Biden admin launches new income-driven student loan repayment program

The Biden administration officially launched the new income-driven student loan repayment plan for borrowers Tuesday, ahead of repayments restarting this fall.

The official launch of the Saving on a Valuable Education (SAVE) plan comes just weeks before interest will begin to accrue on student loans for the first time in more than three years in September. Repayments will resume in October, although no financial consequences will come to borrowers if they are unable to pay for up to a year. 

“Starting today, millions of borrowers can reduce their monthly student loan bills by enrolling in the SAVE plan, the most affordable repayment plan in history,” said Education Secretary Miguel Cardona. “The SAVE plan is another huge step forward in President Biden’s tireless efforts to fix the broken student loan system, reduce the burden of student debt on working families, and put borrowers first.”

Borrowers can visit a page on the Federal Student Aid website and find a quick application process that takes around 10 minutes to complete. Some information that may be difficult for borrowers to find for the application, such as tax returns, can automatically be inserted by the department due to information the government already has.

The launch of the SAVE plan comes after it has been in a beta testing phase for almost a month for officials to work out the bugs on the website.

Those who are on the Revised Pay As You Earn Repayment (REPAYE) plan or applied for the SAVE plan during the beta testing period do not need to fill out the application. Borrowers who miss a certain number of payments will also automatically get enrolled in the SAVE plan. 

A senior administration official said borrowers who want to see the benefit of the SAVE plan before payments restart should apply in the next few days. Applications will take around four weeks to process, the official said. 

“It’s the most affordable student loan plan ever,” President Biden said in a video Tuesday, adding that his administration “will never stop fighting to deliver relief to borrowers and bring the promise of college to more Americans.”

The administration also announced an outreach campaign to ensure borrowers are aware of the new plan, which officials say will save borrowers “millions” on monthly payments. 

The campaign, called “SAVE on Student Debt,” will work in partnership with numerous grassroots organizations and have a “SAVE on Student Debt Week of Action” in September to make borrowers aware of the plan. The organizations will work to host phone banks, workshops, town halls and social media campaigns that explain the program and its benefits. 

The plan will have a two-phase rollout, as some of the program will be implemented this year and other aspects will not go into effect until July 2024. 

This year, the income exemption for monthly payments will be raised from 150 percent above the poverty line to 225 percent, meaning more borrowers will qualify for $0 monthly payments under this plan. 

An individual borrower making up to $32,800 per year and a family of four making less than $67,500 per year will have $0 monthly payments. The federal government says the number of borrows eligible for those payments will total 1 million.

Other changes this year include that unpaid interest will not grow if borrowers are making their payments, and income for borrowers who are married but file separately will not be counted. 

Multiple other changes will occur next July, such as cutting monthly payments from 10 percent to 5 percent of a person’s discretionary income for undergraduate loans.

The new program comes after the Supreme Court over the summer struck down the Biden administration’s plan to forgive up to $20,000 of student debt per borrower.

In the SAVE plan announcement, the administration highlighted that it has forgiven more than $116 billion in student loan debt for 3.4 million borrowers through different programs. 

A universal student loan forgiveness program is still in the works as the Education Department has begun the negotiated rulemaking process to develop a new plan, but details on who will qualify and how much debt forgiveness would occur under such a program will not be available for months.