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Key takeaways
- The Department of Education is pausing student loan payments for nearly a million SAVE borrowers in July.
- The forbearance period gives the DOE time to recalculate according to the new formula that will reduce payments from 10% of your income to 5%.
- You have until June 30 to consolidate loans to potentially make them eligible for SAVE.
Almost a million borrowers on the Saving on a Valuable Education repayment plan, or SAVE, have been notified that they won’t need to make a student loan payment next month, a DOE spokesperson told CNET Money in an email on Friday.
The Department of Education will place SAVE borrowers in a “processing forbearance” as it recalculates loan payments as part of the next phase of the plan’s rollout.
The borrowers should see a welcome change when they come out of this forbearance, too, as payments on undergraduate loans should be cut in half with the new repayment formula.
The end of the month also marks the deadline for consolidating federal student loans, which could make them eligible for SAVE, so there’s even more reason to start tackling your student loan debt.
Here’s what you can expect if you’re a SAVE borrower and how to get enrolled if you aren’t.
What is SAVE and how do I enroll?
SAVE is a newer income-driven repayment plan designed by the Biden administration to make student loan payments more affordable and help borrowers wipe out student loan debt quicker. It was launched last summer after student loan payments resumed, following a payment pause that started during the pandemic and lasted more than three years.
If you have federal student loans and aren’t currently enrolled in an IDR plan, you can sign up on the Federal Student Aid website. There are four IDR plans to choose from, including the SAVE plan. IDR plans base your student loan monthly payment on your income and family size.
If your loans aren’t currently eligible for an IDR, you have until June 30 to consolidate your federal student loans and potentially qualify for student loan forgiveness. It takes approximately 30 minutes to complete the application for consolidating your loans, according to the FSA website.
What’s changing with SAVE?
Beginning on July 1, a new repayment calculation will go into effect for SAVE. The plan’s income evaluation is being reduced from 10% to 5%, so student loan payments for undergraduate borrowers will be cut in half.
If you’re a graduate student, your required monthly payments should also decrease, but it will depend on your ratio of undergraduate to graduate loans.
So I don’t have to pay my student loans in July?
If you’re a SAVE borrower and received a communication from the US Department of Education alerting you to the change and the forbearance, then no, you won’t owe a payment for at least July.
“While borrowers are in this specific forbearance, no payment is required, their interest rate will be set to 0%, and they will receive credit toward IDR forgiveness and Public Service Loan Forgiveness,” the DOE spokesperson said. “As a reminder, 4.6 million borrowers who have zero dollar payments under the SAVE plan will not need to go into forbearance.”
