Biden Administration Launches New Application for Student Loan Repayment Plans
The Biden administration will submit an application for a new student loan repayment plan on Tuesday, the latest effort to provide relief to borrowers as payments resume despite significant political obstacles.
“This plan is a game changer for millions of Americans; many are putting off having children, buying their first home, or even starting a business because they can’t get out from under their student loans. Student loans will be manageable,” Biden’s domestic policy adviser, Neera Tanden, said.
The new plan is part of the administration’s ongoing efforts to address student loans, which were thwarted earlier this year by the Supreme Court’s decision to cancel up to $20,000 in debt for some borrowers.
The SAVE, or Saving on a Valuable Education, plan is an income-driven repayment program that calculates payment size based on income and family size.
It permits borrowers who make consistent monthly payments to have their debt forgiven after a specified number of years.
Beginning in July 2024, borrowers approved for a SAVE plan will have their monthly payments for undergraduate loans cut in half, from 10% to 5% of disposable income—the money left over after paying for necessities such as food and housing.
Those with both graduate and undergraduate loans would pay between 5 and 10% of their income, based on the amounts of their initial loans.
The administration estimates this will result in an annual savings of approximately $1,000 per borrower.
For undergraduate loans, the required repayment period for borrowers with initial loan amounts of less than $12,000 will be drastically reduced from 20 to 10 years.
Those with larger initial principles will be required to make one additional year of payments for every $1,000 in additional loan balance, up to a maximum of 20 years.
Can SAVE lessen the burden on borrowers as payments resume? Some aspects of the program will take effect sooner to provide relief to those who are preparing to resume student loan payments suspended for more than three years due to the coronavirus pandemic.
Starting this summer, an individual approved for a SAVE plan whose income is less than $32,805 will have their monthly payment reduced to $0 until their income increases. The same applies to a family of four earning less than $67,500.
The Department of Education will also cap interest accrual for those approved for SAVE, essentially canceling any interest not covered by their monthly payments to prevent loans from growing.
The administration urges anyone interested in applying for SAVE to do so within the next few days, expecting these benefits to become effective when payments resume in October. However, no specific date has been provided.
Senior administration officials estimate that servicers will need about four weeks from when an application is received to process it.
The SAVE plan benefits eligible borrowers, including those with direct subsidized loans, direct unsubsidized loans, and other loans.
To qualify for the SAVE plan, borrowers with older loans might need to consolidate them into a direct consolidation loan.
To sign up, visit StudentAid.gov/SAVE and complete the application; the application status will be visible on your account’s dashboard.
Borrowers enrolled in the income-driven repayment plan REPAYE will have their monthly payments automatically adjusted to the SAVE plan before payments resume in October.
The initiative is expected to help more than 20 million student borrowers, particularly low- and middle-income families dealing with debt.
Understanding the Supreme Court’s Decision Regarding Student Debt Relief
In June, the Supreme Court ruled against a Biden administration program that would have canceled between $10,000 and $20,000 in federal loans for low-income borrowers.
Since then, the White House has attempted to address the debt in alternative ways, including revamping one of the most popular income-driven repayment programs, REPAYE, into the SAVE program.
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Source: abc NEWS
