President Joe Biden launched a new student loan repayment plan Tuesday—one he’s calling the “most affordable student loan plan ever”—just months before student loan payments are set to return for the first time since a pandemic-induced pause in March 2020.
The Biden Administration launched its latest attempt at improving student loan debt on Tuesday: the ... [+]
The plan—dubbed the “SAVE” plan, standing for “Saving on a Valuable Education”— calculates loan payments using a borrower’s income and family size rather than their loan balance, and will forgive some remaining balances sooner.
Undergraduate borrowers’ payments will be reduced from 10% of their discretionary income to 5%, and people with both graduate and undergraduate loans will pay a weighted average somewhere between 5% and 10% of their income depending on their original principal balances.
The plan also works to eliminate remaining interest, meaning as long as you make your monthly payment, your loan balance won’t grow as a result of unpaid interest; so, if $50 of interest accumulates each month but you have a $30 payment, the remaining $20 would not be charged, according to the Federal Student Aid site.
Student loan payments have been paused since March 2020, but interest is set to begin accruing again on September 1 and payments will start again in October.
Student loan borrowers became eligible to enroll at StudentAid.gov/SAVE on Tuesday. People who were already enrolled in the Revised Pay As You Earn plan—the previous plan that capped payments based on a borrower’s monthly income—are set to be automatically enrolled. Politico reported that borrowers who apply “in the coming days” should see the new plan take effect in time for their first payment in October, though they didn’t give a hard date by which borrowers need to apply for that to happen.
20 million. That’s how many people the Biden Administration estimates could benefit from the new plan structure by having lower—or even no—monthly payments. The Department of Education estimates more than one million low-income borrowers will qualify for a $0 payment under the new plan, and a chart on the SAVE site shows that single borrowers who make $30,000 or less should qualify for $0 monthly payments.
President Joe Biden and Education Secretary Miguel Cardona have been working to address student loan ... [+]
Reducing student debt was one of Biden’s main campaign points in the 2020 election, and he’s struggled to make it happen. Biden announced his first plan to forgive student loans in August 2022, but after a legal battle, the Supreme Court ruled the administration overstepped its power with the program that would have forgiven about $400 billion in student loans. Biden’s team had estimated that about 40 million people would have been helped by the program, and 16 million had already been approved for forgiveness before the Supreme Court shut it down. Despite that student debt relief strategy being rejected, he has provided some relief for borrowers in his first two years in office. About $116 billion in student loans have been forgiven for 3.4 million borrowers, many of whom who work in public service, were defrauded by their colleges or never saw relief that was supposed to accompany previous income-driven repayment plans.