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 offers additional ways to forgive borrowers’ debt based on different qualifying 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 

Many borrowers may consider the SAVE Plan to lower their monthly payments. However, the program also allows some borrowers to qualify for forgiveness after ten years through Income-Driven Repayment Forgiveness (IDRF). This timeline matches Public Service Loan Forgiveness (PSLF) but does not require borrowers to work for a specific employer. Borrowers generally qualify for IDRF after 20 or more years of repayment. Under the SAVE Plan, the forgiveness timeline depends on how much the borrower originally borrowed. That amount determines the borrower’s repayment term, which they must complete to qualify for cancellation. 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 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.

Eligibility for Repayment Refunds

The SAVE Plan also sets a timeframe for refunding loan payments after forgiveness. Borrowers who qualify may receive refunds for payments made during or after January 2024, when the cancellation policy took effect.

If you reach forgiveness but continue making payments afterward, the Department of Education will refund those payments. However, the payments must have been made in or after January 2024.

If you reached forgiveness before January 2024, you will only receive a refund for payments made during or after January 2024. Payments made before 2024 are not eligible for refunds, even if you qualified for forgiveness earlier.

Eligible Loans Calculated Towards Forgiveness

Your loans’ consolidation status determines eligibility and the actions applied to them.

If your loans are not consolidated, eligibility is based on the total of all outstanding loans. If your loans are consolidated, the Department considers the original balances of the underlying loans.

Borrowers with loans in in-school status or in full- or half-time deferment cannot receive forgiveness until those statuses end. Likewise, individuals whose loans were paid in full, forgiven, or discharged before the forgiveness program began are not 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. Before consolidating a loan, speak with a professional. Forgiveness programs, such as PSLF, might better suit your situation. Consolidating your loan can make it harder to achieve forgiveness under these 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.