- Biden officially launched the new income-driven student-loan repayment plan, known as the SAVE plan.
- His administration said the plan will ensure anyone making $15 an hour or less will have $0 payments.
Weeks before the student-loan payment pause ends, President Joe Biden has officially launched his new income-driven repayment plan.
On Tuesday, Biden's administration announced that student-loan borrowers can now officially enroll in the Saving on a Valuable Education, or SAVE, plan, after it began beta testing the program in July. According to the press release, the Education Department in the coming days will begin reaching out to nearly 30 million student-loan borrowers to invite them to apply for the SAVE plan, and it anticipates that over 20 million borrowers will be eligible to enroll in the plan when federal student-loan payments resume in October.
"The SAVE plan is a sea change for students, making college loans far more affordable than ever before," Under Secretary of Education James Kvaal said in a statement. "It will cut payments to zero for borrowers making roughly $15 an hour, save all other borrowers at least $1,000 a year compared to other income-driven repayment plans, and stop runaway interest that leaves folks owing more than their initial loan."
The SAVE plan makes a number of changes to existing income-driven repayment plans, which are intended to give borrowers affordable monthly payments with the promise of loan forgiveness after 20 or 25 years. Specifically, the plan would cut payments for undergraduate loans in half and stop charging monthly interest on borrowers' balances as long as they continue to make their required monthly payments.
Additionally, the plan would ensure that a single borrower who makes about $15 an hour would not have to make any monthly payments — and the department estimates that an additional 1 million low-income borrowers would experience that benefit.
Borrowers can now apply for the SAVE plan on Federal Student Aid's website, which the department says takes just ten minutes to compete. The application also allows borrowers to choose to have the Internal Revenue Service access their income each year so they do not have to recertify their income annually, preventing borrowers from forgetting to submit the required paperwork.
"Most borrowers who apply for the SAVE plan in the coming days can expect to have their new monthly payment amount for their first payment in October," the department's press release said. "After borrowers apply, they can check the status of their application by visiting their account dashboard on StudentAid.gov. Borrowers who are currently enrolled in the REPAYE plan will automatically have their monthly payments adjusted to the new SAVE plan before payments restart."
Along with the formal launch of the application, the department also announced it would be partnering with groups including the NAACP and the Student Debt Crisis Center to promote outreach surrounding repayment options, along with offering training on resources borrowers can use as they reenter repayment.
"The SAVE plan is a game changer," Education Secretary Miguel Cardona told reporters on a Monday press call. "Take a nurse earning $77,000 a year married with two kids. With SAVE, their payment will drop from $267 a month to just $40 a month. That's over $2,700 a year in savings. This is real money President Biden is putting back into the pockets of working families. And when borrowers struggle to make ends meet, we're not going to kick them while they're down. SAVE is the first true student loan safety net in the country."
Despite the promised benefits of the new plan, some borrowers have reported difficulties enrolling since the option became available, including some telling Insider in emails that their new monthly payment estimate is inaccurate. Senior administration officials told reporters on the press call that they believe the enrollment process will be smooth, and an Education Department official previously told Insider that the department is in constant communication with student-loan servicers to ensure it is properly communicating with borrowers as repayment resumes.
Along with the SAVE plan, the department has also started wiping out $39 billion in student debt for over 800,000 borrowers on income-driven repayment plans who have completed their qualifying 20 or 25 years of payments. The department said it will continue checking borrowers' accounts every two months to determine who qualifies for relief.