Legal challenges, differing timelines spur confusion for federal student loan borrowers

The countdown clock has begun ticking for some federal student loan borrowers.

July 1, loan service providers started the process of reaching out to borrowers to start their 90-day deadline to switch from the SAVE repayment plan.

“The only thing I can do is tighten the budgets more, and somehow come up with the money,” Cameron Green told 5 on Your Side.

He said his student loan balance is sitting at about $135,000. That number, he says, has hardly moved over the last decade of repayment.

“It's the only…debts we can't escape,” Green said. “Being a lawyer is not a high paying job like people expect anymore. It's solidly middle class, so I'm sitting here with a third of a house, and I can never really pay it back, because there's no way I can never come up with $135,000 just to pay it off.”

He told 5 on Your Side that he does not believe he will ever be able to get his balance down to $0.

Repayment Options

The earliest deadline to leave the SAVE plan will be September 29. Each person’s specific deadline depends on when they receive an email from their loan service provider. For example, Nelnet says it is reaching out to its borrowers in waves. So, some borrowers could receive a notice as late as March of next year.

According to the U.S. Department of Education, borrowers who do not transition plans within the 90-day period communicated by their servicer will be automatically enrolled into either the Standard Repayment Plan (RAP), or the new Tiered Standard Plan.

Borrowers can also choose from the Income-Based Repayment Plan (IBR), the Pay As You Earn (PAYE) plan, and Income-Contingent Repayment (ICR). 

New legal challenges

A motion filed June 23 by Public Goods Practice on behalf of four student loan borrowers requests that students on the SAVE Plan not be automatically transitioned to another—likely more expensive—plan while the borrowers’ original lawsuit challenging the plan’s changes remains undecided.

Some borrowers are taking that as a sign to wait it out.

“I'm waiting until day 89,” Green said.

It’s a new wave of uncertainty and confusion for borrowers.

Advocacy group Center for Responsible Lending conducts research and promotes financial fairness.

“Anything could happen, because it is litigation. We see that the courts every day are overturning something that has been done years ago, and so they can overturn it, or they can affirm what is already in place right now,” said Jaylon Herbin, the director of federal campaigns for the nonprofit.

5 On Your Side asked Herbin if he believes borrowers could be in another limbo situation if more litigation pops up.

“Yes, I think what can happen is this: we have two years left in this current administration, but we also have advocacy that's taking place right now,” he responded. “The advocacy that's taking place right now is asking for a payment pause, currently, so that people can have enough time to review everything.”

What rights do borrowers have?

Herbin said borrowers have the right to file complaints, if they believe their loan service providers are acting in a predatory manner.

 “We always tell people to reach out to their consumer protection bureau and their [attorney general’s] office,” he said. “There's still the Student Ombudsman's office, while it's not as active as it was, they're still taking complaints, so you can file a complaint online as well.”

The Office of the Ombudsman is a neutral, informal, and confidential resource at the U.S. Department of Education (ED) to help resolve complaints about your federal student aid.