President Joe Biden’s new student loan forgiveness backup plan, SAVE, aims to halve undergraduate loan repayments for most borrowers.
Any borrower with a federal loan in good standing will be eligible, according to the White House. Also, anyone enrolled in her REPAYE, an existing pay-as-you-get program, will be automatically rolled into her SAVE.
The direct-application website is expected to go online later this summer, the White House said.Borrowers who want to start now You can enroll in an existing income-driven repayment plan It should automatically roll into the SAVE.
Some changes will come into force this summer According to the White House, SAVE borrowers include:
- Suspend payments to people earning less than 225% of the federal poverty level. This means that if you are a single borrower with an income of $32,800 or less in 2023, or a family of four with an income of $67,500 or less, you do not owe any loan payments.
- Those who make regular monthly payments do not have to pay any additional accrued interest. So if $70 interest accrues on your balance each month, but your payment is set at $50, you won’t be charged the remaining $20.
The White House claims the new plan will relieve millions of debt. Many borrowers will see their monthly payments cut, and those earning less than $15 an hour won’t have to pay.
SAVE programs are likely to be subject to intense political and legal scrutiny. It’s also not clear if loan servicers are ready to renew millions of accounts.
The U.S. Department of Education will pursue the Debt Relief Program under the authority of the Higher Education Act, a different strategy than last time. The federal rulemaking process is slow, likely to take months, if not longer.
“This new path is legally sound,” Mr. Biden said Friday. “It will take longer, but in my opinion this is the best path left to provide debt forgiveness to as many borrowers as possible.”
Importantly, Biden’s SAVE program will not suspend current payment plans.
Borrowers should plan to resume their current federal payment plans this fall, unless they receive notice that they are on a SAVE plan. There is no specific rollout date for the SAVE program, but the White House said those applying for IDR plans this summer should be processed and approved in time for the first federal payment deadlines this fall.