Over 75 million student loan debtors have enrolled in the U.S. government's newest repayment scheme, the SAVE plan, since its introduction in August.
Recently, President Joe Biden canceled federal student debts for approximately 153,000 borrowers engaged in the SAVE plan, eligible for forgiveness if they had borrowed $12,000 or less and made payments for at least ten years.
The SAVE plan, replacing earlier income-based repayment programs, offers lower payments for many borrowers, with some eligible for payments as low as zero dollars, and prevents interest from accruing, with major alterations slated for July 2024, including reducing the payment ceiling to 5% of discretionary income for borrowers in good standing with their Direct Loan Program loans.
Since its August introduction, the U.S. government's newest repayment scheme has drawn in over 75 million student loan debtors.
Since its August introduction, the U.S. government's newest repayment scheme has drawn in over 75 million student loan debtors. (Photo : by Mario Tama/Getty Images)
Recently, approximately 153,000 borrowers who were engaged in the SAVE plan had their federal student debts canceled by President Joe Biden. Borrowers who had borrowed $12,000 or less and had made payments for at least ten years were eligible for forgiveness.
The federal government replaced earlier income-based repayment programs with the SAVE scheme last year. In comparison to prior repayment programs, many borrowers will now be eligible for lower payments, and many may even be able to have their monthly payments lowered to zero dollars.
Income-Driven Payment Plan
There are many repayment options available for federal student loans from the U.S. Education Department. The typical plan charges debtors a set monthly sum that guarantees, after ten years, full repayment of their loan. However, borrowers can sign up for one of several options that offer reduced monthly payments based on income and family size if they are unable to pay that amount. These are referred to as arrangements for repayment based on income.
Income-driven solutions have been available for a long time, with monthly payments typically capped at 10% of the borrower's disposable income. A borrower's bill is lowered to $0 if their income is sufficiently low. And any debt that remains is canceled after twenty or twenty-five years.
In the SAVE plan, more debtors qualify for no payments at all. If borrowers earn less than 225% of the federal poverty level, or $32,800 annually for a single person, they won't be required to make payments under this scheme. In contrast, the threshold for alternative plans is 150% of the federal poverty level, or $22,000 annually for an individual.
Furthermore, the SAVE plan keeps interest from accruing. Borrowers' total amount won't go up as long as they make their monthly payments. Any outstanding interest is eliminated once they complete their adjusted monthly payment, even if it is zero dollars.
Major alterations will also begin in July 2024. The current 10% ceiling on student loan payments will be reduced to 5% of discretionary income. Depending on their initial loan level, borrowers with graduate and undergraduate loans will pay back anywhere from 5% to 10%.
All Direct Loan Program student loan borrowers who are in good standing with their loans can enroll in the SAVE plan.
