The Biden administration has launched the beta version of the Saving on a Valuable Education (SAVE) plan. This initiative, which comes in the wake of the Supreme Court’s rejection of President Joe Biden’s student debt forgiveness proposal, represents a significant change to the federal student loan system.
The SAVE plan allows federal student loan borrowers to apply for the income-driven repayment program through a user-friendly website accessible at https://studentaid.gov/idr/. Officials predict that the enrollment process will only take approximately 10 minutes, with certain sections automatically populated using information from the IRS, such as tax returns. Borrowers will be able to view their exact monthly payment amount and choose the most affordable repayment plan for their circumstances, streamlining the application process.
Unlike previous systems, borrowers will only need to apply once for the SAVE plan, and it will not require annual resubmissions, enhancing its user-friendliness. Applicants will receive confirmation emails upon submitting their applications, and the approval process, which can be tracked online, is anticipated to take a few weeks.
Those currently enrolled in the federal government’s Revised Pay As You Earn (REPAYE) income-driven repayment plan will be automatically transitioned to the new SAVE plan without the need for additional applications.
The full website launch is expected in August, but early applications during the beta period will not require resubmission. The Department of Education plans to closely monitor site performance in real-time to identify any issues, and updates may be made as necessary during the beta period.
Under the SAVE plan, monthly loan payments will be determined based on borrowers’ income and family size, potentially reducing some payments to as low as $0. The income threshold for qualifying for $0 payments has been raised to 225% of the federal poverty guidelines, equating to an annual income of $32,805 for single borrowers or $67,500 for families of four. This adjustment is estimated to enable over one million additional borrowers to qualify for $0 payments.
One of the plan’s most noteworthy aspects is that borrowers may see their monthly payments cut in half when it takes full effect next year, and after making at least ten years of payments, they could have their remaining debt canceled—a marked departure from previous repayment programs.
Another significant feature of the SAVE plan is that unpaid interest will not accumulate for borrowers who consistently make their full monthly payments.
However, the new initiative does come with substantial costs to the federal government, with estimates ranging from $138 billion to $361 billion over ten years, depending on the number of borrowers who opt for the program. In comparison, Biden’s student loan forgiveness program, which was struck down by the Supreme Court, had an anticipated cost of approximately $400 billion.
The Education Department, however, remains confident in the program’s viability, pointing out that similar income-driven repayment plans have been implemented in the past without facing successful legal challenges.
The beta site launch comes as federal student loan borrowers prepare to resume payments in October after a pause of over three years due to the pandemic.
In related news, the Education Department recently announced that it will forgive approximately $39 billion worth of student debt for 804,000 borrowers after rectifying the counting of qualified monthly payments under existing income-driven repayment plans.