The Biden administration has moved up the timeline for its revamped income-driven student loan repayment plan, SAVE.
The Biden administration has moved up the timeline for its revamped income-driven student loan repayment plan, SAVE. Originally slated to start during the summer, it will begin this month, in February instead. As Forbes reported, SAVE is a replacement for the REPAYE plan and has been designed to be more affordable than other repayment programs.
The program features a larger poverty exception, which means that more of a borrower’s income is ignored in payment calculation, more affordable payments, and a subsidy that erases interest accrued that exceeds the minimum monthly payment. Due to these improvements, many borrowers will have lower payments and no ballooning balances. Furthermore, over 7 million Americans have already enrolled in SAVE, as officials from the Biden administration informed Forbes.
The Department guidelines read, “This means that you could spend as little as half the normal amount of time in repayment before getting forgiveness for your loans, thanks to the SAVE Plan.”
The Department of Education guidelines also explain how the various borrower amounts change the expected time to repay student loan debt.
To qualify for the SAVE Plan, a borrower has to have a Direct federal student loan. Other plans are available for those with other federal student loans so that borrowers can convert those non-Direct federal loans into Direct federal loans through Direct loan consolidation, thus making them eligible for a SAVE repayment plan. Federal Student Aid guidance encourages those who can consolidate to do so so they can get into SAVE plans. “We encourage you to consolidate all of your loans into a Direct Consolidation Loan to access the SAVE Plan.”
In addition to having a Direct federal student loan, a borrower must have a qualifying initial loan balance, the same as the numbers from earlier in the report. The Education Department cautions those who have not consolidated their student loans that their debt will be calculated differently, “For borrowers with loans that have not been consolidated, we will generally consider the sum total of your loans that, together, have an outstanding balance,” The Department of Education told Forbes. “For borrowers who have consolidation loans, we will consider the initial balances of all of the underlying loans that were consolidated into your consolidation loans rather than the starting balance of your consolidation loan.”
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Source: Black Enterprise