The Optometry Money Podcast

2025 Student Loan Update: New Court Decisions and Actions to Take

• Evon Mendrin • Episode 129

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The student loan landscape is shifting again! In this episode, Evon breaks down the latest updates on the SAVE Plan, the recent court rulings, and what these changes mean for optometrists navigating their student loan repayment.

With major legal challenges in play, borrowers on SAVE are currently in interest-free forbearance, but the future of the program remains uncertain. Evon unpacks the key takeaways from the recent 8th Circuit Court of Appeals decision, discusses potential next steps, and shares what optometrists should consider when making student loan repayment decisions.

What You’ll Learn:

✅ Background on the SAVE Plan & Legal Challenges – Why the courts put SAVE on hold and what’s next
✅ What This Means for Optometrists – How the latest rulings impact those on SAVE, PAYE, and IBR plans
✅ Should You Switch Plans? – Factors to consider before making a move
✅ Tax Strategies for Student Loan Borrowers – Filing tips to optimize student loan repayment
✅ Preparing for Uncertainty – Practical steps to protect your financial future

Key Takeaways:

💡 The SAVE Plan is currently blocked, and applications for income-driven repayment plans & loan consolidation are unavailable.
💡 Borrowers on SAVE forbearance are not accruing interest, but these months do not count toward forgiveness.
💡 Income-Based Repayment (IBR) is still available and could be an alternative for some borrowers.
💡 If you’re going for Public Service Loan Forgiveness (PSLF), the recent rulings do not impact the program directly, but timing your repayment strategy is critical.
💡 Tax planning is essential – Your tax filing status (Married Filing Separately vs. Jointly) and timing of recertification can significantly affect student loan payments.

Actionable Steps for Optometrists:

🔹 If you’re on SAVE forbearance – Consider whether staying put or switching to IBR/PAYE (when applications reopen) makes sense for your situation.
🔹 If you’re nearing forgiveness (20-25 years) – Switching to IBR sooner may be necessary to receive forgiveness.
🔹 If you’re married – Review tax filing strategies to exclude spousal income from payment calculations.
🔹 If your income has increased significantly – Be aware that switching to IBR/PAYE could trigger higher payments.
🔹 If you’re pursuing PSLF – Understand the buyback provision and how it affects your repayment plan.

Resources & Next Steps:

📩 Get More Updates! Stay informed with our Eyes on the Money Newsletter for the latest financial strategies tailored for optometrists. Subscribe here.

📅 Need Student Loan Help? Book a free intro call with Evon to discuss your student loan strategy and overall financial plan. Schedule a call here.

📢 Enjoyed this episode? Leave a review and share it with a fellow OD who needs to hear this!


The Optometry Money Podcast is dedicated to helping optometrists make better decisions around their money, careers, and practices. The show is hosted by Evon Mendrin, CFP®, CSLP®, owner of Optometry Wealth Advisors, a financial planning firm just for optometrists nationwide.

Evon:

Hey everybody. Welcome back to the Optometry Money Podcast, where we're helping ODs all over the country make better and better decisions around their money, their careers, and their practices. I am your host, Evon Mendrin, Certified Financial Planner and owner of Optometry Wealth Advisors an independent financial planning firm just for optometrists nationwide. And thank you so much for listening today. Really appreciate your time and your attention today. And we're gonna dive all into student loans. there has finally been some news around what is going on with the SAVE plan. Uh, so we're gonna talk about recent updates to the SAVE plan. We're gonna talk about what in the world that means for you for, for optometrists out there. This month March is, is usually a month where I'm diving into for my own client's. debt and debt planning and debt decisions where, I'm reviewing their debt rates, which is the amount of their income that's going towards debt payments. We're reviewing whether we need to make adjustments to different debts in their lives and a big part of that's student loans, of course. So this month I'm gonna be having a few episodes just on conversations around debt and, starting with the big thing on everyone's mind, which is what in the world is going on with student loans these days? And it's been several months since we've heard news on the SAVE court cases, to go down memory lane a little bit. SAVE was initially rolled out, I think in 2023. in part, so much of it was put into place. The remaining features of it were due to go into effect in July, 2024, and then mid-year 2024. So after it's been around a while, the SAVE plan, specifically the new parts of the plan that were soon to be implemented, were challenged in court and there were two court cases, one out of Kansas, I believe, one out of Missouri. And eventually there was a one line injunction out of the Missouri case that put a halt on the SAVE plan. And from there, borrowers on SAVE were placed into an interest free forbearance that didn't count towards forgiveness. So if you were on SAVE, if you applied for SAVE you eventually found your way into this forbearance, and this is where we're currently at right now. And that injunction was appealed. And now all these months later, after hearing essentially nothing, we saw an update on February 18th, the eighth circuit, US Court of Appeals basically confirmed the injunction of the lower court and in its own thinking, actually expanded it to block the implementation of the entire SAVE plan. And. This particular court actually took its opinions further, kind of going out on a limb on its own, wondering whether forgiveness was legal for any of the income-driven repayment plans that are based on the ICR statute. So that's ICR, Pay As You Earn and SAVE and also the prior REPAYE. Pay As You Earn, SAVE, and REPAYE those were all created based on executive action. Based on the authority, or seemingly based on the authority that the ICR law w gave the president or, or gave the Department of Education. so this court claimed, in their own opinion, claimed that the law doesn't explicitly state forgiveness as a feature of the ICR repayment plan. Only that there should be an income, driven repayment plan, no longer than 25 years. And so that was the big news on the 18th. We finally got some update from, from this court process here. Basically just confirming the injunction that was set before. the other big news is that the options for, or the applications for applying for a new income-driven payment plan and consolidation have been grayed out on the Federal Student Aid website, you can't click into it to continue with that process. so there's no ability to switch plans or to consolidate right now as of this recording. And so there's likely some big adjustments happening on the processes there behind the scenes. maybe as a result of that court ruling, maybe they're applying to remove the opportunity or the option to apply for the SAVE plan. Apply for Pay As You Earn. I'm not sure, this is something I'm expecting to get worked out over the next few weeks. but that's, that's currently where we're at right now. And so what does this all mean for optometrists? How, you know, what does this mean for you as a student loan borrower? well, ultimately nothing really has changed. It's essentially just confirming the injunction set by the lower court. however, this appeals court sent the case back to the lower court and said, Hey. Let's get a ruling already. And so what this should mean hopefully is that we're, we're expecting a final ruling on the, on the destiny of SAVE on the fate of SAVE from that lower court. So hopefully, we'll, we'll hear something soon that gives us a little bit more, I. more concrete direction and I'd expect the online and paper applications to be available again soon, over the next few weeks. And, and so what do I think will happen as a result of this? Well, if I can put my speculation hat on, right. Ultimately, I have no clue. I'm in the same boat as everyone else, still trying to watch and see what can be done. But, if, if I'm going to speculate. hearing the opinions of those who know and follow the legal process and the legislative process better than I do, I do feel it's more likely than not that SAVE doesn't survive the process here, at least not in its current form. so I, I think we should prepare for that if we're on SAVE. If we're relying on SAVE really heavily in terms of student loan outcomes. I think we should prepare for the, the possibility that it doesn't exist at the end of this. Now, I do think it's very possible that REPAYE, Revised Pay As You Earn, can come back essentially. I, I think it's possible that they just reset the landscape that it was before covid. I think that's certainly possible. do I think the sort of. Student loan apocalypse happens that this higher eighth Circuit court had in mind where they sort of reject all forgiveness opportunities, for student loan repayment plans that are based on ICR. I don't think so. I think that's an extreme opinion that's not really grounded on the precedent over the last 30 years. The IBR plan is in statutes, so we know that forgiveness is explicitly mentioned as it relates to the IBR plan. So we, we know it's clear that there's congressional intent for forgiveness, and there hasn't been any clear picture offered of what specifically would happen at the end of 25 years. If there's still a loan balance and there's no forgiveness opportunity, does the borrower defaults? Is there a balloon payment? What does that look like? So nothing's really been offered there. And, and while it's possible, I don't think it's likely that this worst case scenario happens where Pay As You Earn is no longer an option for forgiveness. And Revised Pay As You Earn, is also not an option or ICR. And so what should we do then? We, we have this information, we have this update ultimately. Nothing really changes that much. We're still waiting for this lower court to give us a final ruling, something we can take and do something with more concretely, what should you do here? Well, let's start with what we know. What are some of the facts that we know here? We know that forgiveness is not possible at this current moment. If you are on SAVE or Pay As You Earn, or ICR. If you reach it right now, meaning you're about to hit 20 or really 25 years, you can't receive forgiveness even though your payments are counting. You can't receive actual forgiveness on those plans, but we also know that IBR income based repayment is explicitly in statute, it's in law, it's available, and you can receive forgiveness while on IBR, we also know that payments on Pay As You Earn and past prior payments on Revised Pay As You Earn and SAVE do still count as qualifying payments toward forgiveness. So those payments still count. You're still accruing that, or you did accrue that. We also know that PSLF isn't really at stake here. If you're going for PSLF, it's ambiguous whether you can receive PSLF cancellation while on Pay As You Earn or SAVE or ICR. But I've heard from others doing loan consults that so far they've seen that borrowers have continued to get PSLF processed while on those repayment plans. Now that can change, but ultimately that's what we are. And then PSLF itself as a forgiveness program, as a forgiveness option isn't at stake here. It's not at risk here. so what should you do, particularly if you're on SAVE forbearance? What actions should we think about taking? There's no one right answer for everybody. Ultimately, it's up to the specific situation you find yourself in the details of your own student loans, and what makes the most sense for you and your family. But let's talk about some of these different factors here. So, number one, if you're planning to pay your loans down to zero and you're, you're planning to pay them all back, well, you're just enjoying the interest-free forbearance. You're putting money away into a high yield savings account and you're building up big, a big lump sum for some big payment down the road. So you're just enjoying the ride here, right? And then as soon as that interest fee forbearance ends, then you're starting to make a decision whether to stay on save, if it exists, whether to refinance, whether to do something else. So, you're just staying put for now. If you're going for forgiveness, it gets more interesting. the big question I come across is, should you say, should you stay? On the SAVE forbearance or should you switch to another plan? Mostly IBR or PAYE Pay As You Earn? well, at this exact moment, there's literally nothing we can do with the applications unavailable. there's no action we can really take, but let's assume they are. Let's plan for when they do become available again. Knowing there's no one right answer, here are some factors to think about. I think the big sort of overarching question is you'd wanna think through how high is your risk tolerance? And what I mean by that is that how much do you prefer the certainty of being on another plan like IBR and Pay As You Earn, continuing the loan payments again and get an accrediting months towards forgiveness versus the uncertainty of the SAVE forbearance. Even if it is interest free and just sort of pausing your loans, and even if it does end up in your favor, what are you more inclined to be comfortable with? What's gonna allow you to sleep at night? Is it that certainty, or are you comfortable with that sort of uncertainty with the SAVE forbearance? If you're going for PSLF, maybe you're at the VA or at your at Kaiser Permanente or something like that, you have more options because of the buyback option. so that's something you can consider. Even if you stay on SAVE you're getting that interest free forbearance and you have that potential, the buyback option down the road. I do want to keep in mind though that we're assuming the buyback option is going to continue being available indefinitely, and there's some uncertainty there. Potentially. It was created through executive action. So it is possible that the current administration adjust that buyback provision. But PSLF borrowers have a little bit more flexibility here. Here are some factors to think through, especially if you're going through 20 or 25 year taxable forgiveness. If you're going to be eligible forgiveness very, very soon in the immediate near future, you're gonna need to switch to IBR to get it. Now. You might be able to stick on Pay As You Earn, for example. But eventually, in order to actually get that forgiveness, you're gonna have to hop onto IBR and and through the end of 2025, even that 20 or 25 year forgiveness is tax free. We don't know if Congress is going to extend that, but that's the current law right now. If you switch plans, what you wanna know is that, is it going to lead to a huge jump in your payment amount? Many of you may not had to recertify your income since COVID years. It might have been years and years since you've had to reshow your income and recalculate your payments for the next 12 months. And if you switch plans, for example, from save to IBR, it's going to re-trigger that recertification. So based on your new income and your new family size, or more recent family size. Is that going to lead to a much higher payment? if you're on PSLF, for example, that buyback amount based on your old income. Maybe the cheaper routes. You may want to stay on that SAVE forbearance a little bit longer until you are forced to recertify until you're sort of forced to make a decision. So what's that gonna do to your payment if you are able to switch to IBR, Pay As You Earn, and, and get a pretty similar payment amount, meaning you're in, you're not gonna have this huge jump in income. It might be the better option to try to aim for IBR sooner rather than later. What are the plans are you eligible for? That's the other thing you wanna look at. If you took out your first federal loans after July of 2014, you're eligible for the new version of IBR. And this is nearly identical to Pay As You Earn with a 20 year forgiveness timeline. And it's probably the most desirable option here because again, IBR is sort of quote unquote safer. It's, it's in statute, it's not something that the, any presidential administration can simply adjust. So that newer version of IBR is definitely something you wanna look at. if you already had loans before that point, before July of 2014, then you're eligible for the old version of IBR, which has a less favorable payment calculation. If you took your first federal loans out after October, 2007 and also took out another loan after October, 2011, then you're eligible for Pay As You Earn. So even if you're not eligible for the new IBR, you still do have Pay As You Earn. If you took out loans before 2007, you're really only limited to old IBR. And so you're sort of comparing what SAVE would have been with the old version of IBR, and so that that does make that decision, that math even a little bit more difficult for those older borrowers. So what other plans are you actually eligible for? That's something you wanna look at. Are there any cashflow goals or reasons to continue using the SAVE forbearance? So for example, maybe you're coming up on forgiveness and you need more time to build up dollars. To prepare for that future potential tax bomb when those loans are forgiven. That's something you might wanna keep in mind. Maybe you have an immediate goal of buying a house. You need down payments or building up an emergency fund, or preparing for practice purchase or something like that. Maybe there's an immediate goal that you need to set aside dollars for. Well, if that's the case, then that SAVE forbearance is going to allow you to do that, so. So you wanna think through any short term immediate cash flow goals that you might want to take advantage of. and then what's the potential outcome for SAVE? Is is something you wanna think about. Now, that's hard to know, right? But we do wanna think about what potential outcomes would be for SAVE and whether that's going to be more favorable for you. So for example, something I I've seen is that maybe you're a single borrower and your only other option would be the old IBR plan. It's possible that if Revised Pay As You Earn comes back, that's still gonna be the more favorable option for you. So rather than switching to IBR and then down the road switching to Revised Pay You Earn again, you might just wanna stick it out on the SAVE forbearance and, and see what happens. On the other hand, if you are married and both spouses are working and you're trying to file taxes separately for student loan, purposes. Then maybe Revised Pay As You Earn wouldn't help you anyways, because that doesn't allow you to file taxes separately and exclude your spouse's income from the calculation. And so you do wanna think through, okay, if SAVE were to be replaced by Revised Pay As You Earn, or if SAVE were to stick around, what would that outcome be for me? What would make sense? But as we kind of wrap all that up, you do wanna just think about your, your risk tolerance. How comfortable are you with the SAVE uncertainty on forbearance, rather than going towards the quote unquote certainty with hopping onto another plan with IBR, knowing you're getting those payments started and knowing you're getting that clock ticking again towards forgiveness. Ultimately if you have a long time until you're going to hit forgiveness, especially taxable forgiveness here, if you have 10, 18, 15 years or so until you get to that taxable forgiveness, 20 or 25 years. You are probably looking at making that switch to IBR if possible, or, or Pay As You Earn. That's gonna be the long-term outcome. It, it's just really about timing. When do you wanna make that decision? And think about those other factors I talked about earlier. if you're sticking with forbearance, don't let these months of forbearance go to waste. Keep putting that same monthly payment amount into savings so that you can keep that habit going of making the payments. You can build up dollars towards the buyback if you have PSLF as an option or just build up for the future potential tax bomb when loans are forgiven. So don't let these months of zero payments and zero interest go to waste. Keep that, keep that habit going. And then a couple things I want you to keep in mind. Number one, keep in mind that IBR and pays you Earn. Or going to require a partial financial hardship, meaning that your payment on IBR or pay when you're trying to get into it. So for example, if you're switching from SAVE and trying to apply to get on IBR or Pay As You Earn your payments for IBR or Pay As You Earn would have to be lower than your payment would be in a 10 year standard repayment plan with your current loan balance and interest rate. So you can take a look and say, okay, what would my IBR payment be? What would my Pay As You Earn payment be? And what would my 10 year standard repayment plan be? And would I have that partial financial hardship because if you don't, if your payments are too high, you wouldn't be eligible for those plans. So if your income has just increased substantially to a point where your payments would be too high, or if you're anticipating that being the case, when it comes time to switch out of SAVE later on, you may wanna make that switch sooner rather than later. Especially if you can use the prior year's tax return with more favorable income, or you want to be careful about where you shift deductions, things like that. So you want to keep that partial financial hardship in mind for IBR and for Pay As You Earn. The last thing I wanna bring up is tax filing, and we're at that time of year where we're starting to fill out personal tax returns. Now we're getting those filed. some of you overachievers, maybe even got your returns filed already. But if you're using income-driven plans towards forgiveness, I want you to be mindful of how and when you file your taxes. For example, if you're married and your spouse is working, you want to have projected out, you want to be aware of whether you should or shouldn't be filing your taxes, married, filing separately instead of married, filing jointly. In order to exclude your spouse's income from that loan calculation, I. If you should have filed taxes separately, but already filed taxes jointly, and you're listening to this before the April tax filing deadline, talk to your tax preparer about filing a superseding tax return. Essentially, it's sending in a new tax return with the words superseding return at the top with a letter explaining the reasoning. And if it's done correctly, and before the tax filing deadline, including up to October's extended filing deadline, if you filed an extension, if you do that correctly before the deadline, it's possible to replace a married filing joint return with a married filing separately. Cause once that deadline passes, whether it's the April deadline or if you file an extension, the October deadline, you can't amend a joint return back to a separate return. You can only amend a separate return back to a joint. And so knowing how you should be filing your taxes if you're married and if both spouses are working can be critical to making the math more favorable for student loan planning, especially if you live in a community property state, becomes even more important. the second thing is that timing is important as well. For example, if you have an income recertification date coming up over the next several months, especially if you're on Pay As You Earn and your prior tax return has a much more favorable income amount tha n 2024, you may want to file an extension for 2024 tax return, so that you can reuse the prior year's tax return to recertify your income and recalculate your payments for the next 12 months. Because it's literally, that would literally be your most recently filed tax return. And once that recertification process is done, once your new payments are calculated, then you can go ahead and file that next return. It's all about, remember, it's all about the most recently filed tax return. So that timing conversation is important. And I'd even consider it if you're on the SAVE forbearance, because currently recertification, if you're on SAVE those recertification dates have been pushed into 2026. However, it's very possible that's, that's rescinded, that's changed by the current administration and brought into 2025 into this current year. So I even might consider. filing an extension just to give yourself more flexibility, more breathing room, more options on which year to use. If your 2024 income's gonna be much higher than 2023. So keep an eye on tax filing, keep an eye on what's going on here with the SAVE court cases, and keep an eye on our content. So whether the, it's through this podcast or our weekly newsletter. Keep an eye on what's going on so that you can make informed decision. You can talk to your own Advisors about this and, and make adjustments as those adjustments come up. And if you wanna talk to someone who works exclusively with optometrists to help you plan around these super important topics and so much more, please reach out. I would love to have a no pressure intro call with you just to talk about what's on your mind financially and to share how we help optometrists navigate those same things all over the country. You can also subscribe to our weekly Eyes on the Money Newsletter where I write all about student loans, practice and personal cash flow taxes, investing in so much more, all through a link to that in the show notes. With all that, really appreciate your time. Hopefully this update was helpful. We'll catch you on the next episode. In the meantime, take care.

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Evon Mendrin CFP®, CSLP®

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