Michigan Student Loan Borrowers Benefit from New Income-Driven Repayment Plan
More than 143,600 student loan borrowers in Michigan are set to benefit from a new income-driven repayment plan, according to the U.S. Department of Education. The plan, called SAVE, aims to reduce monthly payments for borrowers based on their income levels. This initiative comes as student loan payments in the state are set to restart in October after a long hiatus due to the pandemic.
Nationwide, over 4 million student loan borrowers have already enrolled in SAVE. The plan allows borrowers to pay a more affordable percentage of their income towards their federal student loan debt. The Education Department has received over 1.6 million income-driven repayment applications, with nearly 1 million specifically for the SAVE Plan.
Under SAVE, many borrowers are expected to save more than $1,000 per year compared to other income-driven repayment plans. To encourage more borrowers to explore their repayment options, an outreach campaign called SAVE on Student Debt has been launched in partnership with organizations like the NAACP and the National Urban League.
While there is no income limit for eligibility, the greatest reduction in monthly payments is expected for borrowers who earn $15 per hour or less, particularly those supporting a family. Currently, borrowers earning $32,800 or less per year (approximately $15 per hour) will have a monthly payment of $0 if they sign up for the SAVE plan.
One of the key advantages of the SAVE plan is that unpaid monthly interest will not accumulate as long as borrowers consistently make their required payments, even if the monthly payment is $0 due to low income. This change is expected to benefit around 70% of borrowers who were on income-driven repayment plans before the pandemic-related payment pause.
To assist borrowers in exploring their options, an online loan simulator is available to review various repayment plans. Additionally, the Education Department and loan servicers have been reaching out to approximately 30 million borrowers to invite them to apply for the SAVE Plan.
As the restart of student loan payments approaches, the Education Department aims to ensure that borrowers are aware of potential relief options and encourage them to apply for the SAVE Plan or other income-driven repayment plans. By offering reduced monthly payments based on income levels, the SAVE Plan aims to alleviate the financial burden on student loan borrowers in Michigan and across the country.
