Student loan borrowers could save thousands of dollars over the life of their loans due to changes to income driven repayment (IDR) plans set to go into effect this fall. The changes are possible despite a blow dealt to debt forgiveness by the Supreme Court late last month. The Biden administration introduced the Saving on…
Student loan borrowers could save thousands of dollars over the life of their loans due to changes to income driven repayment (IDR) plans set to go into effect this fall.
The changes are possible despite a blow dealt to debt forgiveness by the Supreme Court late last month.
The Biden administration introduced the Saving on Valuable Education (SAVE) plan to transform the old IDR system into what the Department of Education called “the most generous” student repayment option ever given to borrowers.
Here’s what borrowers should know about the new SAVE plan before payments resume this fall after a three-year hiatus. What is the SAVE plan?
The plan, announced earlier this year, makes multiple significant changes that will lower the monthly payment for many borrowers, including some who could see their bill go to $0 a month by enrolling in the program.
Anyone with Direct Loans can enroll in the plan, replacing the old Revised Pay-as-You-Earn (REPAYE) student loan system. Those who are already in the REPAYE program will automatically be switched to the SAVE program.
One of the biggest changes in the SAVE plan is the income protected from payments will rise from 150 percent above the federal poverty guidelines to 225 percent.
This means a single person earning less than $32,805 a year will have monthly payments of $0. The same would happen to families of four that make less than $67,500.
The administration touts the new plan will save a single borrower $1,080 a year and families of four $2,244 a year.
And the plan also includes a provision to automatically enroll borrowers who become delinquent on payments.
“The borrowers who are most vulnerable to default, if they’re able to implement automatic enrollment in this plan, effectively, those borrowers when they if they fall behind on their payments, once they’re 75 days delinquent, they’ll be enrolled in this plan,” Jason Cohn, a research analyst at The Urban Institute’s Center on Education Data and Policy, told The Hill.
