The Biden administration’s latest income-driven repayment plan, called the Saving on a Valuable Education (SAVE) plan, will reduce millions of borrowers’ monthly student loan payments starting on July 1. Around 8 million borrowers have already enrolled in this new program, which replaced the U.S. Department of Education’s former REPAYE option. The main feature of the SAVE plan that will lead to reduced bills is slashing the share of discretionary income that borrowers have to pay toward their undergraduate student debt each month to 5% from 10%. This change is expected to have a significant impact on borrowers’ monthly payments.
The increase in the income exemption for payment calculations under the SAVE plan has already benefited some enrollees, with single borrowers making less than $33,900 or a family of four earning less than $70,200 seeing their monthly bills fall to $0. However, the upcoming change that reduces the share of discretionary income that borrowers have to pay will be the most generous provision of the program. For example, a person earning $50,000 a year with a previous student loan payment under REPAYE of $228 will now have a monthly bill of $67. Similarly, someone making $125,000 will see their bill decrease from $853 to $380.
If you are already enrolled in the SAVE plan, you should see the decrease in your monthly payment automatically reflected in your July bill. Borrowers with both undergraduate and graduate student loans will pay a weighted average of between 5% and 10% of their income. To qualify for a lower payment under the SAVE plan, your total debt generally needs to be greater than a third of your annual income. Borrowers can apply for the program at Studentaid.gov. Additionally, some borrowers, including those who borrowed $12,000 or less, will receive loan forgiveness in as few as 10 years under the plan, with previous payments counting toward this relief timeline.
The implementation of the SAVE plan marks a significant step towards making student loan repayment more affordable for millions of borrowers. President Biden has described this program as the most affordable student loan plan ever, highlighting its potential impact on reducing the financial burden of student loan debt. By reducing the share of discretionary income that borrowers have to pay toward their student loans each month, the SAVE plan aims to provide relief to borrowers struggling to make ends meet and manage their monthly payments.
While the SAVE plan is expected to benefit millions of borrowers by reducing their monthly student loan payments, it is essential to ensure that borrowers are aware of the eligibility criteria and application process for the program. By enrolling in the SAVE plan, borrowers can take advantage of the reduced payments and potentially qualify for loan forgiveness in a shorter timeframe. This program represents a significant opportunity for borrowers to alleviate the financial strain of student loan debt and work towards a more manageable path to repayment and eventual loan forgiveness.
