President Joe Biden has officially launched the SAVE Plan, his new student loan repayment plan that will reduce payments and help those with student loan debt.
“Every American deserves the opportunity to pursue a college education without the burden of unmanageable student loan debt,” Biden shared in a press release.
At least 20 million Americans will be eligible to participate in Biden’s new plan as long as they enroll on the Federal Student Aid website. If eligible, borrowers will see their monthly payments decrease before they resume this fall.
The SAVE plan is an income-driven repayment plan that uses a borrower’s discretionary income to determine their payments, not their loan balance.
Under the SAVE plan, discretionary income is defined “as the difference between their adjusted gross income (AGI) and 225% of the U.S. Department of Health and Human Services Poverty Guideline amount for their family size.”
The plan also sees balances forgiven after a certain number of years.
Payments for borrowers with undergraduate loans will now be reduced from 10% to 5% of their discretionary income, the release shared. Those with undergraduate and graduate loans will pay a weighted average between 5% and 10% of their income, depending on their original principal balances of the loans.
Loan payments for some borrowers will end up being $0 per month, as the plan would see those who make about $15 an hour excused from paying based on their discretionary income.
“Borrowers earning above [$15 an hour] would save around $1,000 a year on their payments compared to other IDR plans,” the release shared. “The Department of Education estimates that more than 1 million additional low-income borrowers will qualify for a $0 payment. This will allow them to focus on food, rent, and other basic needs instead of loan payments.”
The plan will also ensure that borrowers “never see their balance grow,” being that they keep up with their required payments every month.
The release shared that if a borrower had a $50 interest accumulate each month, and their required payment was $30 under the new SAVE plan, the remaining $20 would not be charged as long as they paid the $30.
Overall, the Biden administration is estimating that borrowers will see their total payments per dollar borrowed fall by 40%. Across-the-board savings will depend on numerous factors, including earnings and the university borrowers attended.
The release shared that a typical graduate from a four-year public university will save approximately $2,000 a year, while a “first-year teacher with a bachelor’s degree will see a two-third reduction in total payments, saving more than $17,000, while pursuing Public Service Loan Forgiveness.”
“The SAVE plan upholds the promise we make to those seeking a quality education. Monthly payments will be based on income, rather than their total student loan balance,” the White House release shared. “In addition, as long as you make the monthly payments required under your plan, your loan balance will no longer grow because of unpaid interest – making sure that you make progress on paying down your debt.”
For more information about SAVE, visit SutdentAid.gov or the White House website here.
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