The Biden administration has officially unveiled its new income-driven student loan repayment plan known as SAVE.
calculates payments based on a borrower’s income and family size as opposed to their loan balances and forgives debt after a certain number of years. The plan will cut many borrowers’ monthly payments to zero and will save other borrowers around $1,000 a year, according to a White House statement.
An estimated 20 million borrowers will benefit from the plan, the White House said. Borrowers can sign up starting today with an online application atUnder the SAVE plan, borrowers with undergraduate loans will have their payments reduced from 10% to 5% of discretionary income, a change that could slash many payments to zero. For example, under the SAVE formula, a single borrower who makes about $15 a year will not have to make any monthly payments.
The SAVE plan also allows borrowers whose original principal balances were $12,000 or less to receive forgiveness after 120 payments, the equivalent of 10 years. The launch of the SAVE plan comes just weeks before interest will once again start accruing on student loans after a three-year pause during the COVID pandemic. Payments are set to resume in October.
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