In a significant development to ease the burden of Americans’ student loan debt, the Biden administration is launching a beta version of a website for the new income-driven student loan repayment plan known as SAVE (Saving on a Valuable Education). This move comes after the Supreme Court’s rejection of President Biden’s student debt forgiveness initiative in June.
The SAVE plan, first reported by CNN citing government officials, is expected to lower monthly loan payments for many, reduce overall repayment, and is supposedly unlike previous systems that required yearly applications; borrowers only need to apply once for the new plan, and the enrolment process is estimated to take just 10 minutes because sections can be auto-filled with government-held information like IRS tax returns.
The SAVE plan’s structure calculates payments based on income and family size. Notably, some monthly payments may be as small as $0, with the income threshold for $0 payments raised from 150% to 225% of federal poverty guidelines. This adjustment means an annual income of $32,805 for a single borrower or $67,500 for a family of four now qualifies, adding more than 1 million additional borrowers to the eligibility pool for $0 payments.
Next year, when fully implemented, the program may halve payments for some borrowers and cancel remaining debt after at least 10 years of payments. Additionally, unpaid interest will not accrue if borrowers make their full monthly payments. However, these benefits do not come without financial implications for the federal government. The program’s estimated cost ranges from $138 billion to $361 billion over 10 years. This is comparable to the previous $400 billion proposal for student loan forgiveness.
The announcement comes at a critical juncture when federal student loan payments are due to resume in October after a more than three-year pause due to the pandemic. Following the Supreme Court’s decision, the administration has taken several steps to appease borrowers, including a recent announcement that $39 billion worth of debt will be wiped away for 804,000 borrowers under existing income-driven repayment plans.
Information for this briefing was found via CNN. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.