Student loan forgiveness: What to know about the SAVE plan
The newest federal income-driven repayment (IDR) plan for student loans, called the SAVE plan, has been deemed one of the most generous to date.
The SAVE plan, which is short for "Saving on A Valuable Education," launched in August and replaced a previous IDR plan called Revised Pay As You Earn (REPAYE).
On all IDR plans, monthly payment amounts are based on income and family size.
Under the new SAVE plan, millions of borrowers have qualified for $0 monthly student loan payments, and those who make monthly payments won’t see interest accrue on their loan balance.
SAVE student loan repayment plan: Key highlights
Roughly 7.5 million borrowers were enrolled in SAVE as of this week, according to the White House. More than half of this group — 4.3 million people — have qualified for $0 monthly student loan payments.
Some key things to know about the SAVE plan:
- Borrowers earning $32,800 or less individually (roughly $15 dollars per hour), are eligible for a $0 monthly payment under the plan. Those who earn less than $67,500 for a family of four will see $0 monthly bills.
- Most other borrowers will see their monthly payments on undergraduate loans cut in half. Currently, it’s calculated to be 10% of the borrower’s discretionary income, but in July 2024, that number will drop to only 5%.
- For those who make monthly payments, interest won't build up on their student loan balance.
- Those who borrowed $12,000 or less will receive complete student loan forgiveness after 10 years of payments, instead of 20 to 25 years. Those who borrowed more than $12,000 will see their repayment term rise by one year for every additional $1,000 borrowed. Example: Originally borrowing between $12,001 and $13,000 means a student will see their balance wiped away after 11 years.
New student loan forgiveness
President Joe Biden this week announced the first round of student loan forgiveness under the administration’s SAVE plan, helping about 153,000 borrowers to erase about $1.2 billion in debt.
Those eligible in the most recent round of student debt forgiveness included:
- Those enrolled in the SAVE repayment plan
- Have been in repayment for at least 10 years
- Took out $12,000 or less in loans for college
The U.S. Department of Education said borrowers who met the criteria will have their debt canceled starting this week and should have received an email on Feb. 21 from Biden informing them of the action, according to the Department of Education.
The agency emphasized how those who took out more than $12,000 are still eligible. For every additional $1,000 a borrower initially borrowed, they’ll receive relief after an additional year of payments, the administration said.
Student loan SAVE plan application
Student loan borrowers can use the IDR application to apply for the SAVE Plan.
Those who were on the old REPAYE Plan have been automatically enrolled in the SAVE Plan, according to the U.S. Department of Education – adding that there is no need to reapply or request to change the plan.
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This story was reported from Cincinnati. Megan Ziegler contributed from Detroit.