Current Events > New SAVE Plan will provide payment relief for student loan borrowers

(+) Yeah! (+)

While the headlines this weekend focused on the Supreme Court striking down Biden's student loan forgiveness proposal, other elements of Biden's student loan proposal introduced one year ago were not affected and will continue as planned. On the same day as the ruling, the Biden administration announced the SAVE plan (Saving on a Valuable Education).

Here are the main details:

• The SAVE Plan increases the income exemption from 150% to 225% of the poverty line.
• Single borrowers who make less than $15 an hour and families making less than $67.5k will have no monthly payments to make
• All other borrowers will see their monthly payments cut in half for savings of at least $1000 a year
• The plan eliminates 100% of remaining interest for both subsidized and unsubsidized loans after a scheduled payment is made under the SAVE Plan. This means that as long as you are making monthly payments, your balance will never go up, even if you are paying less than the interest accrual. For example, if you accrued $50 in interest in July, and you make a minimum payment of $30, the $20 is erased and not added onto your balance.
• The SAVE Plan excludes spousal income for borrowers who are married and file separately. Spouses no longer have to cosign the IDR application
• Student loan balances not paid off will continue to be forgiven after 20 years under this new plan

More details about the plan can be found here:
https://studentaid.gov/announcements-events/save-plan
https://www2.ed.gov/policy/highered/reg/hearulemaking/2021/idrfactsheetfinal.pdf

https://gamefaqs.gamespot.com/a/user_image/9/1/4/AAHdjXAAEoXa.jpg

Sounds good to me.
As someone that was and will continue to argue against huge write-offs, the govt. eating the interest (aka opportunity cost) on this is a fine way to invest in our future.

Now let's makes college free from jump.

If those bullet points are accurate thats pretty good. Not sure who or how many will be affected, hopefully it is a significant amount of people.

Sounds good to me.

still not enough to counterbalance the predatory nature of student loans

cancel all student debt

Good stuff, I hope it is spread widely throughout the news.

Zanzenburger posted...

Student loan balances not paid off will continue to be forgiven after 20 years under this new plan

I'm curious if the person have to be under the SAVE plan for the whole 20 years. As in, if they ever make more than that 67k, are they essentially kicked off the program? I hope it's not a cliff style dropoff.

Yeah, if I'm being honest, the 10-20k debt forgiveness is a bit of a red herring. Will be ready to label this a genius move if this goes through while republicans are doing their best to block debt forgiveness. Paying the 5% of your disposable income for 20 years followed by full forgiveness is pretty damn close to making university universally (close to) free.

This is pretty good.

Now fix private loans, those are the truly trash ones.

[LFAQs-redacted-quote]


Seems like there's no interest on payments made while you're part of the plan.

Zanzenburger posted...

The plan eliminates 100% of remaining interest for both subsidized and unsubsidized loans after a scheduled payment is made under the SAVE Plan. This means that as long as you are making monthly payments, your balance will never go up, even if you are paying less than the interest accrual. For example, if you accrued $50 in interest in July, and you make a minimum payment of $30, the $20 is erased and not added onto your balance.

emblem-man posted...

I'm curious if the person have to be under the SAVE plan for the whole 20 years. As in, if they ever make more than that 67k, are they essentially kicked off the program? I hope it's not a cliff style dropoff.

If it works like the previous REPAYE plan, it's 20 years in any IDR plan, so if you've already built some years in REPAYE, those should count towards the 20 year forgiveness plan. That's just an assumption, though, we'll have to get more guidance when this goes into effect.

[LFAQs-redacted-quote]

This will replace the existing REPAYE IDR plan. If you are already on a REPAYE plan, you will automatically get transferred over to it. If you are on any other plan, you will have to apply. The application will come out later this summer and you should be notified by your loan provider.

[LFAQs-redacted-quote]

No, as mentioned earlier, any interest you didn't pay gets "forgiven" on a month-to-month basis as long as you make your minimum monthly payment. Then, after 20 years, whatever you have leftover is forgiven for good.

The only question I have about this is, if you have a $0 monthly payment because you are under the exemption guidelines, do you get 100% of your loans forgiven after 20 years?

My initial guess is yes, because that's how PSLF works, where paying $0 for 10 years still qualifies you for the forgiveness at the end, as long as you continue to qualify for the $0 payments.

So this would be a big win for the lower class, who essentially get their loans forgiven (albeit after 20 years). But this is also a win for the middle class, who will get their monthly payments lowered with basically no downside.

[LFAQs-redacted-quote]

This is fair. Fortunately, you have the option to either pay off quickly and get rid of the loan on your credit, or hang on at the lower payment and wait for forgiveness at a later time.

COVxy posted...

Yeah, if I'm being honest, the 10-20k debt forgiveness is a bit of a red herring. Will be ready to label this a genius move if this goes through while republicans are doing their best to block debt forgiveness. Paying the 5% of your disposable income for 20 years followed by full forgiveness is pretty damn close to making university universally (close to) free.

Agreed. I've been following the proposal since its announcement. Even from the beginning, the SAVE Plan in its entirety was not in question from the Supreme Court, just the "forgiveness" part of it which was arguably the main focus. However, there is no question about the authority for the President to enact these other measures, so this is pretty much a sure thing. From what I've read, there is no way for the Supreme Court nor Congress to block this as it falls within the powers of the Department of Education.

Zanzenburger posted...

This is fair. Fortunately, you have the option to either pay off quickly and get rid of the loan on your credit, or hang on at the lower payment and wait for forgiveness at a later time.

Whether that's a good idea depends on whether you think Republicans will take power in the next 20 years and if they'll keep this.

Mathematically, min payments and waiting is the smart move. But in reality . . . get as much ahead as possible imo.

Anarchy_Juiblex posted...

Whether that's a good idea depends on whether you think Republicans will take power in the next 20 years and if they'll keep this.

Mathematically, min payments and waiting is the smart move. But in reality . . . get as much ahead as possible imo.

I've read about this as well, as I'm on track for PSLF forgiveness (only 4 more years to go) and wonder if this is something that could be taken away.

What I've learned from my research is that, even if it's removed, people already on the program are grandfathered in. They would just stop enrolling new people into it. So my understanding is once you are on the SAVE Plan, you should be fine even if it gets taken away, as long as you don't ever unenroll from it and try to reenroll.

IfGodCouldDie posted...

If those bullet points are accurate thats pretty good. Not sure who or how many will be affected, hopefully it is a significant amount of people.

This should affect pretty much everyone that has federal loans, regardless of your income level. The main change is that they are cutting the "discretionary income" threshold for the monthly payment from 1% to 0.5%, which will lower everyone's monthly payment. That plus interest cancellation makes this a pretty big reform, that's unfortunately overshadowed by the forgiveness drama.

Had this been the only thing announced, this would have made a lot more headlines as a HUGE overhaul of the student loan process, as it's more than just a one-time bandaid fix. This will help borrowers for the life of their loan.

Sounds good.

Bump for afternoon crowd.

Zanzenburger posted...

If it works like the previous REPAYE plan, it's 20 years in any IDR plan, so if you've already built some years in REPAYE, those should count towards the 20 year forgiveness plan. That's just an assumption, though, we'll have to get more guidance when this goes into effect.

Interesting. A brief look up shows that the amount you pay on the income repayment plan is based on discretionary income (AGI - 150% of poverty level). With the current plans, if your income rises significantly, your payments would then be higher correct?

In what situations would someone actually be making payments for 20 years? If their income stays low and if their loan is so big that the income based payment increase from higher salary still doesn't pay off the loan?

Another Biden win

emblem-man posted...

Interesting. A brief look up shows that the amount you pay on the income repayment plan is based on discretionary income (AGI - 150% of poverty level). With the current plans, if your income rises significantly, your payments would then be higher correct?

In what situations would someone actually be making payments for 20 years? If their income stays low and if their loan is so big that the income based payment increase from higher salary still doesn't pay off the loan?

Yes, this plan raises it to 225% of the poverty level, and then your monthly payment goes up from there, but by much less than the previous plan. Starting July 1, 2024, there will be even more cuts, with your monthly payment being 5% 9fnyour discretionary income instead of 10%.

Essentially yes. It's possible that your monthly payment is so low that it only pays for your interest without touching the balance. While the balance should never go up, it might stay the same if all you are paying is accrued interest (and remember that any unpaid interest is erased each month). That would mean that a $30k loan may not be paid off in 20 years if the min monthly payment is only $30 and only covers interest. But the whole $30k remaining will be forgiven after 20 years.

Bump

Bumping again, since I know a lot of people were upset about the student loan forgiveness being struck down. This is a decent alternative for those who can utilize it.

Some people just want to be mad though

But for real though, I've sent it to some people, hoping it helps them out

Definitely passing this on to my wife, thanks :)

emblem-man posted...

Some people just want to be mad though

But for real though, I've sent it to some people, hoping it helps them out

RuneterranSnap posted...

Definitely passing this on to my wife, thanks :)

Glad to help!