Surpassing the 4 million mark, enrollees in President Joe Biden’s novel repayment plan, the SAVE (Saving on a Valuable Education) initiative, seek shelter from the financial storm of impending student loan payments, scheduled to recommence in October after a pandemic-induced stationary period. Hatched just this summer, the SAVE plan provides a financial sanctuary for most federal student loan recipients, offering a potential lifeline to those battling to stay afloat in an ocean of student debt.
A significant proportion of the group already benefitting from SAVE previously participated in another iteration of the repayment scheme, acclaimed as the Revised Pay As You Earn (REPAYE) plan, and transitioned automatically. Those not part of the REPAYE cohort are required to apply for SAVE, with over a million individuals reported to have taken this step as per an announcement from the Department of Education.
The scheme’s door remains open to applications, though timely submission is advised to those desiring enrollment by October’s due-loan date. As of the first of September, interest rates on federal student loans have resurfaced, following a dormant period wherein the rates were set to 0% and monthly payments were not mandatory. Loan recipients can anticipate a bill, due to land in their inbox no less than three weeks before October’s payment date.
Before the recommencement of payments, Biden set forth a proposition to wipe out up to $20,000 of student loan debt for struggling low- and middle-income earners. This proposal, however, was snubbed by the Supreme Court in late June.
In contrast, the SAVE program extends its benefits to both current and prospective debt holders. Said to cost an estimated $475 billion over a decade by the Penn Wharton Budget Model, the scheme was first mooted to be in the development pipeline last August by the Biden administration.
Like other income-centric repayment policies, the SAVE plan revolves around a borrower’s earnings and family size, whilst the amount of student loan debt is irrelevant. In instances where a single borrower’s earnings do not exceed $32,800 or a family of four’s income is $67,500 or lower, those registered with the SAVE plan will face no monthly payments.
Moreover, with SAVE, unaccounted interest will not pile up should a borrower settle a full monthly payment.
Scheduled for an unveiling next year, additional elements of the SAVE initiative will incorporate a reduction in payments by half for those shouldering loans from undergraduate studies and a compacted path to debt absolution. After adhering to payments for a solid decade, borrowers may see their leftover balance vanish. In contrast, existing income-driven plans typically necessitate a repayment period of 20 years prior to debt cancellation.
However, despite these benefits, many borrowers may grapple with an increased total repayment amount over time and subsequently extended loan durations, owing to lower monthly payments.
Typically, officials indicate it takes almost four weeks for a loan servicer to process an application once submitted. Should a servicer need additional time, the applicant will be held in forbearance and will not be forced to make a payment.
When the Supreme Court axed Biden’s standalone student loan forgiveness scheme, the administration embarked on another route to deliver some form of student debt respite. However, this new direction requires the Department of Education to employ a formal rule-making process that in itself could span months or even years – and it may still face legal barriers.
Despite this, the Biden administration has already spearheaded the facilitation process for many borrowers to procure federal student loan forgiveness. As a result, approximately $116 billion in loan discharges have been approved for more than 3.4 million beneficiaries through August. These programs are designed to aid those deceived by their for-profit colleges, permanently incapacitated individuals, or those employed in the public sector for more than a decade while managing student loan repayments.