Student loan debt in America has exceeded $1.7 trillion, with the average borrower owing over $30,000. This debt burden not only affects individuals but also entire communities. However, the new Biden administration has made it clear that student loan borrowers are a priority on their agenda.
The Saving on Valuable Education (SAVE) plan, aims to reduce most undergraduate borrowers' payments by half. And according to the White House, any borrower with a federal loan in good standing is eligible for the program. Additionally, anyone enrolled in REPAYE, the existing pay-as-you-earn program, will automatically be enrolled in SAVE.
Borrowers who wish to enroll in the program now can do so by signing up for an existing Income-Driven Repayment (IDR) plan and will be automatically enrolled in SAVE. We've outlined everything you need to know about the program so that you can be one step ahead when payments resume in September.
What is the SAVE plan?
The SAVE Plan is a student debt repayment plan aimed at easing the burden of the student loan crisis. Eligible borrowers will save at least $1,000 per year and preventing their balances from growing due to unpaid interest and may have up to $12,000 of their federal student loan debt eliminated. The plan also includes relaxing the terms of the Public Service Loan Forgiveness (PSLF) Program, which provides loan forgiveness to those who work in public service and make payments for ten years
Savings with SAVE
- The payments for undergraduate loans will be reduced by half, decreasing the amount that borrowers need to pay every month from 10% to 5% of their discretionary income.
- If you earn less than $32,805 a year (or $67,500 for a family of four), you can make monthly payments of zero dollars and still get credit towards PSLF and other kinds of forgiveness programs.
- Borrowers will be covered up to 225% of the Federal poverty guidelines (FPL), which is a big increase from the previous 150%. So, if you're a single borrower earning less than $32,805 per year (or $67,500 for a family of four), you won't have to worry about making any payments anymore.
- If you're earning $125,000 or less, your loan balance can be forgiven after just 10 years of payments instead of the usual 20. This applies to borrowers who started with a loan balance of $12,000 or less.
- Unlike other existing IDR plans, a borrower's loan balance will not grow as long as they make their monthly payments, even when the monthly payment is $0 due to low income.
Who is Eligible?
All borrowers in repayment with federal student loans are eligible for the SAVE plan. Borrowers must have a Direct loan, or consolidate their loans to a Direct loan to be eligible. Second, any borrower who makes less than $125,000 a year will qualify for the debt elimination.
Impact to Student Loan Borrowers
According to the Department's estimates, this reform will enable almost all community college borrowers to become debt-free within 10 years.
The Department of Education says that over 1 million more low-income borrowers are going to qualify for a $0 payment, and 400,000 of them are already on the REPAYE plan, meaning that they will automatically get this benefit. This means they can stop worrying about loan payments and focus on important stuff like food, rent, and other basic needs.
Even if you don't qualify for a $0 payment, you'll still save at least $1,000 a year compared to the current REPAYE plan. If you're a single borrower, you'll save $91 a month on payments ($1,080 a year). And if you're a family of four, you'll save $187 ($2,244 a year).
How to Enroll
The SAVE program will not begin until July 2024, but you don't have to wait to on the Department of Education to make the smartest decision and ensure you're set up on the plan ahead of payments resuming. If you're already signed up for REPAYE, you'll be automatically switched over to SAVE. Your payments will just adjust on their own, so you don't have to do anything.
You can view all of your repayment options and pre-enroll now in the Chipper app and we'll handle enrollment to SAVE as soon as it's available.
