Backup plan… The Biden admin has a new plan to lighten debt loads after SCOTUS struck down its attempt to cancel up to $20K for millions. Introducing — drum roll plz — the SAVE plan (Saving on a Valuable Education), an income-driven repayment plan that, instead of wiping away a single lump sum, could ease borrowers’ debt over time.
How it works: Income-driven plans limit repayments to a set percentage of borrowers’ discretionary income. SAVE slashes that percentage in half for undergrad loans (from 10% to 5%), while limiting the build-up of interest.
Time limit: Smaller loans will be forgiven sooner. In previous plans, debts were wiped away after 20 years of borrowers making payments, but with SAVE, loans of $12K or less will be forgiven after a decade, plus one year for every additional $1K (so $13K after 11 years, $14K after 12 years, and so on).
Raised floor: Borrowers who make less than ~$32K (or ~$67K for a family of four) won’t have to make payments at all.
In practice: Under the previous federal income-driven plan, borrowers paid back nearly $11K, on average, for every $10K in loans. Using SAVE, they’d pay closer to $6K.
When (and if) it’ll happen… The SAVE applications site went live yesterday, and the payment plan is expected to fully kick in by next summer, with parts going into effect this fall (when student-loan payments are set to resume). Experts think it’s likely that SAVE — estimated to cost the gov’t between $138B and $361B, compared to debt cancellation’s $400B — will be challenged in court, but say it stands a better chance than full cancellation did.