The Biden administration has unveiled its groundbreaking income-driven student loan repayment plan known as the ‘Saving on a Valuable Education’ or the SAVE plan.
Beta Launch of the SAVE Plan: Borrowers Can Enroll Now for Future Benefits
The Department of Education released a beta website on Monday, offering borrowers a glimpse of the most affordable repayment plan to date. The new SAVE plan replaces the existing Revised Pay As You Earn Repayment (REPAYE) plan and promises to revolutionize student loan repayment for millions of borrowers. One of the significant changes introduced by the SAVE plan is an increase in the income exemption threshold from 150 percent to 225 percent above the poverty line. This means that individuals earning less than $32,800 annually could have zero monthly payments under this new program. Moreover, the SAVE plan aims to relieve the financial strain on borrowers by preventing unpaid interest from accruing while they make their monthly student loan payments. Additionally, the SAVE plan offers a reprieve for married borrowers who file separately by excluding spousal income from the repayment calculation.
How the SAVE Plan Works
igher Income Exemption and Zero Interest Growth: Inside the SAVE Plan (PHOTO: Kenny Eliason)
Officials have expressed enthusiasm over the user-friendly approach of the SAVE plan. Borrowers will now have access to a comprehensive application process that automatically inserts certain information, such as tax returns, thanks to data already on file with the government. This streamlined process will enable borrowers to view their exact monthly payment amount and select the most suitable repayment option for their financial situation. The full website launch is expected to happen in August, following the beta period’s assessment, during which borrowers who apply for SAVE will not need to reapply once the plan goes live. The implementation of the SAVE plan comes at a critical juncture, as borrowers are set to end their three-year-long pause on student loan payments. This new repayment system will provide a smoother transition for borrowers, allowing them to resume payments without penalties like credit score ratings being affected, until September 2024. Touted as the most generous IDR plan by the administration, the SAVE plan is projected to cost between $150 billion to $350 billion annually, bringing substantial relief to millions of borrowers burdened by student loan debt.
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