The Biden administration launched a beta application for its new student loan repayment plan, providing borrowers an early opportunity to join the program.
The SAVE plan is an income-driven repayment program or IDR, that ties a borrower’s monthly payment to their income, lessening their financial load. However, IDRs have had several significant drawbacks, such as enabling interest to accumulate on a borrower’s debt, prompting the Biden administration to establish SAVE as an alternative.
The launch of the new beta site comes as student loan repayments are expected to start this fall following a three-year hiatus due to the COVID health crisis, and only a month after the Supreme Court rejected President Joe Biden’s plan to wipe out up to $20,000 in debt per student borrower. Borrowers’ monthly payments will resume in October, with interest beginning to accrue in September.
Here’s what to know about the new SAVE student loan repayment plan:
How do I sign up for the SAVE student loan repayment plan?
The Federal Student Aid income-driven repayment plan website hosts the beta site. You’ll see a link at the top of the page that states, “New: Apply for SAVE Plan.”
Applicants can begin an IDR application, which includes the opportunity to participate in the new SAVE student loan repayment plan, according to the website.
“We’re accepting applications now to help us refine our processes ahead of the official launch,” the site says. “If you submit an IDR application now, it will be processed and will not need to be resubmitted.”
I don’t see the SAVE option. What happened?
According to the Education Department, if you apply to the new student loan repayment plan and do not see an option, you should try again later.
The SAVE option, according to the Biden administration, will be “available on and off during this beta testing period.”
What will my payments be under the new SAVE student loan repayment plan?
Borrowers’ monthly payments could be lowered in half or possibly eliminated entirely. According to the Biden administration, many others will save up to $1,000 per year on repayments.
Lower-income households with more family members pay the least under the scheme, which is dependent on income and family size.
According to the Education Department, a household with four family members and an annual income of $60,000 would pay $0 per month under the new student loan repayment plan, whereas a one-person household with the same income would pay $227 per month.
Who qualifies for the new SAVE student loan repayment plan?
According to the Education Department, the SAVE student loan repayment plan is offered to borrowers who have a direct loan in good standing.
People currently enrolled in the Revised Pay-As-You-Earn (or REPAYE) plan will be automatically enrolled in the SAVE plan, with their payments adjusted, according to the Biden Administration.
How does the SAVE plan cut monthly payments?
The SAVE student loan repayment plan lowers the percentage of personal income that borrowers must pay toward their student loans each month. According to the Biden administration, the present IDRs for undergraduate loans calculate that borrowers pay 10% of income beyond 225% of the poverty level, but the SAVE plan will reduce that to 5%.
Borrowers with both undergraduate and graduate loans will pay a weighted average of 5% to 10% of their income, based on the original principal balances of their loans, according to the report.