Biden Administration Announces New Affordable Student Loan Repayment Plan
The Biden administration has recently unveiled a new student loan repayment plan, called Saving on a Valuable Education (SAVE), which officials are promoting as the most affordable plan ever created. This program aims to provide financial relief to borrowers as student loan payments are set to resume later this summer.
Under the SAVE plan, borrowers will have the opportunity to enjoy lower monthly payments, with many individuals even qualifying for $0 payments. The plan offers several benefits, including a subsidy that eliminates interest capitalization and accrual that exceeds the borrower’s monthly payment. It also provides flexible options for married couples to exclude spousal income when determining monthly payments. Additionally, borrowers with lower initial balances can benefit from accelerated student loan forgiveness.
According to the Education Department, borrowers will see a significant reduction in their total payments per dollar borrowed. On average, total payments will decrease by 40%, while those borrowers with the lowest projected lifetime earnings will experience an impressive 83% decrease.
One key feature of the SAVE plan is an expanded poverty exemption. Borrowers whose earnings fall within the exemption threshold will have a calculated monthly payment of $0. This means that even $0 payments can still count towards student loan forgiveness under income-driven repayment (IDR) plans.
Compared to prior income-driven repayment plan options, SAVE’s poverty exemption is significantly higher, set at 225% of the federal poverty limit for the borrower’s family size. This allows borrowers to earn more income while still maintaining low or $0 payments.
The Education Department estimates that millions of borrowers making $32,800 or less individually, or $67,500 for a borrower with a family size of four, will be eligible for $0 payments under the SAVE plan. In fact, more than 1 million additional low-income borrowers will now qualify for this payment option.
To enroll in the SAVE plan, borrowers can visit StudentAid.gov/SAVE and submit an application, which takes approximately 10 minutes to complete. President Biden encourages eligible individuals to sign up now to lower their monthly payments before payments resume this fall. Borrowers currently on the REPAYE plan will be automatically transferred to the SAVE plan.
In an effort to raise awareness and encourage enrollment, the Biden administration is launching an outreach campaign and will be collaborating with nonprofit advocacy groups in the coming weeks.
This student loan repayment plan aims to provide relief and support to borrowers burdened by student debt. With lower monthly payments and enhanced forgiveness options, the SAVE plan seeks to ease the financial strain on individuals and help pave the way for a brighter future.
