WASHINGTON, D.C., USA — The SAVE Plan is a new student loan repayment plan launched by the Biden-Harris administration that the White House says could help millions of borrowers who still owe on their student loans.
But what exactly is the SAVE Plan? And how will it affect borrowers?
Well, for starters, the White House says the SAVE Plan is an income-driven repayment plan, meaning payments are calculated based on a borrower's income and family size, not their loan balance, and will reportedly forgive remaining balances after a certain number of years.
The White House says the plan will cut many borrower's monthly payments to zero, save others around $1,000 a year, prevent balances from growing because of unpaid interest and get more borrowers closer to forgiveness faster.
Under the plan, borrowers with undergraduate loans will reportedly have their payments reduced from 10% to 5% of their "discretionary income". Borrowers with undergraduate and graduate loans will pay a weighted average between 5% and 10% of their income based on the original principal balances of their loans.
Borrower's monthly payments will be based on their discretionary income, which the White House defines as the difference between their adjusted gross income and 225% of the U.S. Department of Health and Human Services Poverty Guideline amount for their family size.
For example, this would mean that a single borrower who makes about $15 an hour would not have to make any monthly payments, and those who earn above that amount would reportedly save around $1,000 a year on their payments compared to other IDR plans.
The Department of Education estimates that more than one million additional low-income borrowers will qualify for a $0 payment.
The Department of Education will also reportedly stop charging any monthly interest that is not covered by the borrower's payment on the SAVE Plan. This would mean that borrowers who pay what they owe would not see their loans grow due to unpaid interest.
According to the White House, IDR plans require all borrowers, regardless of how long they attended school, to repay their loans for at least 20 or 25 years before receiving forgiveness on any outstanding balance.
Under the SAVE Plan, borrowers whose original principal balances were $12,000 or less will reportedly receive forgiveness after 120 payments, which the White House says is the equivalent of 10 years of payments. For each additional $1,00 borrowed above that level, the SAVE Plan will add an additional 12 payments for up to a maximum of 20 or 25 years.
Those who wish to sign up for the plan can do so at StudentAid.gov/SAVE.
For more information on the SAVE Plan, visit this link.
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