As part of its most recent effort to provide relief to borrowers as payments begin amid considerable political obstacles, the Biden administration is releasing an application for a new student loan repayment plan on Tuesday.

For the millions of Americans who are delaying having children, purchasing their first house, or even starting a business because they can’t pay off their student loans, this strategy is a game changer. Neera Tanden, Biden’s domestic policy adviser, predicted that student loan debt would be manageable.

The Supreme Court earlier this year rejected the administration’s attempt to completely wipe out up to $20,000 in debt for some borrowers, so the administration is now redoubling its attempts to address student loans.

SAVE plan

Saving on a Valuable Education, or SAVE, is an income-driven repayment program that figures payment amounts based on family size and income. After a specific number of years, it enables borrowers who regularly make their monthly payments to see their debt cancelled.

Beginning in July 2024, borrowers who are accepted into the SAVE plan will have their undergraduate loan payments cut in half, from 10% to 5% of their disposable income (the money left over after paying for necessities like food and rent).

For those with both graduate and undergraduate loans, payments would be between 5-10% of their income, weighted based off their initial loan amounts.

note: Biden administration begins canceling student loan debt for 804,000 borrowers

According to the government, this will result in annual payment savings for the average borrower of roughly $1,000.

Additionally, the necessary repayment period for undergraduate loans for borrowers with initial loan amounts of $12,000 or less would be drastically shortened, from 20 years to 10 years. For every additional $1,000 in debt, those with larger original principle will have to make an extra year’s worth of payments, up to a maximum of 20 years.

Can SAVE help debtors feel less burdensome as payments start up again?

Some aspects of the program will begin to take effect sooner to provide assistance to those getting ready to start making student loan payments again after they were stopped for more than three years due to the coronavirus outbreak.

Beginning this summer, a person who is qualified for a SAVE plan and earns less than $32,805 will have a $0 monthly payment until their income rises. A family of four earning less than $67,500 has the same situation.

In order to stop debts from rising, the Department of Education will also cap interest accrual for those who are qualified for SAVE, thereby canceling any interest that is not covered by their monthly payments.

Although no specific date was provided, the administration is inviting anyone interested in applying for SAVE to do so as soon as possible with the assumption that these benefits will begin when payments restart in October.

Didn’t the Supreme Court rule against student loan forgiveness?

The Supreme Court rejected a Biden administration scheme in June that would have canceled between $10,000 and $20,000 in government loans for those earning less than a set salary.

Since then, the White House has attempted to address the debt in a variety of ways, including rebranding one of the most popular income-driven repayment programs, REPAYE, as the new SAVE program.

“The Biden administration’s overtly political attempt to sidestep the Supreme Court is a disgrace.” “To chase headlines, the Biden administration is trampling the rule of law, harming borrowers, and abusing taxpayers,” Republican Rep. Virginia Foxx, chairwoman of the House Education and Workforce Committee, said in a statement last month.

Who is eligible?

Most borrowers are eligible loans for benefits provided by the SAVE plan, including direct subsidized loans, direct unsubsidized loans, and others, according to a Department of Education spokesperson.

Some borrowers with older loans will have to first consolidate them into a direct consolidation loan to be eligible for repayment under the SAVE plan, per the spokesperson, and the application will walk borrowers through any actions they need to take to make these loans eligible.

How do I sign up?

Anyone interested in signing up for a SAVE plan should visit StudentAid.gov/SAVE to fill out the application. Application status should be visible on the account’s dashboard once completed.Borrowers who are currently enrolled in the income-driven repayment plan REPAYE will automatically have their monthly payments adjusted to the new SAVE plan before payments restart in October.The administration estimates more than 20 million student borrowers could benefit from SAVE, which will particularly benefit low- and middle-income families struggling to dig out from debt.

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