The Biden administration’s latest income-driven repayment plan, known as the Saving on a Valuable Education (SAVE) plan, is set to reduce monthly student loan payments for millions of borrowers starting on July 1. Under this plan, borrowers pay a percentage of their discretionary income each month and receive forgiveness after a set period, typically 20 or 25 years. The SAVE plan replaces the previous REPAYE option, increasing the income exempted from payment calculations and reducing monthly bills for many borrowers.
The most significant change under the SAVE plan is the decrease in the share of discretionary income borrowers have to pay towards their undergraduate student debt each month from 10% to 5%. This change will result in significantly lower monthly payments for borrowers across different income levels. For example, someone making $50,000 a year with a previous payment under REPAYE of around $228 may see their bill reduced to $67 under the SAVE plan. Similarly, a person earning $125,000 could see their payment drop from $853 to $380.
If you are already enrolled in the SAVE plan, the reduced monthly bill should be automatically reflected in your July payment. Borrowers with both undergraduate and graduate student loans will pay a weighted average of between 5% and 10% of their income. To qualify for a lower payment under the SAVE plan, your total debt should generally be greater than a third of your annual income. Borrowers can apply for the program at Studentaid.gov, and some may be eligible for loan forgiveness in as few as 10 years.
Overall, the SAVE plan offers significant relief to borrowers struggling with student loan debt, making repayment more manageable for millions of Americans. By reducing the percentage of discretionary income required for monthly payments and increasing the income exempted from calculations, the plan ensures that borrowers can afford their student loan bills while still meeting their other financial obligations. If you are eligible for the program, it is important to take advantage of these changes to reduce your student loan burden and achieve financial stability.
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