The SAVE Plan is meant to be the most lenient income-driven student loan repayment plan to date, lowering monthly payments for nearly all borrowers. It will achieve this aim by implementing two significant adjustments in comparison to existing income-driven repayment (IDR) schemes.
Families are anticipated to benefit greatly from the Biden administration’s new repayment scheme
According to the recently published article from The Motley Fool, the SAVE Plan, for starters, reduces the maximum needed payment on undergraduate student loans to 5% of the borrower’s discretionary income. This is a significant departure from the 10% level used by most previous IDR proposals. Graduate school student loan payments will continue at 10% of discretionary income, although debtors with both categories will pay a weighted average (between 5% and 10%).
Second, the SAVE Plan limits the amount of income that is initially deemed discretionary. Previously, everything beyond 150% of the federal poverty threshold was deemed discretionary, but the SAVE Plan elevates this to 225%. In a word, the SAVE Plan limits the amount of your income that may be considered for student loan repayment and limits the percentage of that income that you can be compelled to pay.
12 things student loan debtors should know about the payback period
In a recently published article from NPR, tens of millions of federal student loan borrowers have had unprecedented relief, not just from loan payments, but also from the buildup of interest on top of those debts, over the past three and a half years. Countless books and doctorate theses will be written on what that money paid for instead; what counts now is that interest resumes its relentless march in September, and student loan payments follow suit in October.
The issue for student loan payment borrowers is that a lot has transpired in the last few years. Their lives have most certainly altered, maybe radically, and so has the student loan payment system. Some of the largest loan servicers pre-pandemic are no longer in business, their customers have been transferred to different servicers, and low-income borrowers now face a new, more liberal repayment plan.