The Biden administration’s latest income-driven repayment plan, known as the Saving on a Valuable Education (SAVE) plan, is set to reduce monthly payments for millions of student loan borrowers starting on July 1. This program is designed to be the most affordable student loan plan ever and has already garnered around 8 million enrollees. Under this plan, borrowers pay a share of their discretionary income each month and can receive forgiveness after 20 or 25 years. SAVE replaced the U.S. Department of Education’s former REPAYE plan and has already resulted in reduced bills for some borrowers due to an increase in the income exempt from payment calculation.
The most significant provision of the SAVE plan that will go into effect soon is the reduction of the share of discretionary income that borrowers have to pay towards their undergraduate student debt from 10% to 5%. This change will greatly impact borrowers of various income levels. For example, someone making $50,000 a year with a previous payment of $228 under REPAYE will now have a monthly bill of $67. Similarly, someone earning $125,000 will see their bill decrease from $853 to $380. This adjustment is expected to make a significant difference in the financial burden faced by many borrowers.
The decrease in monthly payments should be automatic for those already enrolled in the SAVE plan, with the reduced bill reflected in their July bill. Borrowers with both undergraduate and graduate loans will pay a weighted average of between 5% and 10% of their income. To qualify for a lower payment under this plan, the total debt generally needs to be more than a third of annual income. Borrowers can apply for the SAVE program on Studentaid.gov. Some borrowers, including those who borrowed $12,000 or less, may be eligible for loan forgiveness in as few as 10 years under this plan, and previous payments made under existing IDR plans or the standard repayment plan will count towards relief.
The implementation of the SAVE plan represents a step towards making student loan repayment more manageable for millions of borrowers. With the reduction in monthly payments and potential for loan forgiveness in a shorter timeframe, many individuals facing student loan debt may find relief through this program. The automatic adjustment in July is expected to benefit a wide range of borrowers, including those with lower incomes who were struggling to make payments under previous plans. By making it easier for borrowers to manage their debt, the SAVE plan aims to alleviate some of the financial burden associated with student loans.
Overall, the Biden administration’s SAVE plan aims to provide more affordable and accessible options for student loan borrowers, helping to reduce their monthly payments and potentially offer loan forgiveness in a shorter timeframe. With millions already enrolled in this program, the July implementation is set to bring relief to many more borrowers. By automatically adjusting monthly bills and allowing for forgiveness after a set period, the SAVE plan represents a significant change in student loan repayment options. Borrowers facing financial hardship due to student loan debt may find the reduced payments under this plan to be a valuable solution to their ongoing financial challenges.
