The Biden administration on Tuesday, August 22 announced the details of the best deal ever offered to federal government student loan borrowers who qualify for income-driven repayment (IDR),
The Department of Education is now accepting applications for the “Saving on a Valuable Education” program or SAVE.
The SAVE Plan replaces the Revised Pay As You Earn (REPAYE) Plan. Borrowers on the REPAYE Plan automatically get the benefits of the new SAVE Plan.
Many borrowers qualify for $0 repayment plans if they make less than $15/hour. It computes payments based on income and family size, and it keeps interest from exploding.
Under this program, as long as you make your payments, your interest on your balance will not increase. That has not been true for some other repayment plans.
Under the new plan, the average borrower will save $1,000 per year.
If you’re already in an income-based repayment plan, you’ll be transferred over automatically if you qualify for the better deal.
Others will have to apply to the program to qualify.
The new plan also accelerates loan forgiveness for borrowers with low starting principal balances. Borrowers who took out $12,000 or less in federal loans could have their remaining balances canceled after 10 years under the SAVE plan. Each additional $1,000 borrowed would add another year of repayment, so the remaining balance on a $14,000 initial loan would be forgiven after 12 years, for instance.
All outstanding balances would be forgiven after 20 years, according to a blog post explaining the program by the White House Council of Economic AdvisersBarron’s – August 22, 2023
For complete information, visit https://www.studentaid.gov/save
You can also apply for the program there.
The SAVE program can plug into the IRS database to verify borrowers’ incomes, meaning that they won’t need to go through the annual income-recertification process that other IDR plans require.
The new plan also includes a more generous exemption for repayments than the Education Department’s previous program, the Revised Pay as You Earn (Repaye) plan. The SAVE plan increases the income exemption to 225% of the poverty line, so single borrowers earning $32,800 or less and families of four earning $67,500 or less wouldn’t be required to make any payments, according to a fact sheet from the department. The Education Department estimates that more than one million borrowers will see their monthly repayment obligations drop to zero under the new plan.
For borrowers with only undergraduate loans whose earnings are above the zero-payment threshold, the SAVE program would set their payments at 5% of their discretionary income, down from 10% under the old plan.Barrons – August 22, 2023