Sep 27, 2024
SAVE, the student-loan repayment plan the federal government rolled out in 2023, is in danger of being scrapped, leaving millions of Americans in a state of limbo. The Saving On A Valuable Education (SAVE) Plan bases monthly loan payments on income, meaning it lowers payments for most borrowers while providing a path toward loan forgiveness.
But now, a federal court injunction has put the program on hold — perhaps permanently. That has left the plan’s 8 million enrollees in a state of limbo. It’s also blocked parts of other income-driven repayment (IDR) plans that have been in place for years. Loans are being temporarily placed in interest-free forbearance, which means payments aren’t required while the issue works its way through the courts. However, that also means borrowers are not making any progress paying down their debt.
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For those living on a fixed income while trying to pay off student loan debt, this has created a new source of stress.
“It seems like a war on the old and poor,” Sue, a 70-year-old woman who went back to school later in life, told Business Insider. Instead of enjoying her golden years, she is primarily living off her Social Security checks, and her student loan balance now stands at just over $84,000.
SAVE had reduced her student loan payments from $300 a month to less than $50. Now, she’s not sure what the future holds or whether she’ll be able to stay afloat financially.
Considering that she supplements her Social Security checks with babysitting and dog walking, she could be facing a tight financial situation.
Older Americans are struggling with student debt
Americans have a collective $1.59 trillion in outstanding student loan debt, according to the Federal Reserve Bank of New York. While ballooning student debt is often seen as a problem that affects younger Americans, it affects older people too — and not just those who are paying off federal Parent PLUS loans on behalf of their children.
The number of Americans approaching retirement age with student loan debt has skyrocketed by more than 500% in about 20 years, according to New America. The think tank reported that in 2022 3.5 million Americans over the age of 60 held $1.25 billion in student loan debt.
In many cases, they’re still paying off loans for their own post-secondary education, according to the U.S. Government Accountability Office (GAO). Most owed less than $10,000 at the time of their initial offset, but thanks to accruing interest, those debts are following them into their golden years.
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What happens next
With the SAVE program in limbo, many Americans are wondering what to do, if anything. For younger Americans, a pause on SAVE — which could be held up in the courts for months or even years — could give them some breathing room. But, while student loan payments are on pause, it also means borrowers aren’t able to earn IDR forgiveness credit.
For someone close to debt forgiveness, a buyback option from the Department of Education allows borrowers to make retroactive payments and receive credit for those payments (though this isn’t an option for Sue, since she’s not close to debt forgiveness). Borrowers could also consider switching to another repayment plan, but depending on their situation, it may make more sense to wait it out. If SAVE does get the axe, other IDR plans may still be an option.
During this time, while student loan payments are on pause, borrowers may want to use that money to pay off other debts (or put it aside in a high-interest savings account). But for older Americans on a fixed income, like Sue, their options may be more limited. While Sue could look for part-time work to bring in more money — something more reliable than babysitting and dog walking — she may also want to explore other avenues for loan repayment and stay up-to-date with SAVE Plan court actions.
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Vawn Himmelsbach is a veteran journalist who has been covering tech, business, finance and travel for the past three decades. Her work has been featured in publications such as The Globe and Mail, Toronto Star, National Post, Metro News, Canadian Geographic, Zoomer, CAA Magazine, Travelweek, Explore Magazine, Flare and Consumer Reports, to name a few.
