July 5, 2023
INSIDE BIDEN’S NEW ‘SAVE’ REPAYMENT PLAN FOR STUDENT LOANS:
Alongside his pledge to start over on a plan to cancel student debt, President Joe Biden last week unveiled the final details of his separate, student loan repayment program. The program, which has been in the works for more than a year, will permanently reshape how borrowers repay their federal student loans.
Here’s our quick guide to Biden’s new “SAVE” plan for student loan repayment:
— What’s in the plan: The finalized income-driven repayment program is largely unchanged from the initial proposal the administration unveiled in January. Many borrowers would face lower monthly payments, the department will curb interest accrual, and borrowers with relatively smaller balances could see loan forgiveness more quickly.
— What’s not in the plan: The administration rejected calls to lower the monthly payment amount (5 percent of income) for graduate borrowers, keeping the benefit only for undergraduate borrowers. And the administration didn’t budge on Parent PLUS borrowers, who remain excluded from the new program.
— Phased implementation: A key feature of the plan that Biden touted on Friday — cutting payments for undergraduate borrowers in half — won’t be available to borrowers for another year, in July 2024. That’s because the administration is implementing the new program in phases. Here’s how the Education Department says it’ll work:
— Sign-ups start soon: The department says that “later this summer” borrowers will be able to begin enrolling in the SAVE plan. It plans to automatically switch borrowers currently enrolled in the existing REPAYE plan to SAVE at that time. The department says that borrowers who apply for one of those plans “this summer” will have their applications “processed in time” for their first payment due dates that begin in October.