In the previous article in this series, I covered the Supreme Court’s snub of the Biden-Harris Student Debt Relief Plan. The court decided that the Secretary of Education’s plan was illegal based on their interpretation of the authority delegated to his office by the HEROES Act. However, both the White House and the Department of Education are continuing efforts to help borrowers that carry student loan debt. Their latest offering is called the SAVE Plan. In this article, I’ll provide a summary of the new initiative to assist debtors with the loans they have garnered during their academic pursuits.
How Biden Plans to SAVE You From Student Loan Debt
The Biden-Harris Administration and Secretary of Education Miguel Cardona are helping borrowers in two ways:
- Lowering payments for borrowers.
- Providing targeted relief for certain student loan borrowers.
Let’s take a look at how both the White House and the Department of Education are taking action driven by these ideals.
Lowered Payments
The SAVE plan is set up to reduce the payments for those with student load debt. These are the relevant regulatory specifics that differentiate the SAVE Plan from other Federal Student Aid (FSA) income-driven repayment (IDR) plans.
- The SAVE Plan significantly decreases monthly payments by increasing the income exemption from 150% to 225% of the poverty line.
- The plan eliminates 100% of remaining interest for both subsidized and unsubsidized loans after a scheduled payment is made.
- The SAVE Plan excludes spousal income for borrowers who are married and file separately.
For details on how your payment may be reduced, see the (FSA) page on SAVE Plan Monthly Payments and Savings.
Future Benefits and Opportunities
Starting July 2024, President Biden, Vice President Harris and Secretary Cardona plan to roll out the following additional benefits associated with the SAVE plan:
- Undergraduate loan payments cut in half from 10% to 5% for borrowers with incomes over 225% of the poverty line.
- Loans of $12,000.00 or less will be forgiven after ten years of qualified payments.
- Loans greater than $12,000.00 will require one additional year of qualified payments per $1,000.00 over $12,000.00.
- Loan consolidation will not erase progress toward loan forgiveness.
- Certain periods of deferment and forbearance will still garner credit toward loan forgiveness.
- Borrowers will have opportunities to make “catch up” payments to gain credit toward loan forgiveness for certain periods of deferment and forbearance.
- Borrowers who are 75 days late will automatically be enrolled in IDR based on providing Dept. of Ed. with access to borrower’s tax records at the IRS.
Targeted Relief
In addition to helping borrowers with the SAVE plan, the Biden-Harris administration, in conjunction with Secretary Cardona, is targeting certain demographics of those indebted with student loans. Below is a list of those groups of borrowers that have had principal amounts either reduced or extinguished. According to the U.S. Department of Education announcement on the SAVE Plan, these exceptions include:
- $39 billion for 804,000 borrowers through fixing historical inaccuracies in the IDR payment count system for borrowers who earned forgiveness;
- $45.7 billion for 662,000 public servants through improvements to Public Service Loan Forgiveness;
- $10.5 billion for 491,000 borrowers who have a total and permanent disability; and
- $22 billion for nearly 1.3 million borrowers who were cheated by their schools, saw their schools precipitously close, or are covered by related court settlements.
How to Take Advantage of SAVE and Targeted Relief
Both the SAVE Plan and the targeted relief effort provide a lot of options to help borrowers of student load debt. How can you take advantage of these opportunities?
Good news! If you are currently enrolled in the Revised Pay As You Earn (REPAYE) Plan, then you will automatically be enrolled into the SAVE Plan. FSA offers several IDR plans. If you are either on a non-REPAYE plan or are not on any IDR plan, then you will need to apply for the SAVE Plan.
Be aware that only certain loan types are eligible. For some of the ineligible loan types, loan consolidation may place you into eligible status. See the FSA SAVE Plan page for full details on the plan, including benefits, eligibility and the application process.
Loans that are in default are not eligible for the SAVE plan. If you have loans in default, then you should consider the FSA Fresh Start Initiative. This option may be able to help you get your loans out of default so that you can continue the application process for the SAVE plan.
In order to determine if you are eligible for targeted relief for loan principal amounts and determine your current IDR plan (REPAYE, etc.), check with the FSA contact center to inquire about your status.
Still Fighting for Borrowers
Although the Supreme Court struck down the Biden-Harris Student Debt Relief Plan, both the White House and the Department of Education are approaching both the SAVE Plan and the targeted relief effort to provide some assistance to borrowers managing student loan debt.
If you are someone who has to deal with student loan debt, then I hope this article has helped both provide better insight into the current state of student debt relief and lead you to the appropriate resources to get assistance.