Official communication from the ED on the SAVE transition timeline

There's been a lot of articles posted etc – but here's the official word from the ED https://www.ed.gov/about/news/press-release/us-department-of-education-announces-next-steps-borrowers-enrolled-unlawful-save-plan

In summary, you'll start getting notices from your servicers as soon as the next few days telling you that this is happening. Come July 1 you'll get a notice giving you 90 days to switch. If you don't, they put you on the standard plan. The ten year standard if you haven't' consolidated – the consolidated standard plan if you have – which is longer than ten years.

I want to address a couple of themes i've been seeing in these threads. My comments here are probably going to get me downvoted to oblivion. That's ok – I'm not here for the karma – I'm here to make sure folks understand their loans and make the best decisions for their long term financial well being. Because that's my goal – sometimes I have to say thing folks don't want to hear.

For those saying they aren't going to switch until forced – you might be harming yourself here. You're certainly not punishing anyone that you're trying to make a point to. Here's who, IMO, should be switching ASAP and here's whose probably ok to drag their feet a bit:

Who should switch ASAP:

-If you're pursuing forgiveness under any of the IDR plans – the 20/25 year forgiveness you should switch now. You're just losing months and time towards forgiveness by waiting. And hypothetically, your income is going to go up over time, and therefore so will your payments. On a related note – if your 2024 tax return has a lower AGI than your 2025 will, and you haven't filed taxes yet – you definitely want to do it now.

-those pursuing PSLF. Yes – you can use buy back for SAVE months. But remember – buy backs are taking over a year and more importantly, buy backs are a lump sum payment due right away. So the longer you are on this forbearance – the more months you will have to pay in a lump sum when the time comes. And that might be difficult.

Who can probably hang out for a while:

-Those borrowers who due to other debt that will be paid off soon and want to funnel the student loan payment money to get rid of that other debt.

-those who are aggressively paying off their loans. This is an opportunity to have all of your money go to targeted loans – such as the ones with the highest interest rates – rather than having to satisfy the minimum due on each loan which you will have to do once in active repayment.

The timing of all of this:
-it actually makes sense to me. They appear to be doing almost a soft launch – warning people now that it's coming. But waiting until the new RAP plan is available in July for those that will want to use that plan to actually start the timer. This way folks won't need to switch twice if the RAP turns out to be a better plan for them.

Now for those saying they refuse to switch – listen – I get it. Your angry. I don't blame you – i am too. Your feelings are very valid and i'm not telling you not to feel them. But here's the hard truth of the matter. SAVE was gone regardless – the courts had made it pretty clear when the case started under the prior administration that they were leaning towards the plaintiffs and were going to rule against the plan. It was going to happen regardless of who won the last election. And failing to switch out of principal is not going to hurt them – it's going to hurt you if you end up with a standard payment amount you can't afford. I'm not saying not to resist – but resist productively by voting. And writing your members of Congress to paint a picture of how your new payment amount is affecting you, your family and the broader economy.

For those saying the ED can't change the terms – they didn't. The court ruled the plan was illegal. The ED would be breaking the law if they continued it.

Payment plans have never been challenged before. And there was no reason for it to occur to anyone that this one might be. But yet a bunch of republican AG's did and here we are. In the meantime, people made the best decisions they could with the information they had at the time.

What plan should i pick?

If you are pursuing PSLF or income driven plan forgiveness you need to be on an income driven plan. Scenarios for likely lowest plan:

-No loans ever prior to July 1, 2014 – new IBR

-No loans ever prior to October 1, 2007 but does have loans prior to july 2014 – paye – but note you'll have to get off that come 2028

-loans prior to October 2007 – old IBR

-balance low compared to your income – check out ICR – that could be the lowest for you in that scenario

-RAP – for some rap will be lower. RAP tends to be similar to old IBR for many incomes. But if you have dependents especially, it could be lower. TISLA will have a calculator including the rap in the next week or two. I'll post it when it's available.