Biden's SAVE Plan To Cut Student Loan Payments In Half

U.S. President Joe Biden delivers remarks on his plan to withdraw American troops from Afghanistan, at the White House

The Biden administration's SAVE (Saving on a Valuable Education) plan is set to bring relief to millions of borrowers with federal student loans. This new repayment plan, fully phased in this summer, offers lower monthly payments and potential debt cancellation after 10 years of payments for some borrowers.

Under the SAVE plan, monthly payments are based on a borrower's income and family size, rather than the amount of student debt. Starting in July, payments for undergraduate loans will be reduced from 10% to 5% of discretionary income, providing significant relief for many borrowers.

For borrowers with loans from both undergraduate and graduate school, payments will be calculated based on a weighted average of their original loan balances. This adjustment aims to make payments more manageable for those with multiple sources of student debt.

Payments for undergraduate loans will be reduced from 10% to 5% of discretionary income.

SAVE plan reduces monthly payments based on income and family size.

Payments for borrowers with loans from both undergraduate and graduate school are calculated based on a weighted average.

One key feature of the SAVE plan is its ability to shield a larger portion of a borrower's income, resulting in lower payments compared to other income-driven repayment plans. This provision can reduce payments to as low as $0 for some borrowers, offering crucial support to those facing financial hardship.

In addition to lowering monthly payments, the SAVE plan also prevents interest from accruing when a borrower's payment is insufficient to cover the full amount. This feature helps prevent loan balances from growing uncontrollably, providing peace of mind to borrowers struggling to make ends meet.

Furthermore, borrowers enrolled in SAVE may be eligible for debt forgiveness in as little as 10 years, compared to the 20 years required by other repayment plans. The Biden administration has already begun canceling eligible borrowers' debt, with $5.5 billion forgiven for 414,000 participants in the program.

Despite the benefits offered by the SAVE plan, it has faced legal challenges from Republican-led states, with some arguing that the administration is overstepping its authority. The estimated cost of the program varies, with projections ranging from $138 billion to $475 billion over the next decade.

Overall, the SAVE plan represents a significant step towards easing the burden of student loan debt for millions of Americans, providing much-needed relief and a pathway to financial stability.