Latest news with #PublicServiceLoanForgiveness
CNET
3 days ago
- Business
- CNET
SAVE Student Loan Borrowers Likely Won't Make Payments This Year, but Should Do This One Thing Now
Pla2na/Getty Images/CNET It's been a trying year for anyone enrolled in the Saving on a Valuable Education student loan repayment plan. There's been a barrage of student loan updates in 2025: proposed changes to Public Service Loan Forgiveness eligibility, an effort to restart collections on defaulted student loan accounts and a new Republican-fronted bill seeking to change existing income-driven repayment plan options. But the biggest news for most borrowers has been the court ruling blocking the SAVE repayment plan for 8 million borrowers. However, since that news, very little has been shared about what's next for SAVE borrowers. Currently, your loan payments remain paused in a general forbearance and your balance isn't collecting interest. That also means you're not making progress toward a loan forgiveness program like PSLF during the payment pause. While you can choose to switch to an alternative repayment plan, most experts suggest sticking with SAVE, and doing this one thing ahead of payments resuming. Here's what you need to know about when payments will restart for SAVE borrowers, how to choose a different income-driven repayment plan and what experts say you should do during this downtime. Read more: How Much Could Student Loan Payments Skyrocket for SAVE Borrowers? We Did the Math When will payments restart for student loan borrowers in SAVE? It's not clear when payments will start again for borrowers on the SAVE plan but it's looking like the end of this year would be the earliest timeframe. The Department of Education's website says SAVE plan borrowers will stay in a general forbearance until at least the fall. It also directed loan servicers to adjust the income recertification deadline to no earlier than Feb. 1, 2026. Robert Farrington, student loan expert and founder of The College Investor, expects the general forbearance to last even longer. "Borrowers will likely see the SAVE forbearance end in mid-to-late 2026," says Farrington. "Many borrowers are already reporting the end date of their forbearance moving to September 2026." Should PSLF borrowers in SAVE switch to another repayment plan? If you're a teacher, nurse or other public servant pursuing PSLF, you may be worried that the payment pause is not counting toward your 120-payment requirement. That leaves you with three options. First, you could switch from SAVE to another income-driven repayment plan (ICR, IBR or PAYE). That way, your payments will count toward PSLF's 120-payment requirement. Alternatively, if you would have hit 120 months of on-time payments if not for the pause, you can apply for the PSLF Buyback program to get credit for your time in forbearance. "This program [allows borrowers] to make a lump-sum payment for any months spent in administrative forbearance under SAVE, ensuring those months count towards PSLF," explains Megan Walter, NASFAA senior policy analyst. The downside of these first two options is that borrowers have been reporting processing delays. So don't expect a fast response. Last, if you've recently enrolled in PSLF or are not close to receiving forgiveness, you might prefer to wait until you're moved into a new payment plan. Yes, your months in forbearance won't count toward your 120-payment goal, but this could give you time to start saving for a potentially higher student loan payment. Whether you decide to change plans now or wait, make sure your decisions align with your financial goals. With SAVE no longer an option, it's important to understand all your avenues for paying back your student loans. What should SAVE borrowers do now? That doesn't mean you should sit back and do nothing, though. Take this time to prepare for the likelihood that your payments will increase in the future. You can use the Federal Student Aid's Loan Simulator tool to help calculate how much your monthly payment will be under different payment plans. While your payments are paused, you won't have to worry about your account being moved to collections. Although borrowers with defaulted loans are once again subject to collections, including wage garnishment, those enrolled in the SAVE plan don't have to worry about those consequences for now. Use this time to improve your finances, suggested Farrington. "This is a great time to pay off other debts (including private loans), build an emergency fund, contribute to an IRA and more." If you have the wiggle room in your budget, start paying yourself each month the same amount you'd pay your student loan servicer. Put this money into a high-yield savings account to earn a little extra interest on your savings.
CNBC
5 days ago
- Business
- CNBC
Court order challenges Trump's plan to move federal student loans to Small Business Administration
A federal judge's recent order may foil President Donald Trump's plans to transfer the country's more than $1.6 trillion student loan portfolio from the U.S. Department of Education to the Small Business Administration. U.S. District Judge Myong J. Joun wrote in his May 22 preliminary injunction that the Trump administration was required to reinstate over 1,300 Education Dept. employees and was blocked from carrying out Trump's directive "to transfer management of federal student loans and special education functions out of the Department." In other words, federal student loans will stay with the Department of Education, for now. Trump had announced on March 21 a plan to transfer over 40 million student loan accounts to the SBA. "They're all set for it," the president said of the SBA at the time. "They're waiting for it." More from Personal Finance:House Republican bill calls for bigger child tax creditStudent loan borrowers in default may see 15% of Social Security benefit garnishedHow college savers can manage 529 plans in a turbulent market Madi Biedermann, deputy assistant secretary for communications at the Education Department, slammed the judge's decision. "Once again, a far-left Judge has dramatically overstepped his authority, based on a complaint from biased plaintiffs, and issued an injunction against the obviously lawful efforts to make the Department of Education more efficient and functional for the American people," Biedermann wrote in a statement to CNBC on Thursday. The Trump administration requested the order be stayed pending an appeal of the decision. The development that student loans will remain in the Education Dept. for now is good news for borrowers, said Sarah Sattelmeyer, a project director at New America and senior advisor under the Biden administration. "Instead of increasing efficiency, the movement of the Department's core functions would have increased confusion and decreased the effectiveness of programs that students depend on to access education," Sattelmeyer said. Consumer advocates are worried that a mass transfer of accounts between federal agencies could trigger errors, or compromise federal student loan borrowers' privacy. Those problems have occurred during much smaller transfers between loan servicers. Advocates also raise concerns about how a change in agency might affect borrower protections and programs such as Public Service Loan Forgiveness. The Small Business Administration has no experience relevant to the management of federal student loans, said higher education expert Mark Kantrowitz. It would ultimately require an act of Congress to move the loan portfolio to the SBA, Kantrowitz said. The Higher Education Act of 1965 spells out that that the Education Department's Federal Student Aid office is responsible for the debt, he said. Adding to advocates' criticism over Trump's proposed transfer was his administration's announcement in March that the SBA's workforce would be reduced by 43% — leaving fewer people to manage this new responsibility.
Yahoo
21-05-2025
- Politics
- Yahoo
Indiana Senator introduces act aimed at 'terrorists'
WASHINGTON, D.C. (WTWO/WAWV)— Senator Jim Banks (R-Ind.) introduced the No Loan Forgiveness for Terrorists Act on Wednesday aimed at students working with organizations engaging in what they claim are 'illegal activities'. The bill is said to prevent students from receiving credit for Public Service Loan Forgiveness for working at said organizations. The act is in place to codify an executive order from President Trump to end taxpayer-funded student loan forgiveness for students who participate in quote: 'illegal, anti-American behavior'. 'Taxpayers shouldn't be forced to pay student loans for radicals who aid terrorists, mutilate children, or promote illegal immigration,' said Senator Banks. 'This bill codifies President Trump's order to stop subsidizing anti-American extremism.' According to the news release from the senator's office, the key provisions of the act will prevent students from receiving credit if their organization engages in: Aiding or abetting violations of federal immigration laws Materially supporting terrorism Materially supporting child abuse, including the chemical or surgical castration or mutilation of children or the trafficking of children to transgender sanctuary States for purposes of emancipation from their lawful parents, in violation of applicable law Aiding and abetting illegal discrimination Violating State tort laws, including against trespassing and disorderly conduct For the full text of the bill, you can click here. Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Forbes
21-05-2025
- Business
- Forbes
Major Update For 9 Million Borrowers About Huge Student Loan Forgiveness Threat From PSLF And IDR Delays
A growing backlog in PSLF and IDR processing is delaying student loan forgiveness and putting public ... More servants' eligibility at risk As millions of public service workers anxiously await promised student loan forgiveness, a new threat has emerged: due to massive processing delays in federal forgiveness programs, many borrowers may lose eligibility even after making 120 qualifying payments. When forgiveness is granted, the Public Service Loan Forgiveness program requires borrowers to be still employed by a qualifying public service employer. Now, lengthy delays in processing Income-Driven Repayment and PSLF buyback applications mean that borrowers who have already completed a decade of service or are close to it could be denied forgiveness, not because their payments won't count, but because they might retire, change jobs, or get laid off before the government finalizes their discharge. This is another headwind for the over 9 million public service workers with federal student loans eligible to pursue PSLF, the 1.3 million of those who are actively pursuing it, and the 50,000 borrowers currently waiting for their PSLF buyback applications to be processed. New data reveal a historic backlog in student loan forgiveness processing. In a recent court-mandated status report, the Education Department admitted that as of April 30, it had approved only around 79,000 IDR plan applications, while nearly 2 million applications remain unprocessed. This 96% backlog has effectively paralyzed the IDR enrollment system and, by extension, PSLF forgiveness for many borrowers. Even if all 120 qualifying payments have been made, forgiveness cannot occur until these applications are reviewed and approved. The logjam has created a severe student loan forgiveness delay for anyone relying on IDR or PSLF programs to cancel their debt after years of payments. PSLF borrowers are acutely impacted. Under newly expanded rules, PSLF applicants can retroactively buy back specific past periods, for example, months spent in deferment or forbearance, to count toward their 120-payment requirement. But progress has been glacial: 49,318 PSLF buyback requests were pending as of the end of April, and fewer than 1,500 were processed that month. Less than 3% of pending PSLF buyback applications have been resolved, highlighting the severity of the backlog. According to a court filing, these pending cases likely represent about 49,000 public service workers who have met all PSLF requirements and should have their loans canceled under federal law yet remain in limbo. In other words, tens of thousands of teachers, nurses, government employees, and non-profit workers are technically eligible for immediate debt forgiveness, but bureaucratic delays are postponing their relief indefinitely. One major culprit behind the delays is the legal battle over President Biden's new IDR plan, the SAVE plan. Last year, a group of state attorneys general sued to block SAVE, and in February 2025, the Eighth Circuit Court of Appeals issued an injunction halting the plan's implementation. In response, the Education Department abruptly shut down all online IDR applications and halted processing pending requests for weeks, plunging millions of borrowers into uncertainty. During this freeze, no borrower could change into a new IDR plan, even if they needed one to keep their payments affordable or to qualify for PSLF. Access was partially restored by late March after a lawsuit, but officials did not resume processing IDR enrollments until mid-May. The result is a mountain of stalled IDR plan changes that must be cleared. Compounding the issue, roughly 8 million borrowers enrolled in the SAVE plan were placed into a special litigation forbearance status due to the injunction. These borrowers have had their repayment plans paused against their will. Months spent in this limbo typically do not count toward PSLF or IDR forgiveness since no payments are being made. Borrowers had received mixed messages about whether this forbearance time would be credited. The Education Department has now confirmed that time spent in the SAVE plan litigation forbearance can be reclaimed through the PSLF buyback program. However, that is only a partial consolation: to buy back those months, borrowers must make extra lump-sum payments for each month of forbearance and wait for those payments to be processed and credited. Given the significant backlog, it could be many months or even years before affected borrowers see their PSLF counts updated. The PSLF employment requirement is now the core threat to these borrowers' long-awaited forgiveness. Under program rules, a borrower must work full-time for a qualifying public service employer while making the 120 payments, when they apply for forgiveness, and when the forgiveness is officially granted. There is no partial forgiveness in PSLF; it's all or nothing. Usually, this requirement isn't a problem: borrowers apply once they hit 120 payments and receive forgiveness within a few months, all while still on the job. However, the wait could be much longer, with processing grinding to a halt. The risk is that if a borrower retires, switches to a private-sector job, or is laid off before the government finalizes their forgiveness, they could be disqualified from PSLF at the finish line. This delay could impact retirement plans for many public-sector and non-profit workers. It could also stifle mobility as workers facing burnout or better opportunities may feel trapped in their jobs until their debt is cleared. These situations are within the worker's control; however, there's also the unpredictable risk of job loss. Recent budget strains and organizational changes have led to layoffs at federal and state agencies. The Education Department underwent mass layoffs and staffing cuts in early 2025, contributing to the processing slowdown. A public service borrower can do everything right. However, it will still be derailed by an involuntary layoff, a real possibility in today's economic climate, and the stated intention of President Trump's administration to cull the federal workforce. "At least 121,000 federal workers have been laid off or targeted for layoffs in the three months since President Donald Trump's second term began," according to a CNN analysis. "It's a vast number that doesn't count those placed on administrative leave or who took voluntary buyouts," the report noted. Unfortunately, PSLF does not provide a safety net for such cases. You're ineligible if a qualified employer does not employ you at the moment of forgiveness. For now, PSLF seekers should remain in qualifying employment until their student loan forgiveness discharge is completely processed, no matter how long it takes. That may mean postponing retirement or declining a private-sector opportunity for longer. If you have reached 120 payments and submitted your PSLF application, continue working for your public service employer until you see a $0 loan balance. Some services may allow a brief payment forbearance during the wait (so you don't have to make additional payments after 120), but be cautious: any break in qualifying employment before forgiveness is finalized could nullify your approval. If you keep paying past 120 out of caution, the government has said it will refund any overpayments once your loan is forgiven. In short, don't leave your public service job until the finish line is officially crossed.
Newsweek
19-05-2025
- Business
- Newsweek
Student Loan Borrowers in These Jobs Have Most Long-Term Financial Impact
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. A new national survey reveals that public-sector employees are significantly more likely to hold student loan debt than their private-sector counterparts. However, they often face fewer long-term financial repercussions, thanks in part to structured forgiveness programs and targeted employer resources. Meanwhile, private sector workers continue to bear residual financial burdens despite repaying their loans. Researchers have labeled this phenomenon the "debt-overhang" effect. The report, released by the MissionSquare Research Institute on Monday, surveyed over 2,000 U.S. workers across both sectors and found that 43 percent of public employees carry student loan debt, compared to 36 percent in the private sector. Yet the effects of that debt diverge sharply across employment types, with private sector workers reporting more enduring financial stress, even post-repayment. Why It Matters The study highlights a troubling contradiction in the financial health of America's workforce: private sector workers who pay off their student loans may not achieve the same long-term financial security as public workers still in debt. This is due primarily to access disparities in employer-provided support and federal loan forgiveness programs. "Balancing competing financial priorities while managing student debt can significantly hinder wealth accumulation," said Dr. Zhikun Liu, vice president and head of the MissionSquare Research Institute, in a statement. Liu noted that even those who have paid off their loans may delay retirement savings or large purchases, extending financial insecurity into later life. Graduates of Columbia University's lauded School of International and Public Affairs (SIPA) celebrate at SIPA's commencement exercises at St. John the Divine cathedral May 17, 2004 in New York City. Graduates of Columbia University's lauded School of International and Public Affairs (SIPA) celebrate at SIPA's commencement exercises at St. John the Divine cathedral May 17, 2004 in New York To Know Among the key findings, nearly half of all employees (48 percent) reported receiving no employer-provided debt management resources, regardless of sector. However, only 29 percent of public employees were informed by their employer about the Public Service Loan Forgiveness (PSLF) program, which can forgive federal loans after a decade of qualifying payments for government or nonprofit workers. Despite the higher incidence of debt, public sector workers tend to fare better over time due to these support mechanisms. As a result, private sector workers often express more concern about their long-term financial outlook, even when their student loans have been paid in full. "The rising cost of education has outpaced inflation for decades, creating a financial barrier that hits private sector workers particularly hard," Kevin Thompson, the CEO of 9i Capital Group and the host of the 9inning podcast, told Newsweek. "As long as education remains this costly, the wealth gap will likely continue to grow, reinforcing economic disparities." What People Are Saying Drew Powers, the founder of Illinois-based Powers Financial Group, told Newsweek: "For many public sector workers, the potential of student loan forgiveness was a major deciding factor in choosing that position. As the cost of higher education continues to outpace inflation, a lower salary plus forgiveness over 10 years may be more viable than a higher salary with 30 years of payments in a private sector career." Kevin Thompson, the CEO of 9i Capital Group and the host of the 9inning podcast, told Newsweek: "Public sector workers often carry more student debt, but they have unique advantages. Programs like Public Service Loan Forgiveness (PSLF) can wipe out balances after a set number of qualifying payments. On top of that, many government jobs come with pensions under the Federal Employee Retirement System (FERS) and generous retirement plans like the Thrift Savings Plan, often with matching. These benefits are often ignored by many but their power in regard to retirement savings is truly unmatched." What Happens Next Researchers recommend a dual-track approach: better communication and expanded access to relief programs in the public sector, as well as new debt-support initiatives in the private sector. "For many private sector employees, student debt is a long-term financial drag. Without the automatic savings mechanisms like pensions and matching contributions that public sector workers enjoy, private employees often have to delay saving while chipping away at their loans," Thompson said. Without broader intervention, disparities in financial security between sectors could widen. "Any student loan repayment is competing for dollars that might otherwise go towards retirement savings or purchasing a home," Powers said. "It's a time value of money and compound interest problem."
