The Biden Administration has announced the official launch of the most affordable student loan repayment plan – the Saving on a Valuable Education (SAVE) plan.
Also, an outreach campaign to encourage eligible borrowers to sign up for the plan has been kicked off.
The SAVE plan is an income-driven repayment (IDR) plan that calculates payments based on a borrower’s income and family size – not their loan balance – and forgives remaining balances after a certain number of years.
The SAVE plan will cut many borrowers’ monthly payments to zero, will save other borrowers around $1,000 per year, will prevent balances from growing because of unpaid interest, and will get more borrowers closer to forgiveness faster.
The SAVE plan builds on the actions the Biden Administration has already taken to support students and borrowers, including cancelling more than $116 billion in student loan debt for 3.4 million Americans.
It is estimated that more than 20 million borrowers could benefit from the SAVE plan. Borrowers can sign up today by visiting StudentAid.gov/SAVE
The SAVE plan will cut payments on undergraduate loans in half. Borrowers with undergraduate loans will have their payments reduced from 10 percent to 5 percent of their discretionary income. Those who have undergraduate and graduate loans will pay a weighted average between 5 percent and 10 percent of their income based upon the original principal balances of their loans.
A borrower who makes about $15 an hour will not have to make any monthly payments. Borrowers earning above that amount would save around $1,000 a year on their payments compared to other IDR plans. The Department of Education estimates that more than 1 million additional low-income borrowers will qualify for zero repayment. This will allow them to focus on food, rent, and other basic needs instead of loan payments, the White House said.
The scheme will ensure that borrowers never see their balance grow as long as they keep up with their required payments.
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