Saving On A Valuable Education (SAVE) Student Loan Repayment Plan Replaced The Revised Pay As You Earn (REPAYE) Program
In a recent move, President Joe Biden’s administration introduced a groundbreaking income-driven student loan repayment plan, known as Saving on a Valuable Education (SAVE), aimed at providing much-needed relief to borrowers burdened by student loans.
This innovative student loan repayment plan, which will replace the Revised Pay As You Earn (REPAYE) program, promises to lower monthly bills and reduce the total amount repaid over the life of the loans. With the Supreme Court’s rejection of Biden’s student loan forgiveness program, the new student loan repayment plan or SAVE emerges as a crucial step towards easing the financial strain of student debt.
One of the most significant advantages of the new student loan repayment plan or SAVE is the potential for borrowers to witness their monthly bills cut in half, paving the way for complete debt cancellation after making a minimum of 10 years of payments. The best part is that this new student loan repayment plan is available to both current and future borrowers who enroll, unlike the blocked one-time forgiveness program. By applying for the new student loan repayment plan or SAVE this summer, eligible borrowers can experience the changes in their bills before the resumption of payments in October, following the pandemic-induced pause. (See reference here: FORBES)
The Department of Education has undertaken a formal rulemaking process for the new student loan repayment plan or the SAVE plan, ensuring a thorough implementation and avoiding potential legal challenges. While the cost to the government is a concern, with estimates ranging from $138 billion to $475 billion over a decade, it is a relatively more feasible option than Biden’s previous student loan forgiveness program, which was projected to cost around $400 billion.
New SAVE Student Loan Repayment Plan: What Are Its Propitious Elements?
Key elements of the new student loan repayment plan or SAVE plan set to be implemented this summer include an increase in the protected income threshold to 225% of the federal poverty guidelines. This change means that borrowers with lower incomes, such as single individuals earning less than $32,805 or families of four earning less than $67,500, may qualify for a monthly payment as low as $0. Additionally, unpaid interest will no longer accumulate for borrowers who make full monthly payments, ensuring their loan balances do not grow unexpectedly. (Know more about SAVE here: CBS News)
Another noteworthy feature of the new student loan repayment plan or SAVE is its provisions for married borrowers. Those filing taxes separately will no longer be required to include their spouse’s income in payment calculations, potentially reducing monthly payments for two-income households.
Moving forward, the new student loan repayment plan will offer even more benefits once fully implemented in July 2024. The new repayment plan brings a substantial reduction in payments for borrowers with undergraduate loans, cutting them in half from 10% to 5% of income above 225% of the poverty guidelines. Moreover, for those juggling both undergraduate and graduate loans, the payment will be determined based on a weighted average ranging from 5% to 10% of their income, depending on the initial principal balances of their loans. This move provides much-needed relief to borrowers, easing the financial burden they face.
Moreover, the new student loan repayment plan aims to shorten the path to debt forgiveness, especially for borrowers with relatively small loan balances. Those who initially borrowed $12,000 or less will be eligible for forgiveness after 10 years of payments, while additional years of payments will be required for borrowers with higher initial loan balances.
Overall, the new student loan repayment plan or SAVE represents a significant stride towards addressing the student debt crisis, offering genuine support and tangible solutions to borrowers struggling with their loans. By providing affordable repayment options and faster paths to loan forgiveness, President Biden’s administration is aiming to alleviate the financial burden on countless individuals seeking a valuable education.