Accelerated IDRF Forgiveness with the SAVE Plan

Since the Supreme Court struck down the Biden administration’s student loan debt relief plan in July 2023, the administration has put together a new federal student loan plan. Within this plan, the administration has provided additional ways to forgive borrower’s debt based on different qualification factors.

“…the Biden-Harris Administration continues to cancel student debt for millions of borrowers and is leaving no stone unturned in the fight to give more borrowers breathing room on their student loans,” the White House said in a public statement.

The SAVE (Saving on a Valuable Education) Plan, an IDR plan introduced in August 2023, like other IDRs, allows qualifying borrowers to calculate their federal student loan payments based on their income and family size rather than their loan balance. This will allow many borrowers to cut their payments to $0, preventing balances from growing due to unpaid interest.

However, while the Biden Administration’s original plan for loan forgiveness was struck down, they have unveiled a new process within the SAVE Plan that will make it easier for borrowers to reach forgiveness qualifications.

Time Frame Calculation for Loan Forgiveness 

While many may be tempted to apply for the SAVE Plan to lower monthly payments, the program also allows specific borrowers to be eligible for forgiveness after only ten years through the Income-Driven Repayment Forgiveness (IDRF) program, equivalent to the amount of time necessary for Public Service Loan Forgiveness (PSLF) without the restriction of working for a specific employer.

While borrowers become eligible for IDRF after 20+ years of repayment, the timeframe for cancellation with SAVE depends on how much you borrowed, which depends on the individual’s repayment term, which borrowers must reach to qualify.

As the Biden Administration defines it, a repayment term is “the amount of time you need to have spent in repayment before you can qualify for this forgiveness, and it will increase based on how much money you originally borrowed.”

However, the current loan balance you owe doesn’t impact the length of the repayment term.

The shortest term before someone can qualify for forgiveness is ten years (120 monthly payments) with a $12,000 or less loan amount. However, the repayment term increases by one year for every $1,000 borrowed above the $12,000 base.

This increase will continue until you hit your repayment term cap, which is the maximum amount of time your repayment term can be. The repayment term cap is different depending on the type of loan borrowed. For example, it will depend on whether you only have undergraduate loans or a mixture of graduate and undergraduate loans.

The repayment term cap is set to 20 years (240 months) for those with only undergraduate loans. If you have a mixture of graduate and undergraduate loans, the repayment term cap is 

set to 25 years (300 months).

Eligibility for Repayment Refunds

The SAVE Plan’s implementation of loan forgiveness also includes a timeframe for receiving refunds on loan payments, allowing borrowers who qualify for forgiveness to be refunded the amount they paid during or after January 2024, when the cancellation was implemented.

You will be refunded if you reach forgiveness, but continue making payments towards your loan amount afterward. However, these payments must have been made during or after January 2024.

If forgiveness is reached before January 2024, you will only be refunded if you made payments during or after January 2024. This means previous payments made before the start of 2024 will not be refunded if forgiveness was reached priorly.

Eligible Loans Calculated Towards Forgiveness

Based on how your loans are consolidated will determine the eligibility and actions taken on them.

Loans that aren’t consolidated will be considered based on the total of all your loans with an outstanding balance. On the other hand, if your loans are consolidated, the initial balance of all the underlying loans will be considered.

It’s important to note that borrowers who have loans in an in-school status or are in a full- or half-time deferment will not be eligible for forgiveness until their loans are no longer in any of those statuses. Additionally, individuals whose loans have been paid in full, forgiven, or discharged before forgiveness was implemented won’t be eligible.

If you have loans that aren’t eligible under the SAVE Plan but would be if additional steps are taken, your balance(s) will still be considered. This includes all outstanding Federal Family Education Loan (FFEL) Program loans. 

However, outstanding parent PLUS loans will not be considered, but the initial balances of parent PLUS loans included in consolidation loans will be.

The Biden Administration encourages individuals with ineligible loans to consolidate them into a Direct Consolidation Loan. This will make them eligible for the SAVE Plan. However, before consolidating a loan, it would be wise to speak to a professional about whether a different forgiveness program, such as PSLF, would be better for your situation. Consolidating your loan can make it harder to reach forgiveness through other programs.

If your loans are paid in full, forgiven, or discharged after implementation, your repayment term will not decrease. However, if a new loan is added, your repayment term will be altered to match the new overall amount.

Additionally, if all of your loans are paid in full, forgiven, or discharged, then the time until forgiveness will be reset and reevaluated based on any new loans taken out in the future.