The Biden administration is set to implement a new student loan forgiveness relief program as early as this week. The initiative, known as the Student Aid and Vocational Education (SAVE) plan, was initially scheduled to go into effect later this summer but has been expedited to February. Under this plan, qualifying borrowers who are enrolled in the SAVE student loan repayment plan, have borrowed less than $12,000, and have been in repayment for 10 years will have their remaining student debt cancelled.
The SAVE plan is designed to be more affordable than other income-driven repayment (IDR) options. It offers a larger poverty exemption, a more affordable repayment formula, and an interest subsidy that eliminates interest accrual exceeding the minimum required monthly payment. Approximately 7 million borrowers have already enrolled in SAVE, according to officials.
In addition to providing more affordable repayment options, the SAVE plan offers accelerated student loan forgiveness for certain borrowers. Typically, all IDR plans result in loan forgiveness after 20 or 25 years of repayment. However, under the SAVE plan, borrowers with initial balances of $12,000 or less can receive forgiveness in as little as 10 years. Borrowers with initial balances of $21,000 or less may be eligible for forgiveness between 10 and 20 years, depending on their starting balance.
To qualify for early loan forgiveness, borrowers must enroll in the SAVE plan. This requires having Direct federal student loans. Borrowers with other types of federal student loans, such as FFEL loans or Perkins loans, may need to consolidate their loans into a Direct Consolidation Loan to be eligible for the SAVE plan and the associated benefits. There is a consolidation deadline of April 30, 2024, for the IDR Account Adjustment, another related initiative that can credit borrowers for earlier periods of repayment under different plans.
While borrowers who meet the criteria for early loan forgiveness will have the relief automatically implemented starting next month, they must still enroll in the SAVE plan to be eligible. Upon enrollment, their loans may be placed in an administrative forbearance while the discharge eligibility is reviewed. Processing forbearances like these are normal and no payments are required during this time.
Once a borrower is determined to be eligible, their loans will be put into forbearance while the forgiveness is being processed. This process may take longer for some borrowers, but no payments will be required until the forbearance ends. Additionally, eligible borrowers who have made excess payments may be eligible for refunds after receiving student loan forgiveness.
It is important to note that certain aspects of the student loan forgiveness and relief programs implemented under the Biden administration have faced opposition. Republicans are planning to repeal these programs, and three existing programs are set to end this year. However, for now, eligible borrowers can look forward to the accelerated loan forgiveness provided by the new SAVE plan, which aims to alleviate the burden of student loan debt for millions of Americans.
