In the wake of a recent U.S. Supreme Court decision, student loan repayments are scheduled to start up again this fall. However, the Biden administration unveiled a new SAVE plan that’s aimed at making those repayments more affordable.
The court decision earlier this year blocked an attempt by President Joe Biden to wipe away $400 billion in federal student loan debt over the next 30 years.
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The new Saving on a Valuable Education (SAVE) plan is taking an alternative approach, providing repayment plans based on a debtholder’s income and family size. Under the income-driven repayment plan, many debtholders would pay $0 per month.
According to the U.S. Department of Education, a single borrower who earns $38,000 could be eligible for $43 monthly repayments under the plan. A table of repayment estimates based on household size and income is as follows:
| Income | Family Size (1) | Family Size (2) | Family Size (3) | Family Size (4) | Family Size (5) |
|---|---|---|---|---|---|
| $0-$30,000 | $0 | $0 | $0 | $0 | $0 |
| $40,000 | $60 | $0 | $0 | $0 | $0 |
| $50,000 | $143 | $47 | $0 | $0 | $0 |
| $60,000 | $227 | $130 | $34 | $0 | $0 |
Furthermore, so long as borrowers make their monthly payments, their overall balance won’t increase — even if that payment is $0. This is meant to prevent interest from snowballing for low-income debtors.
In July 2024, more changes are set to take place, including a rule that caps undergraduate loans at 5% of discretionary income, as opposed to 10% currently. Those with graduate and undergraduate loans could expect to pay between 5% and 10% per month, depending on the initial balance.
That same month, borrowers with initial balances of $12,000 or less will get the remainder of their loans canceled after 10 years of repayment, with an additional year of payments for each $1,000 borrowed.
Supporters of the new plan say it will provide much-needed relief to debtholders struggling to catch up on their payments, though opponents say it passes the costs of student loans onto taxpayers, many of whom never went to college themselves.
The SAVE plan will replace the existing Revised Pay As You Earn (REPAYE) plan, and borrowers on the REPAYE plan will automatically receive the benefits of the SAVE plan, according to the USDOE.
To apply for an income-driven repayment plan, visit the department’s website by clicking here. For more information about the plan, click here.
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