Biden's New SAVE Plan: Cut Student Loan Payments & Get Forgiveness 💸

With student loan payments set to restart in October 2023, the Biden Administration recently announced a new student loan income-based repayment plan called the SAVE Plan. Not only is the SAVE plan going to significantly lower the required monthly payment for both undergraduate and graduate student loans but there is also a 10-year to 25-year forgiveness period built into the new program. While the new SAVE program is superior in many ways when compared to the current student loan repayment options, it will not be the right fit for everyone. In this article, we will cover:

• How does the new SAVE Plan work?
• How does the SAVE program compare to other student loan repayment options?
• How are the monthly payments calculated under the SAVE program?
• What type of loans qualify for the SAVE plan?
• How do you apply for the new SAVE plan?
• How does loan forgiveness work under the SAVE plan?
• Who should avoid enrolling in the SAVE plan?
• The new Fresh Start Plan to wipe away defaults and delinquent payments in the past

www.Studentaid.gov has excellent resources available:

www.Studentaid.gov/save for information about the new income-driven repayment loan plan
www.Studentaid.gov/restart: for borrowers who were in repayment before and are going to resume payments
www.Studentaid.gov/firstpayment: For borrowers who haven’t made a payment before

Call Studenaid.gov for info on your student loans: 1-800-433-3243 (1-800-4-Fedaid)

Contact Michael Ruger with Questions: 518-477-6686 or mruger@greenbushfinancial.com
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Frequently Asked Questions (FAQs):
What is the SAVE student loan repayment plan?
The SAVE Plan is a new income-driven repayment (IDR) option that replaces the former REPAYE plan. It bases monthly payments on a borrower’s income and family size, and forgives any remaining balance after 10 to 25 years of qualifying payments.

How are SAVE Plan payments calculated?
Monthly payments are generally set at 5% of a borrower’s discretionary income for undergraduate loans and 10% for graduate loans. Discretionary income is the difference between a borrower’s adjusted gross income (AGI) and 225% of the federal poverty guideline for their household size.

When does the 5% payment rate under the SAVE Plan take effect?
While borrowers can enroll now, the 5% discretionary income payment rate for undergraduate loans becomes effective in July 2024. Until then, borrowers will pay 10% of their discretionary income, similar to the previous REPAYE plan.

Which student loans qualify for the SAVE Plan?
Only federal student loans are eligible for the SAVE Plan. Private student loans and Parent PLUS loans do not qualify. Borrowers with both undergraduate and graduate federal loans will have a weighted average payment rate based on the loan types.

How does loan forgiveness work under the SAVE Plan?
Forgiveness occurs after 10 to 25 years of payments, depending on the original loan balance and loan type. For example, borrowers with $12,000 or less in original federal loans may receive forgiveness after 10 years, with one additional year added for each $1,000 above that amount.

Does unpaid interest continue to grow under the SAVE Plan?
No. Under the SAVE Plan, any unpaid interest is canceled rather than added to the loan balance. This prevents balances from growing due to compounding interest when monthly payments are low or temporarily paused.

What is the Fresh Start program for student loans?
The Fresh Start program allows borrowers with defaulted or delinquent federal loans to restore their accounts to good standing. It removes previous defaults from credit reports, but borrowers must contact the Education Department or their loan servicer before September 2024 to enroll.

Is the SAVE Plan the best option for every borrower?
Not necessarily. While the SAVE Plan can significantly lower monthly payments, higher-income borrowers or those with smaller loan balances may pay more over time compared to the standard 10-year plan. Borrowers should compare repayment options and consider long-term costs before enrolling.

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