direct Consolidation Loan (DCL) Application is now available. Both parties must file the application if they want to receive a DCL under their name only. (Note: If only one-party files the application, the other party will be responsible for paying the remaining balance in the JCL). Applications are only available on paper and there is no indication of how long it may take to process them after they are filed. Servicers should place you in forbearance pending the processing of the application. For more information and to down load the application, visit studentaid.gov.

Collections on Defaulted Federal Student Loans Pushed Back to 2025

The Biden Administration announced they will not begin collecting on defaulted federal student loans until sometime in 2025. There are approximately 6 million borrowers still in default. For a relevant article, click here.

Biden Debt Relief Plan B Litigation

The Biden Administration announced plans to implement “Debt Relief Plan B” several weeks ago. This plan would provide partial or full debt relief to up to 25 million borrowers based on the age of the loans, the amount of unpaid interest accrued and other factors. The Attorney General from Missouri (Andrew Bailey) first attempted to stop the plan in a Georgia court (which rejected the petition) and subsequently filed in Missouri. The court in Missouri has now issued a preliminary injunction blocking ED from implementing any part of this plan for the foreseeable future. To read the judge’s decision, click here.